CBN Releases Details of Dollar Sales to Banks at N1,495/1$ Cut-Off Exchange Rate
- The CBN has successfully conducted its first retail sale to enhance supply in the foreign exchange market
- The apex bank received over 3,347 requests from Nigerian companies, including Dangote, seeking dollars for imports
- The CBN hopes that this move will bolster the value of the Nigerian currency in the foreign exchange market
Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
The Central Bank of Nigeria (CBN), on Tuesday, August 6, 2024, carried out retail foreign exchange (Fx) sales to end users through authorized dealer banks.
The apex bank said the auction was designed to meet unmet foreign exchange (Fx) demand, using a naira/US dollar (N/US$) currency pair for transactions backed by verifiable Forms A and M only.
Source: Getty Images
Retail Dutch Auction System (RDAS)
The CBN explains that the Retail Dutch Auction System involves the sale of FX through an auction system to end users.
It begins with a call for bids for an auction, where all bids are collated and arranged from the highest to the lowest.
The auction mechanism is based on the volume of FX available for sale, and it also provides forward guidance on the exchange rate to promote market stability.
The cutoff point of an auction is the lowest exchange rate that clears the offered volume.
The Dutch Auction System was introduced and used by the CBN in 1987, 1990, and from 2002 to 2006.
Bidding Process:
Bidders were required to submit their bids between 9:00 a.m. and 3:00 p.m. via a dedicated CBN email address, with all bids being password-protected.
Auction Results:
The total value of bids received was US$1,191,071,651.59. Following the collation of these bids, the Committee of Governors of the Central Bank of Nigeria approved a cut-off bid rate of N1495.00/US$.
A total of US$815,362,006.30 (Eight Hundred and Fifteen Million, Three Hundred and Sixty-Two Thousand and Six US Dollars and Thirty Cents) in successful bids were accepted, with bid rates ranging from N1495.00/US$ to N1650.00/US$ across 26 participating banks.
Disqualifications:
Six banks were disqualified from the auction: four for submitting bids after the stipulated 6-hour submission period and two for failing to use the provided bid template.
Full list of the approved banks can be found here.
Allocation and Settlement:
Each end user was allocated foreign exchange at the rate submitted by their respective bank.
The CBN settled the retail FX sales to banks on Thursday, August 8, 2024, with a 1+2 settlement. Accounts not funded by August 8, 2024, were deemed ineligible for settlement.
Report predicts 3 sources Nigeria will get dollars
Legit.ng reported that a recent quarterly statistical bulletin from the Central Bank of Nigeria (CBN) has highlighted that foreign exchange (FX) consumers consumed more dollars in the three months ending in December 2023 than they did in the previous quarter.
The inflows will most likely come from World Bank budget finance, NNPC-related flows, and Eurobond issuance.
The inflows will most likely come from World Bank budget finance, NNPC-related flows, and Eurobond issuance.
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Source: Legit.ng
