The Central Bank of Nigeria (CBN) has advised Nigerian businessmen and importers to trade with the China Yuan to reduce the pressure on the naira-dollar exchange rate.
The CBN’s move is to strengthen foreign exchange and boost foreign reserves of Africa’s largest economy. The apex bank is working to meet the $50 billion mark in foreign earnings in the year 2018.
According to reports, CBN officials made the call during various town hall meetings with businesses in Lagos, Aba and other cities in the country on the importance of the bilateral currency swap agreement between Nigeria and the Republic of China.
The regulator had said it will soon commence bi-weekly trading sessions to ensure liquidity for trade and direct investment between the two countries.
“The Central Bank will encourage users importing goods from China to use the yuan and not the dollar,” officials said.
“Dollar demand burden arising from trade with China would be lifted from our foreign exchange reserves,” they said, adding that initial Yuan trades could be small.
The CBN signed a $2.5 billion currency swap arrangement with the People’s Bank of China (PBOC) in May.
Under the swap arrangement, the CBN would hold N720 billion in an account in favour of the PBOC while the Chinese central bank would hold 15 billion yuan, implying an exchange rate of N48 to the yuan.
Since the fall of the global fuel price in 2015 which resulted in the shortage of foreign reserves, the country’s monetary policy introduced multiple exchange rates and float the currency for foreign investors.
With this, the apex bank has been working hard to strengthen the naira rate against the greenback. The naira currently exchanges at N305 per dollar at the official market and about N360 per dollar at the parallel market.