3 Things To Know If You Want To Benefit From Nigeria-China Currency Deal
So, sometime in May, the Central Bank of Nigeria, CBN signed a currency swap agreement with Peoples Bank of China.
The agreement will allow the two sides to swap a total of 15 billion Chinese yuan, about $2.5 billion dollars, for 720 billion Nigerian naira, or vice versa, within the next three years.
The move is aimed at facilitating bilateral trade, investment and promoting the financial stability of both sides, according to a statement by the PBOC at that time.
The deal can be extended by mutual consent.
Now, later this month, the execution of that deal starts and importers from Nigeria will be able to lay their hands of the Chinese currency to import from China.
Here are 3 things you need to know if you are an importer hoping to tap into the currency swap arrangement.
1. The Exchange Rate Is Attractive: Although exchange rates “may be” determined via a “bi-weekly Renminbi bidding sessions” conducted by the CBN, when the deal starts later this month, the CBN will sell the Chinese yuan to the importers at 48 naira per yuan.
This is very attractive as it is far below the current official exchange rate of yuan to naira which stands at 54 naira to 1 yuan as at the time of filing this report.
2. CBN Will Reward You If You Raise Invoice In Yuan: You see, the normal practice before now is for your Chinese suppliers to raise invoice in dollar for settlement.
You can still do that and CBN will do the conversion and give you the yuan equivalent. But if you convince your Chinese suppliers to raise your Performa invoice in yuan, CBN will reward you by reducing the percentage spread you pay for the yuan.
The percentage spread reduction has yet to be announced but CBN’s Director, Banking Supervision, Mr. Ahmad Abdullahi confirmed recently that the idea is to make it far cheaper for importers who raise invoices in yuan.
3. Your Bank Will Pay For You: So, you are not even allowed to open a yuan domiciliary account, and payments must be for goods to be imported from China.
More so, your bank won’t give you the yuan in cash when you present your invoice. Instead, they will make payment to your supplier’s bank through a letter of credit transactions.
According to CBN guidelines, documents must be routed to the issuing bank either directly from the supplier’s bank or through your (the importer’s) offshore correspondent bank.
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