By Uche Usim
In a decisive effort to ease the strain on Nigeria’s foreign exchange market and enhance transparency in pricing, the Central Bank of Nigeria (CBN) has conducted a Retail Dutch Auction System (rDAS) sale. The auction saw $876.26 million sold at an exchange rate of N1,495 per dollar to 26 deserving banks. This was disclosed in a statement signed by Dr. Omolara Duke, Director of the Financial Markets Department.
The auction, held on August 6, 2024, aimed to address the high demand for foreign exchange (FX) and ensure fair price discovery. According to the statement, authorized dealer banks were required to submit comprehensive templates detailing their customers’ outstanding FX demands, supported by Forms A and M. These submissions were made via email between 9:00 am and 3:00 pm on the auction day, with password-protected templates sent to the CBN. The passwords were provided after the bid submission deadline, allowing the bids to be opened and reviewed.
End users’ accounts were to be credited with the naira equivalent of their bids by August 7, 2024, with the settlement for successful bids scheduled for August 8, 2024.
Out of a total of $1.18 billion in bids received from 32 dealer banks, only $876.26 million worth of bids from 26 banks were accepted. Six banks were disqualified from the auction: four failed to meet the submission deadline, and two did not include bids in their submitted templates. Consequently, approximately 75% of the total bid amount was supplied by the CBN.
The statement further explained: “A total bid valued at $1.18 billion was received from 32 Authorized Dealer Banks. Of these, bids valued at $876.26 million from 26 banks qualified, while bids totaling $313.69 million from six banks were disqualified. Of the disqualified bids, four were submitted after the cutoff time of 3:00 pm, and two did not provide bids in the submitted template. Additionally, all bids with Form Q, and unverifiable Form A and Form M on the Trade Portal were disqualified.”
To support FX liquidity and promote price discovery, the CBN set a cut-off rate of N1,495/US$ for this auction. The CBN also committed to publishing the total bids submitted by banks and the qualified bids on its website, reinforcing the transparency of the process.
This strategic auction by the CBN represents a significant effort to stabilize Nigeria’s FX market, ensuring a fair and transparent allocation system that fosters confidence among market participants.
