Business
CBN to Implement Retail Dutch Auction System to Address Mounting Forex Demand
The Central Bank of Nigeria (CBN) has announced plans to introduce a Retail Dutch Auction System (DAS) to tackle the growing unmet foreign exchange (FX) demand from end users.
According to a circular, the initiative is set to begin next Wednesday and aims to ease pressure on the FX market and stabilize the naira, which recently closed at N1,617.08/$1.
The CBN has directed all authorized dealer banks to submit a detailed list of outstanding FX demands from their customers.
The circular stated, “The CBN has noted growing unmet FX demand from end users with banks, which has continued to increase demand pressure in the FX market, adversely affecting the naira’s exchange rate. Authorized dealer banks are therefore to provide the CBN with a legitimate list of all outstanding FX.
READ ALSO: Naira hits record low amid persistent market pressures
The required list must include customer information such as name, address, contact details, Bank Verification Number (BVN), account number, Tax Identification Number (TIN), transaction type, Form A or Form M, and Letter of Credit (LC) Number.
Authorized dealers must submit this information via email to [email protected] by Tuesday, August 6, 2024, using the provided template.
Additionally, prospective customers’ accounts must be naira-backed to qualify for participation in the auction, ensuring immediate settlement upon confirmation of bid acceptance by the CBN.
READ ALSO: Naira slumps further against major currencies
The Retail Dutch Auction System is expected to alleviate demand pressure by allowing authorized dealers to bid for forex based on actual end-user requests. This mechanism aims to stabilize the FX market and support the naira.
In July, the CBN sold at least $377.17 million to authorized FOREX dealers.
Additionally, on July 18, 2024, the CBN approved the sale of FX to eligible Bureau De Change (BDC) operators to meet demand for invisible transactions, selling $20,000 to each BDC at a rate of N1,450/$1.
As the naira continues to face significant demand pressure, the CBN remains committed to addressing the FX supply gap to ensure market stability.
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