The Nigerian Central Bank has revealed intentions to introduce a Retail Dutch Auction System in response to the growing unmet end-user demand for foreign exchange.
According to the circular, this action, set for next Wednesday, is intended to stabilize the value of the naira and lessen the mounting pressure on the foreign exchange market.
This move comes as the naira, which closed at N1,617.08/$1 on Friday, faces severe demand pressure, according to Nairametrics.
According to the circular, the CBN has directed all authorized dealer banks to submit a detailed and legitimate list of outstanding FX demands from their end users.
The circular read: “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 adverse impact of the exchange rate of the naira.
“Authorised dealer banks therefore are to provide to the CBN, a legitimate list of all outstanding FX demand by end users.”
The customer’s name, address, phone number, account number, Bank Verification Number (BVN), Tax Identification Number (TIN), type of transaction, Form A or Form M, and Letter of Credit (LC) number must all be included in this exhaustive list.
The directive mandates that all authorized dealers must submit the required information via email to [email protected] 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.
It is anticipated that the Retail Dutch Auction System will lessen the need for qualified transactions to be completed through licensed dealers, stabilizing the foreign exchange market and bolstering the naira.
The CBN sells foreign exchange directly to end customers through the banks using the Retail Dutch Auction System (DAS).
