In a bid to address the growing unmet foreign exchange (FX) demand from end users, the Central Bank of Nigeria (CBN) yesterday, announced a strategic intervention through a Retail Dutch Auction System (DAS).
The announcement by the apex bank came on same day its Governor, Mr. Olayemi Cardoso, said decisions on financial policy, currency convertibility, cross border movement and transactions, and payment systems remained key determining factors for the success of the African Continental Free Trade Area (AfCFTA).
For the retail auction, the apex bank directed all authorised dealer banks to submit a comprehensive and legitimate list of outstanding FX demands from their end users.
This initiative, set to take place next Wednesday, aims to mitigate the increasing demand pressure in the FX market and stabilise the exchange rate of the naira.
In a circular to banks, the CBN noted that it observed a significant rise in unmet FX demands from end users with banks, which has exacerbated the pressure on the FX market and adversely impacted the naira’s exchange rate.
It 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 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.
“This list must include comprehensive information about each customer, such as their name, address, and contact details including email, telephone number, Bank Verification Number (BVN), account number, Tax Identification Number (TIN), type of transaction, Form A or Form M, and Letter of Credit (LC) Number.
“The CBN will undertake a Retail Dutch Auction System (DAS) to mitigate the demand for eligible transactions through authorised dealers on Wednesday, 07 August, 2024.
“Consequently, all authorised dealers are to provide the information above via email in the attached template to EMDEXDealers@cbn.gov.ng on or before Tuesday, August 06. 2024.
“The account of 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 CBN’s directive mandates authorised dealers to provide this information via email to EMDEXDealers@cbn.gov.ng using the attached template. The deadline for submission is Tuesday, August 6, 2024. Additionally, the 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.”
Meanwhile, Cardoso, speaking at the opening of the 2024 African Caucus Meeting of Finance Ministers and Central Bank Governors, with the theme, ‘Facilitating Intra-African Trade: Catalyst for Sustainable Economic Growth in Africa’, in Abuja, said the continent stands at a crossroads with unprecedented opportunities for development alongside significant challenges.
He noted that to navigate the complex landscape and set the continent on a path of sustainable economic growth, Africa must leverage the support of its global partners, particularly the International Monetary Fund (IMF) and the World Bank Group (WBG), both of which play critical roles in the equation.
Cardoso said their expertise and resources could provide the essential impetus needed to unlock the continent’s vast potential.
He said the continent now stands on the threshold of a new era in African economic cooperation through the AfCFTA, the largest such agreement in the world by both area and number of countries.
Citing data from the World Trade Organisation (WTO), Cardoso noted that intra-African trade accounted for about 13 per cent of the continent’s total trade compared to 60 per cent in Europe and 40 per cent in North America.
He said, “This indicates that significant efforts are needed to build a robust, economically diversified, and prosperous Africa. As monetary authorities, we have the responsibility to formulate policies that enhance trade among countries on the continent.
“We can achieve this by fostering a financial landscape that encourages collaborative research and development (R&D) to support our industries and generate economic wealth for our growing populations.”
He said Nigeria, like many other African countries, faces economic challenges adding however that “we are committed to the vision of a united and economically integrated Africa.”