CBN ask banks to sumbit bids for second Chinese yuan aunction

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LAGOS, Aug 17 – Nigeria’s central bank asked lenders on Friday to submit bids for the Chinese yuan, traders said, in its second auction of the currency after it agreed a swap with the People’s Bank of China in May.

In May, the central bank signed a $2.5 billion three-year currency swap deal with Beijing to facilitate trade between the two countries and cut reliance on the dollar.

It sold 69.86 million yuan ($10.16 million) in its first auction of the Chinese currency two weeks ago at a range of 49-51 naira.

Dollar liquidity has been shrinking as a result of capital reversals after the U.S. central bank started to raise interest rates this year.

Concerns over political risk in the run-up to next year’s presidential election, where incumbent Muhammadu Buhari will seek re-election, and falling yields on government treasuries have deterred inflows.

The auction is part of efforts to encourage the use of an alternative trading currency to the U.S. dollar especially as Nigeria imports heavily from China.

Bids at the auction must be backed by customer invoices, traders said, with the exchange rate determined via a book building process.

The bank also plans to auction the U.S. currency on Friday, traders said.

The naira, which is traded over the telephone, has been quoted at a range of 362 to 363 per dollar. It could ease to 364 next week owing to tight liquidity on the interbank market, traders say.

The unit is quoted at around 306 per dollar on the official market, supported by central bank’s regular intervention. ($1 = 6.8785 Chinese yuan renminbi)

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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