The Central Bank of Nigeria (CBN) has injected $289.76 million into the retail Secondary Market Intervention Sales (SMIS) and CNY38.70 million in the spot and short-tenored forwards segment of the inter-bank foreign exchange market.
CBN’s Corporate Communications Director, Isaac Okorafor, who confirmed the figures, noted that the dollar-denominated interventions were for transactions in the agricultural and raw materials sectors.
On the spot and short-tenored sales in Chinese Yuan, he said they were similarly for payment of Renminbi denominated Letters of Credit for agriculture and raw materials based on bids received from authorised dealers.
While reiterating the bank’s support for the inter-bank foreign exchange market, he disclosed that the apex bank’s management was pleased with the level of stability at both the Bureau-de-Change (BDC) and the Investors’ and Exporters’ (I&E) window of the foreign exchange market.
According to him, the CBN was also satisfied with the implementation of the Bilateral Currency Swap Agreement (BCSA) with the Peoples Bank of China (PBoC), coupled with a recent inflow of about $2.8 billion Euro bond.
Okorafor expressed confidence that the foreign exchange market in Nigeria will continue to enjoy stability in the coming months and beyond, given the marginal increase in the country’s external reserves.
It will be recalled that the CBN last Tuesday, intervened in the wholesale, Small and Medium Enterprises (SMEs) and invisibles windows of the inter-bank foreign exchange market to the tune of $210 million.
Meanwhile, $1 exchanged for N361 at the Bureau de Change (BDC) segment of the foreign exchange market, while CNY1 exchanged for N53.
Nigerian banks are already counting their gains from the $2.5 billion currency swap deal.
Analysts said the economies of both countries need each other, and so do their businesses and banks. The banks in both countries are not only earning fees from the ensuing transactions, but are beginning new lending to businesses.
The analysts said these gains and the need to keep the naira stable prompted the CBN to sign the bilateral currency swap agreement with the People’s Bank of China (PBoC).
In local currencies, the swap is worth 15 billion Renminbi (RMB) or N720 billion. The three-year renewable deal allows for the direct exchange of RMB and naira for the purpose of trade and direct investment between both countries.
According to the PBoC, the aim of the swap arrangement is to facilitate bilateral trade, direct investment, and safeguard financial market stability.
The trade is reducing the demand for United States (US) dollar by Nigerians importing from China and consequently strengthen the value of the Naira. The deal is also reducing certain barriers for Nigerian importers of goods from China and reduce the cost of transactions in multiple currencies.