Nigeria’s External Reserves Hit $36.80bn Ahead of Retail Dutch FX Auction
Nigeria’s foreign reserves climbed further to about $36.80 billion from sources suggested to be disbursement from the International Monetary (IMF) and NNPCL oil revenue remitted through the Central Bank.
The nation’s foreign reserves climbed to the highest level seen 18 months ago ahead of the Central Bank of Nigeria’s retail Dutch Auction FX sales (rDAS) scheduled for Wednesday, amidst ongoing nationwide protests.
Nigeria’s FX reserves reached its highest point since February 2023 at the end of July, data obtained from the apex bank revealed. The gross reserve level increased by $290.77 million in the just concluded week to settle at $36.80 billion.
While Nigeria’s external reserves keep it uptrend, supported by oil-backed loan and multi-lateral borrowings, the naira has been falling. Latest move to defend the local currency has proven to be ineffective as the naira exchange rate worsened across the forex markets.
Analysts observed that the liquidity level in the official currency market remained tight following a muted intervention from the CBN, which underpinned the increased pressure on the naira. The CBN has revealed plans to resume a retail sale Dutch auction on August 7, selling foreign exchange to end users through authorised dealer banks direct.
In a circular titled notice of retail Fx sale to end users through authorised dealer banks,” the CBN directed authorised dealer banks to provide it with legitimate list of all outstanding fx demand by Fx users.
The apex bank expects the details to contain information, such as, the customer’s name, address, contact information- including email, telephone number and Bank Verification Number (BVN)-, account number, Tax Identification Number (TIN), purpose for which the Fx is required, Form A or Form M and Letter of Credit number.
“The account of the prospective customer should be naira backed as a prerequisite to participate in the auction for immediate settlement upon confirmation of bid acceptance by the CBN”, the notice reads.
The CBN reintroduced the rDAS, having noticed growing unmet FX demand from end users with banks, which it said, “has continued to increase the demand pressure in the FX market with adverse impact of the exchange rate of the naira.”
The CBN adopted the rDAS the Wholesale Dutch Auction System (wDAS), and Interbank Rate System Regime between 2002 and 2015. The RDAS and WDAS entailed forex auctions twice a week, with the rDAS intervention being directly to the customers while the wDAS was to the banks to be sold to the customers.
However, in its bid to tackle the pressure on the naira, the CBN had in February 2015, announced the closure of the retail/wholesale Dutch Auction Systems, rDAS and wDAS.
In its statement announcing the closure of the two windows, the CBN said it observed the widening margin in both segments of the market had engendered undesirable practices such as round-tripping, speculative demand, rent-seeking, spurious demand and inefficient use of foreign exchange resources by economic agents. #Nigeria’s External Reserves Hit $36.80bn Ahead of Retail Dutch FX Auction
