Currency swap deal to deepen naira sovereignty in Africa – Gwadabe

The President, Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe has said that the $2.5 billion currency swap agreement between the Central Bank of Nigeria (CBN) and the People’s Bank of China will promote naira’s sovereignty in Africa.
Gwadabe, who spoke on the CBN and PBoC Bilateral currency swap agreement over the weekend, said the naira will benefit from the deal given the rising influence of Chinese Yuan in the international market.
He said the admittance of Yuan into the basket of International Monetary Fund (IMF) currencies and the Naira/Yuan swap deal will actualize the dream of naira sovereignty in Africa.
The nation’s currency has remained stable at both the official and parallel markets, following the CBN weekly dollar interventions.
The naira which exchanged in February 2017 at rate of N520 to a dollar in the parallel market now traded at N361 to a dollar while rate at the official market remains N305.9 to a dollar.
The Yuan has equally made significant progress this year, appreciating by 1.8 per cent against the dollar to become the world’s second-strongest Asian currency.
The ABCON boss also urged the CBN to consider diversifying dollar disbursement to BDCs with percentage amount of Yuan to meet the critical needs of their numerous clients travelling to China for personal and business purposes.
He explained that if implemented, such a move will further deepen the interest in purchasing Yuan and reduce dollar demand.
Gwadabe disclosed that the currency swap deal was part of the CBN’s plan to keep the naira stable and protect the foreign reserves domiciled in dollars.
He said the deal will provide adequate local currency liquidity for Nigerian and Chinese industrialists and reduce difficulties they face in searching for the greenback.
He explained that in local currencies, the swap is worth 15 billion Renminbi (RMB)/Yuan or N720 billion adding that the three-year renewable deal will allow for the direct exchange of RMB and naira for the purpose of trade and direct investment between the two countries.
The agreement can be renewed on expiration, at the instance of both countries.
The ABCON boss said Bureau de Change (BDCs) will equally benefit from the swap deal given that a stable and strong naira is good for the economy and operators, adding that increased use of Yuan in trade deals will also open a new business opportunity for BDC operators.
According to Gwadabe, ABCON will continually support CBN in achieving its exchange rate stability mandate and promoting economic growth through increased global partnerships and collaborations.
According to the guideline, the swap agreement allows for both banks to among other purposes, make available liquidity in their respective currencies for the facilitation and promotion of trade and investments across Nigeria and China.
This will be done through the purchase, sale and subsequent repurchase and resale of the Chinese Yuan (CNY) against naira and vice versa.
Gwadabe reiterated that the said swap deal will smoothen bilateral trade, boost investment, and protect the financial market in both countries as well as cut dollar demand by Nigerians entrepreneurs importing from China.
All these, he said, will firm the value of the local currency.
He said the deal will reduce currency transaction cost for importers that go for Yuan while also easing foreign exchange liquidity pressures in periods of rate volatility and/or scarcity for Nigeria.
According to the regulations for transactions with authorized dealers in Renminbi, importers intending to import from China shall obtain Proforma invoice denominated in Renminbi as part of the documents required for registration of Form ‘M’.