The Central Bank of Nigeria (CBN), yesterday, July 20, 2018, flagged off its intervention in the sale of foreign exchange in Chinese Yuan (CNY), signaling the consummation of the Bilateral Currency Swap Agreement (BCSA) signed with the People’s Bank of China (PBoC) on April 27, 2018.
A statement, issued by the Bank, yesterday, disclosed that the sales should be through a combination of spot and short tenored forwards. It added that the exercise, which shall be Special Secondary Market Intervention Sales (SMIS) retail, would be dedicated to the payment of Renminbi denominated Letters of Credit for raw materials and machinery and agriculture.
The Bank’s spokesman, Isaac Okorafor, explained that the CBN would receive bids from all authorised dealers. He added that due to the peculiarity of the exercise, the Bank would not be applying the relevant provisions of its Revised Guidelines for the Operation of the Inter-bank Foreign Exchange Market, which direct all SMIS bids to be submitted to the CBN through the Forex Primary Dealers (FXPDs).
According to Okorafor, the CBN would also not be applying the relevant provisions of the guidelines, which equally provide that “Spot FX sold to any particular end-user shall not exceed one per cent of the overall available funds on offer at each SMIS session”.
Speaking on the bid period, he said authorised dealers were requested to submit their customers’ bids from 9.00 am to 12.00 pm on Friday, July 20, 2018, adding that bids received after this time would be disqualified.
On funding, he disclosed that authorised dealers were to debit the customers’ accounts for the Naira equivalent of their bids, stressing that the CBN would debit authorised dealers’ current account on the day of intervention to the tune of the naira equivalent of their bid request.
Okorafor, further explained that there would be no predetermined spread on the sale of FX Forwards by authorised dealers to end-users under the Special SMIS-Retail, adding that authorised dealers would be allowed to earn 50 kobo on the customers’ bids.
While also explaining that the bids were on Spot FX basis as the authorised dealers’ accounts with the CBN would be debited in full for the Naira equivalent of the USD bid amount, he advised customers that were not willing to accept the settlement terms not to participate in this Special SMIS – Retail.
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