CBN Woos Importers to Trade Chinese Yuan

The Central Bank of Nigeria (CBN) is wooing local businesses importing goods from China to use the yuan instead of the US dollar in its effort to support its naira currency and boost reserves.

To this end, central bank officials yesterday held a town hall meeting with businesses in Lagos to introduce the yuan for imports from China ahead of plans to start auctioning the Asian currency later this month.

The dollar is Nigeria’s main trade currency. The OPEC member suffered severe dollar shortages after the price of crude oil, its top export and main source of FX, plunged in late 2014, prompting it to introduce capital controls in 2015. It now has multiple exchange rates against the U.S. currency and has been selling the dollar on the interbank market to boost liquidity after floating the naira for investors.

“The central bank will encourage users importing goods from China to use the yuan and not the dollar,” officials told Reuters.

“Dollar demand burden arising from trades with China would be lifted from our FX reserves,” they said, adding that initial yuan trades could be small. Nigeria signed a $2.5 billion currency swap arrangement with the People’s Bank of China (PBoC) in May.

Officials said the deal was aimed at reducing reliance on the dollar and “as such reduce the pressure on the naira-dollar exchange rate.” Under the swap arrangement, Nigeria’s central bank 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.