The Bankers’ Committee has endorsed Nigeria’s Chinese Yuan currency swap arrangement, describing it a monetary measure with great potential to help Nigeria’s efforts aimed at shoring up her dollar-denominated foreign reserves.
The bankers, at the end of their meeting in Lagos, noted that Nigeria importers may also pay less if they get Renminbi invoices from Chinese exporters.
Speaking at the end of the committee’s parley, Stanbic IBTC Bank Managing Director, Mr. Demola Sogunle, said: “Specifically on the Renminbi and what is in it for importers, the idea is that the CBN is encouraging importers to receive invoices in Renminbi instead of dollars.
According to him, one of the incentives is that there is percentage spread, which is yet to be determined, is actually given to any importer that is bringing Renminbi invoices for settlement, instead of dollar invoices.
Sogunle explained that such importers will avoid 10 per cent mark-up prices usually associated with dollar-denominated importation, adding that the currency swap arrangement is expected to help small and medium enterprises grow their businesses.
On the overall cost on imports, the banker pointed out that importers who submit Renminbi invoices will pay less, noting further that “when you look at the overall cost, in terms of naira, if you bring Renminbi invoices, it is going to be cheaper for the importer coming to the CBN to get foreign currency, which in this case will be Renminbi.
“The importer will have to bring lesser amount of naira. If he goes ahead to bring from the same supplier, based in China and makes the invoice in dollar, it is going to cost more, in terms of the naira amount he is going to use to get the foreign currency”, Sogunle added.
He explained that “if we are able as a country, to bring in machinery and equipment, without depleting the foreign reserves, the external reserves will not be under threat”.
In his remarks, CBN Director, Banking Supervision, Ahmad Abdullahi, said the drop in inflation rate to 11.61 per cent in May and $48 billion in foreign reserves as well as 2.44 per cent projected Gross Domestic Product (GDP) growth for the current year indicated a positive outlook for the economy.
Similarly, the Managing Director of United Bank for Africa Group, Kennedy Uzoka, confirmed that the CBN had made it possible for all banks to sell Personal Travel Allowance and Business Travel Allowance to travellers at all their branches, including persons that do not have bank accounts with the lenders.
“The CBN has been intervening in all the markets and has the capacity to defend the naira,” Uzoka said.
The CBN recently signed a three-year renewable bilateral currency swap agreement with the People’s Bank of China (PBoC) worth about $2.5 billion as part of its efforts to ensure Naira’s foreign exchange rate stability.
In local currencies, the swap is worth 15 billion Renminbi (RMB) or N720 billion. The deal allows for the direct exchange of RMB and naira for the purposes of trade and direct investment between the two countries.
According to the PBoC, the swap is to facilitate bilateral trade, direct investment, and safeguard financial market stability as well as to reduce the demand for United States dollar by Nigerians importing from China and consequently strengthen the value of the naira.
The deal will also help to mitigate certain barriers for Nigerian importers of goods from China and reduce the cost of transactions in multiple currencies.
In merchandise trade, China is one of Nigeria’s largest merchandise trade partners over the last five years, with her goods accounting for an average of 20.95 per cent of Nigeria’s total imports between 2013 and 2017.