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.
The guidelines
titled: “Regulations for Transactions with Authorised Dealers in
Renmnbi” 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.