Central Bank of Nigeria (CBN) Friday asked banks to submit bids for the second Chinese yuan auction, according to foreign exchange dealers.
In May, the CBN 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.
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 for the auction are expected to be backed by customer invoices with the exchange rate determined via a book building process.
It sold 69.86 million yuan ($10.16 million) in its first auction of the Chinese currency two weeks ago at a range of N49-51. 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 elections and falling yields on government treasuries have deterred inflows.
The naira, which is traded over the telephone, has been quoted at a range of N362 to N363 per dollar. It could fall to N364 this week owing to tight liquidity on the interbank market, traders say. The unit is quoted at around N306 per dollar on the official market, supported by central bank’s regular intervention.
Nigeria November 21, 2019