The Central Bank of Nigeria (CBN) is set to reintroduce the Retail Dutch Auction System (rDAS) as part of its strategy to address the growing demand for foreign exchange (FX) in the country.
This move comes as the naira continues to face significant pressure, closing at N1,617.08 to the dollar last Friday.
In a circular obtained by Meteor Nigeria, the CBN announced that the rDAS will resume next Wednesday, a measure aimed at easing the FX market tension and stabilizing the naira.
The auction system is expected to help in managing the distribution of forex more effectively by matching demand with supply.
As part of this initiative, the CBN has instructed all authorized dealer banks to submit comprehensive lists of outstanding FX demands from their customers.
This list must include detailed information such as the customer’s name, address, Bank Verification Number (BVN), account number, and transaction type, among other details. The submission deadline is set for Tuesday, August 6, 2024.
“The CBN has observed an increasing unmet FX demand among end users with banks, which has added pressure on the FX market, negatively impacting the naira’s exchange rate,” the circular stated.
“Authorized dealer banks are required to provide a legitimate list of all outstanding FX demands by end users.”
To ensure a smooth process, the CBN has mandated that accounts of prospective customers be naira-backed, which is necessary for participating in the auction. Immediate settlement will be required upon confirmation of bid acceptance by the CBN.
The reintroduction of the rDAS is anticipated to stabilize the FX market by ensuring that only eligible transactions through authorized dealers are accommodated, thereby supporting the naira.
In July, the CBN sold approximately $377.17 million to authorized FX dealers. Additionally, the bank approved the sale of FX to eligible Bureaux de Change (BDCs) to address the demand for invisible transactions, selling $20,000 to each BDC at a rate of N1,450 to the dollar.
These measures come as the CBN continues to battle severe demand pressure and dollar scarcity in the official market.
