The Central Bank of Nigeria (CBN) has unveiled a strategic initiative through the Retail Dutch Auction System (DAS) aimed at mitigating volatility in the forex market and addressing the growing demand for foreign exchange by end users. In a circular issued to banks over the weekend, the CBN instructed all authorised dealer banks to compile and submit a comprehensive and legitimate list of outstanding FX demands from their end users. This initiative, set to commence on August 7, aims to manage demand pressure in the FX market and stabilize the naira’s exchange rate.
The CBN highlighted a significant increase in unmet FX demands from end users with banks, which has intensified pressure on the FX market and negatively affected the naira’s exchange rate. To participate in the auction, the accounts of prospective customers must be naira-backed, ensuring immediate settlement upon confirmation of bid acceptance by the CBN.
Through this initiative, the CBN seeks to provide a more efficient and transparent mechanism for allocating foreign exchange, thereby improving market stability and fostering confidence among end users. The implementation of the Dutch Auction System represents a crucial step in addressing the forex challenges faced by the Nigerian economy.
