Thorough examination of the Central Bank of Nigeria's (CBN) first-ever Retail Dutch Auction System (rDUS) reveals a number of important details about the August 10, 2024, event.
The CBN successfully auctioned $815.36 million to end users through 26 banks at a rate of N1495 per dollar. This auction marked a pivotal move in Nigeria's foreign exchange market.
The auction received a total of $1.191 trillion in bids, out of which $815.36 million were approved, while $375.7 million worth of bids were disqualified due to late submission.
As stated by the CBN, "After the collation, the Committee of Governors of the Central Bank of Nigeria approved a cut-off bid of N1495.00/US$ with the total successful bids of US$815,362.006.30 (Eight Hundred and Fifteen Million, Three Hundred and Sixty-Two Thousand and Six US dollars and Thirty Cents)."
The range of successful bids varied between N1495.00/US$ and N1650.00/US$ across the participating banks.
Six banks faced disqualification during this process. Four banks were disqualified for submitting their bids after the stipulated six-hour submission period (9:00 am-3:00 pm), and two banks did not provide bids in the correct template supplied by the CBN.
This strict adherence to submission guidelines signifies the CBN's commitment to maintaining order and transparency in the auction process.
The auction had a positive impact on the Naira, which appreciated by N42.88 against the dollar by the end of the week. This gain reflects the market's response to the CBN's efforts to stabilize the currency through controlled foreign exchange distribution.
Additionally, the CBN has emphasized the need for evidence in all divestments and the repatriation of foreign investments. This requirement aims to ensure that foreign exchange transactions are conducted transparently and within regulatory frameworks.
Furthermore, net FX flows increased by 55%, reaching $25.4 billion in six months, indicating a robust inflow of foreign exchange into the Nigerian economy.
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