The Central Bank of Nigeria (CBN) has announced plans to implement a Retail Dutch Auction System (DAS) to address the increasing unmet foreign exchange (FX) demand from end users.
According to a circular obtained by Daily Query, the initiative, which is to commence next Wednesday, aims to alleviate the growing pressure in the forex market and stabilize the naira’s exchange rate.
This move comes as the naira, which closed at N1,617.08/$1 on Friday (yesterday, August 2), faces significant demand pressure. The circular directs all authorized dealer banks to submit a detailed and
legitimate list of outstanding FX demands from their end users.
The circular stated: “The CBN has noted growing unmet FX demand from end users with banks. This has continued to increase the demand pressure in the FX market with an adverse impact on the exchange rate of the naira. Authorized dealer banks are therefore required to provide the CBN with a legitimate list of all outstanding FX demand by end users.”
This comprehensive list must include information such as the customer’s 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. The directive
mandates that all authorized dealers must submit the required information via email to EMDEXDealers@cbn.gov.ng by Tuesday, August 6, 2024, using the provided template.
Additionally, accounts of prospective customers must be naira-backed to qualify for participation in the auction, ensuring immediate settlement upon confirmation of bid
acceptance by the CBN.
The circular further added: “The CBN will undertake a Retail Dutch Auction System (DAS) to mitigate the demand for eligible transactions through authorized dealers on Wednesday, 07 August, 2024. The account of prospective customers should be naira-backed as a prerequisite to participate in the auction for immediate settlement upon confirmation of bid acceptance by
the CBN.”
The Retail Dutch Auction System is expected to mitigate the demand for eligible transactions through authorized dealers, thereby stabilizing the FX market and supporting the naira. The DAS involves the direct sale of Forex by the CBN through the banks to the end users.
