Published On: Mon, Jul 9th, 2018

Banks brace up to Renmibi-Naira swap


Commercial lenders in the country are wrapping up preparations for the commencement of Renmibi-Naira currency swap arrangement tidied up by the Central Bank of Nigeria (CBN) in the second quarter of the year as a way of further deepening trade between Nigeria and China.

The Central Bank in the last two weeks has embarked on a number of road shows in Kano, Aba and Lagos to sensitize Nigerian importers and exporters on the need embrace the Renmibi Window as soon as it starts operation.

Although the CBN has not announced a date for the commencement of the trading window, Mr. Isaac Okorafor, acting Director, Corporate Communications, CBN, disclosed at a stakeholders’ meeting in Lagos last week that the Renminbi trading platform would soon be opened after consultations with certain critical stakeholders, disclosing that importers from China could begin to open Letter of Credits (LCs) in Renmibi shortly.

After the CBN concluded the $2.5 billion bilateral currency swap deal with the People’s Bank of China (PBoC) in April, it appointed FirstBank, Stanbic IBTC, Standard Chartered Bank (SCB) and Zenith Bank Plc have been appointed the settlement banks for the deal.

FirstBank is currently working around some of the requirements the CBN expects from settlement banks before the opening of the Renmibi Window, explained Babatunde Lasaki, Head, Media and External Communications, FirstBank.

Stanbic IBTC already has structures in place, making it ready for the start of the Renmibi Forex Window, Usman Imanah – Corporate Communications Manager of the bank told BH. He noted that for over 10 years, Stanbic IBTC, a member of Standard Bank, which has relationship with the Industrial and Commercial Bank of China as its major stakeholder, has been maintaining a China Desk, which is manned by a Chinese.

The CBN explained that it decided to enter into the currency swap agreement with China to lessen the pressure on the country’s external reserves, since China has become Nigeria’s largest trading partner.

According to the CBN, China accounts for 22 per cent of Nigeria’s merchandise Import in 2017. Data obtained from the National Bureau of Statistics (NBS) on Nigeria’s foreign trade flow shows that China was not among Nigeria’s top 10 export destinations. Netherland, India and Spain were Nigeria’s largest export trade points in Q1 2018, accounting for 20.53 per cent, 18.19 per cent and 8.35 per cent of its total export during the period. These exports were majorly crude oil.

At a sensitization forum in Lagos last week, participants expressed fears that the Renmibi- Naira swap deal may further worsen the country’s trade deficit with China. But CBN through its spokesman, Okorafor, reiterated that the monetary authority put the country’s interest foremost before signing the agreement with China.

Although China was Nigeria’s top import partner in the first quarter of 2018, accounting for 21 per cent of total import, only N4 billion worth of polyethylene was the major manufactured product Nigeria exported to China in the first three months of the year, the country imported N43.46 billion of manufactured products, ranging from motorcycles to electrical and telephone devices.

The CBN maintained that the country is not presently positioned to have a trade surplus with China as it is currently one of the world’s largest exporters of goods to other countries. Okoroafor further explained that Nigeria can only gradually narrow down its trade deficit with China.

According to him, the commencement of the Renmibi currency swap would help Nigerian importers reduce cost as they won’t need the dollar to settle their Chinese suppliers.  “All these arrangements is designed to make it possible to ease the businesses that already exists between us and China. Our aim as a monetary authority is to ensure that the demand for Renmibi through our trade with China lifts up our reserve,” Okorafor stated further.

Responding to complaints that Chinese importers are not opening LCs in Naira and not willing to accept Naira invoices, he claimed that the CBN is already in discussion with People’s Bank of China on this. 

The CBN made it clear that the Renmibi-Naira swap deal which is expected to run for three years and is renewable thereafter, will involve mainly cash transactions, where dealers would bid. He added that as the deal progresses, the CBN may modify some of the modalities.

Okorafor said that bureau de change operators would not be allowed to participate in the Renmibi deal as it would involve mainly deposit money banks (DMBs).

In the same vein, the 41 items tagged as not valid for forex would not be eligible for the Renmibi swap.

The Renmibi exchanged N53.79 at the open market on Friday, while dollar was sold for N361.

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