CBN Tells Importers To Use Yuan Instead Of Dollar

The Central Bank of Nigeria have started persuading businesses importing goods from China to use the yuan instead of the U.S. dollar.

This, the apex bank said is to support the Naira and boost the country’s foreign reserve.

According to Reuters, CBN officials on Wednesday held a town hall meeting with businesses in Lagos to introduce the yuan for imports from China.

CBN officials have been holding town hall meetings with businesses across the country, especially in Lagos and Aba, ahead of plans to start auctioning the Asian currency later this month.

“The central bank will encourage users importing goods from China to use the yuan and not the dollar,” CBN officials said.

“Dollar demand burden arising from trades with China would be lifted from our FX reserves.”

In May, the CBN and the Peoples’ Bank of China (PBOC) signed a three-year bilateral currency swap agreement worth N720 billion valued at ¥15 billion.

Under the arrangement, the CBN would hold N720 billion in an account in favour of the PBOC while the Chinese central bank would hold 15 billion yuan, implying an exchange rate of N48 to the yuan.

A currency swap involves the exchange of principal and interest in one currency for the same in another currency. Simply put, it is the exchange of one currency for another at a specific rate of exchange and for a duration.

The swap is expected to facilitate bilateral trade between the two countries. Trade between China and Nigeria has been on the rise following the commencement of swap discussions in 2016.

Deputy Chinese ambassador to Nigeria, Mr. Lin Jing, had earlier said China’s bilateral trade with Nigeria between January and November 2017 stood at 12.3 billion, a figure that is 30 per cent improvement compared to the same period of 2016.

However, payments for crude oil sold to China would be made in dollars.

Reuters reports that Nigeria imported goods worth almost $2 billion per annum from China last year as against almost $500 million imported by the Chinese.

Nigerian businesses use dollar as their major trading currency. When crude oil prices fell, the country suffered severe dollar shortages.

The apex Bank now sells dollar weekly on different segments of the interbank market to boost liquidity.