The Central Bank of Nigeria (CBN) on Friday enhanced liquidity in the foreign exchange market to the tune of $327 million and CYN69 million to meet the needs of agricultural and raw material sectors of the economy.
The dollar injection was made into the interbank retail Secondary Market Intervention Sales, while the Chinese Yuan sale was in the spot and short-tenored forwards.
Isaac Okorafor, acting director, Corporate Communications at the CBN, said that the exercise which was in tune with the CBN guidelines, were for the payment of Renminbi denominated Letters of Credit for agriculture as well as raw materials. He added that the sales in the Chinese Yuan were through a combination of spot and short-tenored forwards, arising from bids received from authorized dealers.
While noting that availability of Renminbi was sure to ease pressure on the Nigerian foreign exchange market, Okorafor attributed the relative stability in the foreign exchange market to the intervention of the CBN as well as the sustained increase in crude oil prices in the international market. He further assured that the CBN would remain committed to ensuring that all the sectors continue to enjoy access to the needed foreign exchange by Nigerians.
Meanwhile, $1 exchanged for N360 at the Bureau de Change (BDC) segment of the foreign exchange market, while CNY 1 exchanged for N53.35.
The CBN recently signed a bilateral currency swap agreement with the People’s Bank of China (PBoC) worth about US$2.4 billion.
FSDH Research review in the last five years shows that Nigeria’s imports from China are higher than the exports to China, leading to a negative trade balance.
China has been one of Nigeria’s largest import partners over the last five years, with imports from China accounting for an average of 20.95 percent of total imports between 2013 and 2017.
Nigeria’s exports to China averaged just 1.50 percent of total exports over the same period. According to the research firm, the fact that it removes some trade barriers between the two countries may increase Nigeria’s imports from China. This development, without a corresponding increase in Nigeria’s exports to China, will further increase Nigeria’s trade deficit with China.
Nigeria needs to develop competitive advantage in the production of certain exportable goods that China currently imports in order for Nigeria to get the full benefit from this currency swap deal.
Tags: Economy, Federal Government, Agriculture