CBN Moves To Boost Use Of Chinese Yuan

 

By Stephen Ubanna

Worried by the low patronage  of the Chinese  currency, Renminbi, Yuan,   by Nigeria importers ,  for their transactions in the Asian country of China, the Central Bank of Nigeria, CBN,   has approved some  mouth watery  fresh incentives  for the importers who patronise the Chinese  currency in payment  for their importations  instead of using  the United States, US, dollar to settle the bills of their suppliers  in China.

Ahmed  Abdullahi, the CBN Director of Bank Supervisions confirmed the Bankers Committee decision, stressing that the it was taken  to encourage Nigeria importers  to patronise the yuan for their business transactions in China. Abdullahi  disclosed that the apex Bank  was fully  prepared to” weather the  headwind of the global economy in order  to stabilise business transactions in the country”.

Many had expected  the Nigeria importers to resort to the use of the Chinese yuan in settling their Chinese suppliers with the current currency Swap deal between the two countries  but nothing appear to have changed as the US dollar is still very much  used by importers to make their payments to their Chinese suppliers.

A senior Customs official who spoke to the Magazine  at Tincan Island port disclosed  that most of the payments  for the Containerised cargoes that had been discharged at the port  in the recent time from China  were made in the US dollar, thus forcing the Valuation officers at the Command to base their duty calculation for such imports on the prevailing exchange rate between the naira to the dollar in the official foreign exchange market istead of  the yuan.

the worry of the Bankers Committee,  Chaired by Godwin Emefiele, the CBN governor , was that the attitude of importers to use the Chinese   yuan in the payment  of their importations  from China was still persisting because  importers are yet to come to terms with the Chinese yuan for their business transactions in China, instead of the dollar.

The CBN officials are optimistic that the  low patronage of the yuan   would change for the better with the incentives put in place by the  apex bank to encourage importers.   The CBN was said  to have assured  importers  that” it has enough Chinese yuan to guarantee a stable exchange rate and ensure that there was  enough  liquidity of the Chinese currency  in the country’s weekly foreign exchange market.  As at last April, Nigeria has about $49 billion foreign exchange reserves. That much was confirmed by Emefiele, the CBN, governor.

Many believe that with the incentives approved  for importers who use the yuan for their business transactions in China by the Bankers Committee to, it would encourage importers of  equipment, machinery and other goods to get their  invoices from their suppliers in China  in the yuan instead of the US dollar. The  officials of Commercial banks had predicted a significant drop in the demand for the US dollar  by importers in next couple of months because of the incentives  put in place by the CBN to encourage  importers  to pay  their suppliers in China with the yuan.

”One of the incentives that was said to have been approved  at the Bankers Committee meeting for importers   who get their invoices from the Chinese suppliers on their own currency, was a percentage spread to encourage others to start using the yuan for their imports  was basically to  bring down the cost of importation and price of goods in the country”, Abdullahi had said.

The Bankers Committee may have  reasoned in  coming out with the incentives  that  if  importers  could collect   invoices from their Chinese suppliers in the dollar, it would  add up to their cost  in terms of the naira, going by the current exchange rate of N365.00 at the official forex market. The argument , therefore, was that if the importers could  obtain  their invoices for their goods ordered from China with the yuan, and going by the exchange rate  against the naira, it will be lesser because of the currency Swap deal between the two countries.

It would be recalled that  Emefiele, the governor of the CBN and his counterpart in the peoples Bank of China had signed  over 16 billion Yuen or $2.5 billion  bilateral currency Swap deal recently intended to ”stabilise the  international  financial market and facilitate and facilitate trade and investment between the two trading partners. The negotiation for the currency Swap deal was said to have taken two years before it was finally signed last May. The CBN has given an insight the currency Swap deal between the two countries will be effective for the next three years  and could only be extended by mutual consent of the parties involved in the deal.

Prior to the Bankers Committee decision to come out with incentives to encourage importers to use the Yuen for payment of Chinese Suppliers, Isaac Okrorafor, an Assistant Director and the CBN, Spokesman , had said  that deal  will bring more flexibility  to both China and Nigeria markets by easing up the challeges encountered  in the search  for the dollar and providing   adequate  naira liquidity to Nigerian business men and   the yuan liquidity to their Chinese counterparts.

He is optimistic that  that Nigeria manufacturers, particular, Small and Medium  Enterprises,( SMEs )manufacturers and Cortege industries which import raw materials, Spare parts and simple machinery  would not have any cause to worry as they would have access to the Yuen from the banks without being exposed to the difficulties  of seeking for other scarce foreign currencies. The good news for importers was that the currency Swap deal was that it would be calculated based on the exchange rate of  N305.00 to A $1 in the official foreign exchange market.

John Uchechukwu, a business man, believes that the drop in the demand for the dollar by importers because of the CBN fresh incentives   would reduce the pressure on the naira, if properly implemented by the CBN. Emefiele , the governor of the apex  Bank has made it clear to that cares to listen  that all the necessary measures  have been put in place to block all loopholes to ensure proper implementation of the currency Swap deal with China to avoid abuse.