The exercise marks the formal take-off of the Bilateral Currency Swap Agreement (BCSA) the bank signed on April 27, 2018 with the People’s Bank of China (PBoC).
A statement by the CBN spokesperson, Isaac Okorafor, said the sale shall be through a combination of spot and short-tenored requests.
Mr Okorafor said the Special Secondary Market Intervention Sales (SMIS) retail would be dedicated to the payment of Renminbi denominated Letters of Credit (LCs) for raw materials and machinery and agriculture only. He said the CBN would receive bids from all authorised dealers.
Due to the peculiarity of the sale, Mr Okorafor said the bank would not be applying the relevant provisions of its revised guidelines for the operation of the inter-bank foreign exchange market.
The guidelines direct all SMIS bids to be submitted to the CBN through the Forex Primary Dealers (FXPDs).
Besides, Mr Okorafor said, 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 one per cent of the overall available funds on offer at each SMIS session.”
On the bid period, he said authorised dealers were requested to submit their customers’ bids from 9.00 a.m. to 12.00 p.m. on Friday.
Bids received after the deadline would be disqualified.
On funding, he said authorised dealers were to debit the customers’ accounts for the Naira equivalent of their bids.
On the other hand, the CBN would debit authorised dealers’ current account on the day of intervention with the Naira equivalent of their bid request.
Mr Okorafor further explained there would be no predetermined spread on the sale of FX Forwards by Authorised Dealers to end-users under the Special SMIS-Retail.
He said authorised dealers would be allowed to earn 50 kobo on the customers’ bids.The bids, the CBN spokesperson said, were on Spot FX basis as the authorised dealers’ accounts with the CBN would be debited in full for the Naira equivalent of the dollar bid amount.
Customers that were not willing to accept the settlement terms were advised not to participate in this Special SMIS – Retail. Similarly, he said, forward bids would be settled through a multiple-price book building process to be cut-off at a marginal rate to be disclosed after the conclusion of the Special SMIS–Retail process.
“Customers not willing to accept the terms of the forward rate are not to participate in this Special Chinese Yuan SMIS Intervention,” he said.
“CBN reserves the right not to make a sale if it has the impression the exercise did not provide an effective price for the determination of the CNY/NGN exchange rate.”