Sale of forex in Chinese Yuan’ll cut off pressure on dollar, drop inflation—Experts
Financial market pundits have hinted that the implementation of the Bilateral Currency Swap Agreement signed by the Central Bank of Nigeria (CBN) with the People’s Bank of China (PBC) on April 27, 2018, will have two positive effects on the economy.
First, it will reduce pressure on demand for US dollars for Chinese imports and secondly, it will weaken inflationary trend to fall which means better price of things going forward.
A development economist, Dr. Ken Igboanugo in an interview weekend, observed that shift from dollar to Yuan will among other things remove the age-long pressure on US dollars which will mean serious steps to fiscal stability on the long run.
Another economist, Salaudeen Amao averred that “The direct implication of this deal would be a drop in the price of goods imported from China. Businessmen who trade in Chinese goods had hinted of a likely drop in the cost of goods imported from China as it would now be cheaper than when they had to make purchases in dollars”.
Business Hilights recalls that the CBN, on Friday, commenced its intervention in the sale of foreign exchange in the Chinese Yuan.
In a statement issued, CBN said the sale of foreign exchange under the agreement would be done through a combination of spot and short-tenor forwards.
According to the apex bank, the exercise was in form of a Special Secondary Market Intervention Sales retail and would be dedicated to the payment of Renminbi denominated Letters of Credit for raw materials, machinery and agriculture.
Spokesman of the bank, Mr. Isaac Okorafor, explained that the apex bank would receive bids from all authorised dealers, adding that due to the peculiarity of the exercise, the apex bank would not be applying the relevant provisions of its revised guidelines for the operation of the Inter-bank Foreign Exchange Market, which direct all SMIS bids to be submitted to the CBN through the Forex Primary Dealers.
The statement noted in parts that “The CBN would also not be applying the relevant provisions of the guidelines, which equally provide that spot foreign exchange sold to any particular end-user shall not exceed one per cent of the overall available funds on offer at each SMIS session.”
