Godwin Emefiele
CBN Governor, Godwin Emefiele
• Finally, FAAC disburses N668bn for May  
• June allocation uncertain

By Chika Amanze-Nwachuku, Obinna Chima in Lagos and Ndubuisi Francis in Abuja   

The Central Bank of Nigeria (CBN) yesterday commenced its intervention in the sale of foreign exchange in Chinese Yuan (CNY), signaling the consummation of the bilateral currency swap agreement it signed with the People’s Bank of China on April 27.

This is coming as the Federation Account Allocation Committee (FAAC), after three inconclusive meetings scheduled to share allocations for the month of May, has finally distributed N668.898billion to the three tiers of government. 

Acting Director, Corporate Communications at the CBN, Isaac Okorafor said in a statement yesterday that the sales shall be through a combination of spot and short tenored forwards.

According to him, the exercise, which shall be Special Secondary Market Intervention Sales (SMIS) retail, would be dedicated to the payment of Renminbi denominated Letters of Credit for raw materials, machinery and agriculture. 

He explained that the CBN would receive bids from all authorised dealers, further adding that due to the peculiarity of the exercise, the Bank would not be applying the relevant provisions of its Revised Guidelines for the Operation of the Inter-bank Foreign Exchange Market, which require all SMIS bids to be submitted to the CBN through the Forex Primary Dealers.

Furthermore he said that 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 1% of the overall available funds on offer at each SMIS session”.

Speaking on the bid period, Okorafor said authorised dealers were requested to submit their customers’ bids from 9.00 am to 12.00 pmon Friday July 20, 2018, adding that bids received after this time would be disqualified. 

On funding, he disclosed that authorised dealers were to debit the customers’ accounts for the Naira equivalent of their bids, stressing that the CBN would debit authorised dealers’ current account on the day of intervention to the tune of the naira equivalent of their bid request. 

The CBN spokesman explained that there would be no predetermined spread on the sale of FX Forwards by authorised dealers to end-users under the Special SMIS-Retail, adding that authorised dealers would be allowed to earn 50 kobo on the customers’ bids.

Pointing out that the bids were on Spot FX basis as the authorised dealers’ accounts with the CBN would be debited in full for the Naira equivalent of the USD bid amount, Okorafor advised customers that were not willing to accept the settlement terms not to participate in this Special SMIS – Retail. 

According to him, forward bids would be settled through a multiple-price book building process and would cut-off at a marginal rate to be disclosed after the conclusion of the Special SMIS – Retail process. He urged customers not willing to accept the terms of the forward rate not to participate in this Special Chinese Yuan SMIS Intervention.

He emphasised that the CBN reserved the right not to make a sale if it had the impression that the exercise did not provide an effective price for the determination of the CNY/NGN exchange rate.

“There will be very marginal discount to encourage people to go for it. But the discount will be so small as not to encourage arbitrage, but encourage those who really want to do so that they can get an advantage for embracing the Renminbi currency,” the source had told THISDAY

The CBN recently held town hall meetings in some cities in the country in its bid to woo businesses importing goods from China to use the Yuan instead of the United States dollar in its effort to support its naira currency and boost reserves.

Officials said the deal was aimed at reducing reliance on the dollar and “as such, reduce the pressure on the naira-dollar exchange rate.”

Meanwhile, the FAAC, after three inconclusive meetings scheduled to share allocations for the month of May has distributed N668.898billion to the three tiers of government.

The stalemate was occasioned by a sharp disagreement over remittances into the Federation Account by the revenue generating agencies, especially the Nigerian National Petroleum Corporation (NNPC).

The states, represented in FAAC by commissioners for finance had insisted that the NNPC must remit what they considered appropriate before disbursements could take place.

Following the deadlock, many civil servants at the federal and state levels were unable to get their salaries paid.

However, the Ministry of Finance announced yesterday that N668.898 billion had been distributed among the three tiers of government, for the month of May.

A statement issued by the Director (Information) in the ministry, Hassan Dodo said:  “The urgent need to cushion the undue hardships being experienced by workers nationwide has made it necessary to distribute the May figures totalling N668.898 billion to the three tiers of government, while efforts are being intensified to address the unsatisfactory remittances.”

The disbursed N668.898billion, the statement added, was made up of statutory distributable sum of N575.475 billion and N 93.423 billion from the Value Added Tax (VAT).  

The total revenue realised for the month, was shared in line with the extant formula as follows: federal government – N282.223 billion; states – N181.167 billion; and local governments – N136.490 billion. The oil producing states received N53.071 billion as 13 per cent derivation. 

The sum of N15.947 billion was paid to the revenue generating agencies as costs of collections. 

The statement explained that the statutory revenue of N575.475 billion received for the month of May 2018 was lower than the N613.057 billion received for April 2018 by a total of N37.582 billion. From the total statutory revenue of N575.475 billion, the federal government got N268.770 billion; the states – N136.324 billion; local governments – N105.100 billion; oil producing states – N53.071 billion, and the revenue generating agencies received N12.210 billion as costs of collections. 

For the month of May 2018, the total revenue of N93.423 billion from the Value Added Tax (VAT) was N5.458 billion higher than the N87.965 billion distributed in April 2018. 

From the N93.423 billion, the federal government received N13.453 billion; states– N44.843 billion; local governments — N31.390 billion, while N3.737 billion was received by the revenue collecting agencies.

With the May allocation finally distributed, it is uncertain when the June accruals will be shared.