(Adds details, dollar auction)
By Chijioke Ohuocha
LAGOS, Aug 17 (Reuters) - Nigeria’s central bank asked lenders on Friday to submit bids for the Chinese yuan, traders said, in its second auction of the currency after it agreed a swap with the People’s Bank of China in May.
In May, the central bank signed a $2.5 billion three-year currency swap deal with Beijing to facilitate trade between the two countries and cut reliance on the dollar.
It sold 69.86 million yuan ($10.16 million) in its first auction of the Chinese currency two weeks ago at a range of 49-51 naira.
Dollar liquidity has been shrinking as a result of capital reversals after the U.S. central bank started to raise interest rates this year.
Concerns over political risk in the run-up to next year’s presidential election, where incumbent Muhammadu Buhari will seek re-election, and falling yields on government treasuries have deterred inflows.
The auction is part of efforts to encourage the use of an alternative trading currency to the U.S. dollar especially as Nigeria imports heavily from China.
Bids at the auction must be backed by customer invoices, traders said, with the exchange rate determined via a book building process.
The bank also plans to auction the U.S. currency on Friday, traders said.
The naira, which is traded over the telephone, has been quoted at a range of 362 to 363 per dollar. It could ease to 364 next week owing to tight liquidity on the interbank market, traders say.
The unit is quoted at around 306 per dollar on the official market, supported by central bank’s regular intervention. ($1 = 6.8785 Chinese yuan renminbi) (Reporting by Chijioke Ohuocha Editing by Andrew Heavens and Alison Williams)