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HomeBusinessCBN plans renewal of Naira-Yuan currency swap deal to steam currency depreciation

CBN plans renewal of Naira-Yuan currency swap deal to steam currency depreciation

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By Oludare Mayowa

The Central Bank of Nigeria (CBN) is set to renew the currency swap arrangement with the Chinese government next year, according to a senior lawyer, Femi Falana.

Falana made this revelation on a Television program on Friday, saying the CBN informed him of the latest developments on the currency swap.

According to him, he wrote to the central bank under the Freedom of Information Act to seek details of the previous agreement on the Naira-Yuan swap carried out under the immediate past President Mohammadu Buhari administration.

In 2018, the CBN signed a bilateral currency swap agreement with the People’s Bank of China (PBoC) worth about $2.4 billion. In local currencies, the swap was worth 15 billion renminbi, or N720 billion.

The deal was expected to reduce the demand for US dollars by Nigerians importing from China and consequently strengthen the value of the naira. The deal was aimed at reducing certain barriers for Nigerian importers of goods from China and reducing the cost of transactions in multiple currencies.

The currency swap deal was intended to reduce pressure on the country’s external reserves and ensure foreign exchange stability.

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However, Falana said that many Nigerian traders who import goods from China are not aware of the scheme’s existence and are still looking for dollars for their import business.

In June, the Bola Tinubu government abolished multiple exchange rates and technically devalued the local currency by floating the naira, leading to the free fall of the naira on both the official and parallel markets.

Falana said with the Yuan and naira swap still in place, the pressure on the available dollar would be minimized as traders would no longer require to source for dollars to make purchases of goods from China.

Consequently, the naira/yuan exchange rate traded at N105/N117 to the Yuan as of August 15, compared with N48 to the CYN in 2018 when the agreement was signed.

The naira was exchanged at N840/N860 dollar exchange on the parallel market on Thursday, while it was exchanged at N740.67 on Thursday at the official window against the previous close of N759.86.

Efforts to confirm Falana’s claims regarding the potential developments in the Naira-Yuan currency swap from the Central Bank of Nigeria yielded no definitive response.

(Contact; omayowa@globalfinancialdigest.com; Newsroom: +234 8033 964 138)

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