The Central Bank of Nigeria (CBN) has announced that it sold a total of US$876.26 million to end users using Retail Dutch Auction System (RDAS).
It said the transaction was done by mandating authorised dealer banks to submit bids using an approved template within a given time frame.
According to a statement released on Wednesday, 7 August, signed by Omolara Omotunde Duke, Director, CBN’s Financial Markets Department, a total bid valued at $1.18 billion was received from 32 authorised dealer banks but bids valued at US$876.26 million from 26 dealer banks were qualified.
Join our WhatsApp ChannelIt said bids valued at US$313.69 million from six banks were disqualified.
READ ALSO: CBN Sells $148m To 29 Authorised Dealers
Explaining the reason for the disqualification, the CBN said four banks submitted their bids after the cut-off time of 3:00 pm on Tuesday, 6 August, while two banks did not provide bids in the template submitted. It added that all bids with Form Q and unverifiable Form A and Form M on the Trade Portal were disqualified.
The apex bank said it approved a cut-off rate of N1,495/US$ for the Retail Dutch Auction in accordance with its objective to boost FX liquidity to the market.
Detailing the result of the auction, the CBN said: “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$313.69 million from six banks were disqualified.
READ ALSO: Naira Appreciates Against Dollar At Official Market
“Of the disqualified bids, four banks submitted their bids after the cut-off time of 3:00 pm, while two banks did not provide bids in the template submitted. All bids with Form Q and unverifiable Form A and Form M on the Trade Portal were disqualified.
“In line with the objective of the CBN to boost Fx liquidity to the market as well as promote price discovery, the Bank approved a cut off rate of NI495/US$ for the Retail Dutch Auction where bids valued at US$876.26 million from 26 banks qualified.”
Since the devaluation of the naira that came on the back of foreign exchange reforms last year, the CBN has introduced a raft of measures to regulate activities in the market and stabilize the value of the naira. It had sold dollars of specific amounts between February and July this year to authorised Dealers and licensed Bureau de Change operators at certain rates all in a bid to increase dollar supply to the market and curb activities of speculators. However, high FX demand continued to put pressure on the Naira leading to persistent depreciation.
Analysts said the adoption of the Retail Dutch Auction System aims to ease of the mounting pressure on the local currency and stabilise the foreign exchange market.
Victor Ezeja is a passionate journalist with seven years of experience writing on economy, politics and energy. He holds a Master's degree in Mass Communication.
