The central bank of Nigeria CBN, reaffirmed its pledge to balance the foreign exchange market and enable fair price settings after a proof of sales on Tuesday.
To enhance liquidity in the foreign exchange market, the Central Bank of Nigeria (CBN) said it has successfully conducted a Retail Dutch Auction System (rDAS) sale, resulting in the approval of bids valued at $876.26 million from 26 authorized dealer banks.
According to a statement by the Director of the Financial Markets Department at the CBN, Omolara Duke, the sale conducted on Tuesday highlights the Central Bank’s efforts to stabilise the foreign exchange market and ensure effective price discovery.
A Dutch auction is a type of auction in which the auctioneer starts with a high asking price and gradually lowers it until a bidder accepts the current price, thereby winning the auction.
Ms Duke said the auction saw a total of $1.18 billion in bids from 32 authorized dealer banks.
However, bids amounting to $313.69 million from six banks were disqualified for various reasons, including late submission and unverified documents. Specifically, four banks submitted their bids after the cut-off time of 3:00 p.m., and two banks failed to provide necessary documentation on the trade portal, leading to the disqualification of their bids.
She also said authorized dealer banks were required to submit comprehensive templates detailing their customers’ outstanding trade-backed foreign exchange demands by email between 9:00 a.m. and 3:00 p.m. on the day of the auction.
These templates, protected by passwords, were submitted to the CBN before the deadline for bid submissions. Once received, the bids were opened and collated by the CBN.
She said the successful bids will be settled on Thursday, 8 August, with the accounts of all end users funded with the naira equivalent of their bids by Wednesday, 7 August.
In line with its objective to boost FX liquidity and promote price discovery, the CBN said it set a cut-off rate of ₦495/US$ for the auction.
This rate applies to the $876.26 million worth of bids that were approved by the 26 qualifying banks.
Ms Duke emphasised the transparency of the process, stating that the total bids submitted by banks and all qualified bids for payment will be published on the CBN’s website for public information.
Moreover, the first auction sale since the CBN reintroduced the rDAS sale in a bid to address unmet foreign exchange demand.
This move comes as the local currency faces severe pressure amid liquidity issues in the forex market.