CBN Moves to Crash Dollar Again, Introduces New System to Sell FX to Dealers
- The Central Bank of Nigeria (CBN) has announced plans to begin the Retail Dutch Auction System (rDAS) from Wednesday, August 7, 2024
- The bank asked all dealer banks to provide it with legitimate Forex demands with which to conduct the transactions
- The bank disclosed that it is reintroducing the system due to the growing demands for Forex in the banks
Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment, and the economy for over a decade.
The Central Bank of Nigeria (CBN) has announced that it will reintroduce the Retail Dutch Auction System (rDAS) starting Wednesday, August 7, 2024.
The system will see the apex bank sell foreign exchange to end users and authorized dealer banks.
Source: Getty Images
CBN requests customer information from banks
According to a circular by CBN, the bank directed authorized dealer banks to furnish it with a legitimate list of outstanding Forex demands by users containing the customer’s name, address, and contact information, such as email, phone number, BVN, account number, TAX Identification Number (TIN), the purpose for the FX requests, Form A or Form M, and Letter of Credit Number.
Read also
Zenith, Access, GTB, others borrow N73.6 trillion as CBN announces changes to funding costs
It also directed all authorized dealers to make the details available on or before Tuesday, August 6, 2024.
The circular said:
“The account of the prospective customer should be naira backed as a prerequisite to participate in the auction for immediate settlement upon confirmation of bid acceptance by the CBN."
A Dutch auction (also called a descending price auction) system is a type of auction in which an auctioneer starts with a very high price and incrementally lowers it until someone places a bid.
That first bid wins the auction (assuming the price is above the reserve price), avoiding bidding wars.
CBN explains the reason for the system
According to reports, CBN said it reintroduced the system after noticing growing unmet FX demands from end users with banks. This increased demand pressure in the foreign exchange markets, negatively impacting FX rates and the naira.
Findings show that the CBN adopted the Dutch Auction System and Interbank Rate System Regime between 2002 and 2015.
The bank conducted Forex sales via the system twice weekly, with the rDAS going directly to customers and the wDAS going to the banks.
The naira crashes again after two days of gain
The development came with the Nigerian naira, which crashed against the US dollar after rallying for two days.
Data from the FMDQ Exchange show that the naira crashed to N1,617 to a dollar on Friday, August 2, 2024, after appreciating N1,570 per dollar on Thursday, August 1, 2024.
FX traders quoted the dollar at a high of N1,635 and a low of N1,550 per dollar as Forex turnover stood at $131.55 million.
CBN crashes dollar for importers
Legit.ng earlier reported that the Central Bank of Nigeria (CBN) has lowered the Nigeria Customs Service foreign exchange rates for cargo clearance in Nigeria’s ports.
The apex bank pegged the Customs exchange rate at N1,600 per dollar from the N1,610 it reported on Wednesday, July 31, 2024.
The development follows the consistent gain of the naira against the US dollar in the official market.
PAY ATTENTION: Stay Informed and follow us on Google News!
Source: Legit.ng
