CBN Sells $876m to Banks at ₦1,495/Dollar as Parallel Market Trades at ₦1,574
The Central Bank of Nigeria (CBN) has sold $876.26 million worth of foreign exchange to banks at a rate of N1,495 per dollar, in a bid to reduce demand pressure in the FX market and promote price discovery. This move comes as the parallel market continues to trade at a significantly higher rate of N1,574 per dollar.
According to a statement by Omolara Omotunde Duke, CBN’s Director of Financial Markets Department, the transaction was conducted through a retail Dutch auction system (rDAS), which is a direct sale of FX by the CBN through banks to end-users. The system is based solely on the actual demand of FX by end-users.
The CBN received a total bid of $1.18 billion from 32 dealer banks, with bids valued at $876.26 million. However, a total of 26 banks won the bids, as six banks were disqualified, with four banks missing the deadline and two failing to provide bids in their submitted templates.
“The Central Bank of Nigeria undertook the sale of foreign exchange (FX) to end-users through a Retail Dutch Auction System (rDAS) to reduce the demand pressure in the FX market and promote price discovery,” the CBN said.
The regulator aims to boost FX liquidity in the market and promote price discovery, with the approved cut-off rate of N1,495/US$ for the Retail Dutch Auction. The CBN will publish the total bids submitted by banks and all qualified bids for payment on its website to ensure transparency.
Read: CBN Approves Merger of Unity and Providus, Sets Loan Conditions
Naira Continues to lose value despite CBN intervention
Since President Bola Tinubu’s monetary reform, which included collapsing the different exchange rates, Nigeria’s apex bank has been trying to mitigate the depreciation of the naira with little success.
From increasing interest rates to clamping down on the cryptocurrency exchange Binance, which was accused of manipulating the forex market, as well as other measures, the demand for dollars continues to put a strain on the naira, which has lost 150% of its value in 12 months.
This move by the CBN is seen as an effort to stabilize the FX market and prevent the currency from further depreciating.
