CBN Boosts FX Market with $876 Million Auction
By Patience Ikpeme
The Central Bank of Nigeria (CBN) has offered $876 million to fulfill bids submitted by customers at an auction concluded on Wednesday, August 7, 2024.
This initiative underscores the CBN’s commitment to providing transparent access to foreign exchange (FX) for all legitimate customers.
The CBN recently introduced an additional mechanism through the Retail Dutch Auction System (RDAS) to directly facilitate FX sales to end users. This approach aims to foster a more transparent market by reducing information asymmetry and supporting price discovery.
It complements the two-way quote system deployed over the past few months, enhancing liquidity in the interbank market. Over the last three weeks, more than $305 million of FX has been sold to authorized dealers through this system and the results of these policy measures are becoming evident.
According to the CBN, net foreign exchange flows rose to $25.4 billion between January and June 2024, marking a 55% year-over-year increase. This growth has been driven by a rise in capital importation, which reached $6 billion in June 2024, and record inflows from diaspora remittances through formal channels.
It was also stated that the foreign exchange market is showing signs of improvement and increased depth, with more robust and diversified sources of liquidity contributing to the sustained convergence of exchange rates across all market segments.
The official market recorded a turnover of $43 billion in customer transactions by the end of July 2024, with CBN-supplied liquidity representing less than 5% of total market activities.
