The Central Bank of Nigeria(CBN) has said that Nigeria would start holding yuan as part of its foreign exchange reserves from the next quarter of this year.
The governor of the CBN, Sanusi Lamido Sanusi, who made this remark in an interview yesterday with Reuters, said that Nigeria would initially focus on buying Chinese government onshore bonds.
He said that the CBN would also look at investment opportunities in the offshore yuan market in Hong Kong, where the currency was fully convertible.
“We got an indication from the People’s Bank of China that we will be able to get a quota to invest in the onshore bond market in Shanghai, and we will be able to take out the money when we need it.? That’s all the convertibility we need,” he said.
The apex bank,? which holds about $32 billion in foreign exchange reserves,? had on Monday said it would diversify about a tenth of that into yuan.
Currently, other central banks that have approval to invest in China’s onshore bond market include the Hong Kong Monetary Authority(HMA) and Malaysian Central Bank. China has a closed capital account, and all inflows into its markets need prior approval from the People’s Bank of China. ?
Sanusi stated that the CBN decided to diversify its foreign exchange reserves earlier this year and China has been facilitating that decision.
“They are not going around asking people to convert their foreign exchange into renminbi. That is a decision we made by ourselves,” he said. “Actually, talking to the Chinese central bank, they’re not pushing anybody. If you want, you come. That’s the impression I had.”
The renminbi is another name for the yuan.
The CBN? boss? however said that the apex bank would also be looking at August’s consumer price data before going into its next policy meeting later this month to decide on whether to tighten monetary policy further.
This is because the recapitalisation of three nationalised banks plus plans to pump money in to save another five in September and October may add to inflation pressures, even as a good harvest brings down food prices, which make up for much of the country’s consumer price index.
“There are strong monetary impulses that may push inflation. the connectivity and fiscal spending would tend to suggest that there would be monetary pressures that might be strong enough to counterveil any cyclical benefits from the harvest,” he added.
The nation’s headline inflation unexpectedly fell in July to 9.4 per cent, reaching its lowest level for more than three years following an aggressive period of monetary tightening by the central bank.
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