Amaka Obiefuna

The Central Bank of Nigeria (CBN) says bids will be on Spot FX basis as the Authorized Dealers’ accounts with the CBN would be debited in full for the Naira equivalent of the USD bid amount, and advises customers that are not willing to accept the settlement terms not to participate in this Special SMIS – Retail.

The CBN had on Friday, July 20, 2018, flagged off its intervention in the sale of foreign exchange in Chinese Yuan (CNY), signaling the consummation of the Bilateral Currency Swap Agreement (BCSA) signed with the People’s Bank of China (PBoC) on April 27, 2018.

A statement issued by the Bank on Friday disclosed forward bids would be settled through a multiple-price book building process and would cut-off at a marginal rate to be disclosed after the conclusion of the Special SMIS – Retail process and that customers not willing to accept the terms of the forward rate should not participate in the Special Chinese Yuan SMIS Intervention.

It added that the sales shall be through a combination of spot and short tenured forwards and that the exercise, which shall be Special Secondary Market Intervention Sales (SMIS) retail, would be dedicated to the payment of Renminbi denominated Letters of Credit for raw materials and machinery and agriculture.

The Bank’s spokesman, Isaac Okorafor, explained that the CBN would receive bids from all authorized dealers. He added that due to the peculiarity of the exercise, the 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 (FXPDs).

According to Okorafor, the CBN would also not be applying the relevant provisions of the Guidelines which equally provide that “Spot FX sold to any particular end-user shall not exceed 1% of the overall available funds on offer at each SMIS session”.

Speaking on the bid period, he said authorized Dealers were requested to submit their customers’ bids from 9.00 am to 12.00 pm on Friday July 20, 2018, adding that bids received after this time would be disqualified.

On funding, he disclosed that authorized dealers were to debit the customers’ accounts for the Naira equivalent of their bids, stressing that the CBN would debit authorized dealers’ current account on the day of intervention to the tune of the naira equivalent of their bid request.

Okorafor further explained that there would be no predetermined spread on the sale of FX Forwards by Authorized Dealers to end-users under the Special SMIS-Retail, adding that authorized Dealers would be allowed to earn 50 kobo on the customers’ bids.

Okorafor emphasized that the CBN reserved the right not to make a sale if it had the impression that the exercise did not provide an effective price for the determination of the CNY/NGN exchange rate.