CBN settles $815.36m demand at Friday retail auction
The Central Bank of Nigeria (CBN) on Friday settled a total of $815.36 million out of $1.19 billion foreign exchange (FX) demand by end users funded by 26 banks at N1,495/$. The CBN disclosed this in a statement containing the summary of the Retail Dutch Auction and signed by Omolara Omotunde Duke, director of the Financial Markets Department of the CBN.
The statement said after the collation, the Committee of Governors of the CBN approved a cut-off bid of N1495.00/$ with the total successful bids of $815,362.006.30.
This represents 6.95 percent below the $876 million sold by 26 banks on Wednesday.
According to the FX market summary, the range of successful bids was N1495.00/US$ – N1650.00/US$ across 26 banks. Six banks were disqualified, including four banks that submitted after the six-hour submission period stipulated (9:00am-3:00 pm). In addition, two banks did not provide bids in the template supplied.
“It is hereby emphasised that each end user is allocated foreign exchange at the rate submitted by their bank. The Central Bank of Nigeria settled the retail Fx sales to banks on Thursday, August 08, 2024, at T+2. All Accounts not funded by August 08, 2024, do not qualify,” the CBN said.
The CBN on Tuesday, August 06, 2024, undertook retail foreign exchange (Fx) sales to end users via the Authorised Dealer Banks after an evaluation of FX demand and supply in the Nigerian Foreign Exchange Market to improve supply to the foreign exchange market and promote price discovery.
The Retail Dutch Auction System involves the sale of FX through an auction system to end users. It starts with a call for the submission of bids for an Auction. All the bids are collated and arranged from the highest bid to the lowest bid.
The auction mechanism is predicated on the volume of the FX that is available for sale. In addition, it is also targeted at giving forward guidance of the price of exchange rate that will promote FX market stability.
The cut-off point of an auction is the lowest exchange rate that clears the volume that is offered for sale.
Dutch Auction System was introduced and used by the CBN in 1987, 1990 and 2002-2006,
The CBN noted that calls for bids were in naira/US dollar (N/US$) currency pair for unmet FX demand backed by verifiable Forms A and M only.
“All bids were password protected and submitted through the dedicated email address provided by CBN between 09:00 a.m. and 3:00 p.m. Bids received after 3:00om were disqualified. Passwords for the bids were sent after the close of the auction. The total bids received were valued at US$1,191,071,651.59,” the CBN said.
