The Central Bank of Nigeria, CBN, may have hit a comfort zone in the Bilateral Currency Swap Agreement, BCSA, it signed with the People’s Bank of China (PBoC). Investigations made by Vanguard show a relative stability across all the dimensions of the BCSA especially in the area of liquidity, exchange rate, demand management and projections to terminal date.
The agreement has reached one year of implementation last month as it was signed on April 27, 2018, to ease demand pressure on the country’s supply of foreign exchange. Accordingly, a recent Vanguard investigations show adequate supply of the Chinese Yuan in the weekly intervention of the CBN in the foreign exchange market with demand averaging CNY135 million per month.
The new investigation also reveals that there are relative stability enjoyed by the end users with exchange rate averaging CNY1/N51.9 over the past one year. The BCSA exchange rate at commencement was on the average of CNY1/N53.17.
Improvements were seen by the second trading week this month because the rate had trended further down to as low as CNY1/N46, showing significant appreciation of the Naira against the Chinese currency under the new agreement.
In addition to that, CBN appeared to have hit demand-supply equilibrium in the past three months with average volume at lower range of CNY33.4 million per trading session, down from peak CNY69.7 million.
The CBN appears to be within huge comfort zone in the maximum limit of CNY15 billion for three years provided in the BCSA, due to the average trading volume of about CNY1.74 billion in the first anniversary of the agreement.
CBN Director, Corporate Communications Department, Mr Isaac Okorafor, expressed satisfaction over the stability of the foreign exchange market since the commencement of the BCSA which, according to him, was largely due to sustained intervention by the bank.
He assured that the apex bank would remain committed to ensuring that all the sectors of the forex market continue to enjoy access to the needed foreign exchange and urged Nigerians to continue to support the policies of CBN aimed at boosting the production capacity of local industries as well as creating jobs.
Okorafor lauded players in the various sectors of the FOREX market for their contributions to the prevailing stability.