The Central Bank of Nigeria (CBN) recently conducted a retail Dutch auction, selling $876.26 million to 26 qualified banks at an exchange rate of N1,495 per dollar. However, six prominent banks were excluded from participating due to various reasons.
The excluded banks include United Bank for Africa (UBA), First City Monument Bank (FCMB), Stanbic IBTC, Wema Bank, SunTrust Bank, and Rand Bank. The reasons for their exclusion ranged from late submission of bids to failure to provide bid rates.
The auction was part of the CBN’s efforts to alleviate demand pressure in the foreign exchange market and promote price discovery. A total of $1.18 billion in bids was submitted by 32 banks, but $279.04 million worth of bids from the six excluded banks were disqualified.
The CBN’s strict regulatory requirements aim to maintain transparency and efficiency in the FX market. The exclusion of major banks highlights the importance of adhering to submission deadlines and accurately completing bid templates for future auctions.
The successful bids were settled on August 8, 2024, as part of the T+2 settlement process. The CBN’s retail Dutch auction marks one of the most significant FX interventions by the apex bank under the leadership of Governor Yemi Cardoso, who has been actively working to stabilize the naira and address ongoing volatility in the FX market.
The CBN’s actions demonstrate its commitment to maintaining a stable and transparent FX market. By excluding banks that fail to meet regulatory requirements, the CBN ensures that only qualified banks participate in the auction, promoting fairness and efficiency.
The auction’s outcome also highlights the CBN’s efforts to address demand pressure in the FX market, which has been a challenge for the Nigerian economy. By selling dollars to qualified banks, the CBN aims to increase FX liquidity and promote price discovery.
The CBN’s retail Dutch auction is a positive step towards stabilizing the naira and promoting transparency in the FX market. As the apex bank continues to implement measures to address FX volatility, Nigerians can expect a more stable currency and improved access to foreign exchange.
The CBN’s exclusion of six banks from the retail Dutch auction highlights the importance of regulatory compliance and transparency in the FX market. As the CBN continues to work towards stabilizing the naira, Nigerians can expect a more stable economy and improved access to foreign exchange.
