Central Bank of Nigeria Issues Guidelines For China-Nigeria Currency Swap Deal

The Central Bank of Nigeria (CBN) on Friday published the long-awaited regulatory guidelines for prospective operators under the bilateral currency swap agreement between Nigeria and China.

Central Bank of Nigeria Building

The guidelines titled: “Regulations for Transactions with Authorised Dealers in Renminbi” was signed by CBN Director, Financial Markets Department, Alvan Ikoku, and published on the bank’s website.

Mr Ikoku said the regulations which were part of CBN’s statutory mandate, were in line with the provisions of the Banks and Other Financial Institutions Act (BOFIA) LFN 2004 (as amended) and the CBN Act 2007.

The guidelines said the swap agreement was for a maximum of 15 billion Chinese Yuan for N720 billion with a three-year tenor.

The currency swap agreement allows the central bank and the Peoples Bank of China (PBoC) to, among other purposes, provide liquidity in their respective currencies, to facilitate and promote trade and investments across the two countries.

The regulation, which identified deposit money banks and merchant banks as authorised dealers, also spelt out the purposes for which the currency swap shall be used.

They include to finance trade and direct investment between China and Nigeria; maintain financial stability as well as other purposes that both countries may agree upon.

Besides, the regulations stipulated that the objectives of the swap deal could be achieved through the purchase, sale and subsequent repurchase and resale of the Chinese Yuan against Nigeria’s Naira and vice versa.

To realise these objectives, the guidelines said the CBN may conduct bi-weekly Renminbi bidding sessions where the currency sales shall be applicable only to trade-backed transactions.

Those qualified to apply for access to the CBN bi-weekly Renmibi bidding include all authorised dealers that open Renminbi accounts with a correspondent bank and advise the CBN with their Renminbi account details. The bank may be a bank onshore or offshore China.


Others are importers intending to import from China and have obtained Proforma Invoices denominated in Renminbi as part of the documents required for the registration of Form M.

Each authorised dealer will earn not more than 50 kobo on every customer’s bid.

“Authorised dealers shall not open domiciliary accounts denominated in Renminbi for customers. No bank is allowed to endorse or pay based on documents not properly routed in compliance with the regulations,” Mr Ikoku said.

The regulation listed the modes of payment under the deal, which shall be in line with memorandum 9 of the FOREX manual, letters of credit or all negotiated shipping documents routed from the beneficiary/suppliers through his or her bank to the issuing bank.

While importers and exporters shall continue to pay applicable levies on imports and exports, authorised dealers would be required to utilise the funds within 72 hours from the values date, failing which such funds must be returned to the CBN for repurchase at the bank’s buying rate.

The CBN is expected to debit authorised dealers’ current account on the day of intervention with the Naira equivalent of Renminbi bid request.

On bills or collection transactions, the guidelines said documents must be routed to the issuing bank either directly from the supplier’s bank or the offshore correspondent of the issuing bank.

Besides, documents marked “not valid” for foreign exchange transactions shall be routed by the supplier directly to the applicant’s bank that validates the underlying E-form M.

Orignally Posted Premium Times

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