CBN sells $876m to banks at N1,495 per dollar

The Central Bank of Nigeria (CBN) says it sold foreign exchange (FX) to banks worth $876.26 million at N1,495 per dollar.

The apex bank said the auction aimed to reduce demand pressure in the FX market and promote price discovery, according to a statement on Wednesday, signed by Omolara Omotunde Duke, CBN’s director of financial markets department.

The CBN said the transaction was conducted through a retail Dutch auction system (rDAS).

The system, announced on August 4, is a direct sale of FX by the CBN through the banks to the end users.

The rDAS is based solely on the actual demand of FX by the end users.

“The Central Bank of Nigeria (CBN) undertook the sale of foreign exchange (Fx) to end users through a Retail Dutch Auction System (rDAS) to reduce the demand pressure in the FX market, and promote price discovery on Tuesday, August 06, 2024,” CBN said.

“Authorised dealer banks were required to submit a comprehensive template that contains the details of the Forms A and M of all the outstanding trade backed unmet FX demand of their customers via email on Tuesday, August 06, 2024, between 9:00am and 3:00pm.

“The templates were all password protected with the passwords submitted to the CBN after the deadline for the submission of the bids, thereafter, the bids were opened and collated.

“The accounts of all end users were to be funded with the naira equivalent of their bids by Wednesday, 07 August 2024. The settlement for the successful bids is T+2, that is, Thursday, August 08, 2024.”

According to the CBN, a total bid of $1.18 billion was received from 32 dealer banks.

The regulator said while bids valued at $876.26 million from 26 banks qualified, bids from six banks were disqualified, as four banks missed the deadline and two did not provide bids in their submitted templates.

“A total bid valued at US$1.18 billion was received from 32 authorized dealers banks, of which, bids valued at US$876.26 million from 26 banks qualified, while bids valued at US$313.69 million from 6 (six) banks were disqualified,” the bank said.

“Of the disqualified bids, 4 (four) banks submitted their bids after the cut off time of 3:00pm, while 2 (two) banks did not provide bids in the template submitted. All bids with Form Q, and unverifiable Form A and Form M on the trade portal were disqualified.

“In line with the objective of the CBN to boost Fx liquidity to the market as well as promote price discovery, the bank approved a cut off rate of N1495/US$ for the Retail Dutch Auction where bids valued at US$876.26 million from 26 banks qualified.”

CBN said it will publish the total bids submitted by banks and all qualified bids for payment on its website for public information to ensure the transparency of the process.