In the latest testament to the Central Bank of Nigeria’s (CBN) ongoing commitment to support the proper functioning of the foreign exchange market by enhancing liquidity when necessary, the apex bank offered $876m to fulfil bids submitted by customers at an auction concluded on Wednesday, August 7, 2024. In line with its pledge to provide transparent access to foreign exchange for all legitimate customers, the CBN’s leadership has 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, reducing information asymmetry and supporting price discovery. It complements the two-way quote system deployed over the past few months to enhance liquidity in the interbank market, through which over $305 million of foreign exchange has been sold to authorised dealers in the last three weeks. The CBN’s policy objectives are yielding tangible results and bolstering market confidence. Net foreign exchange flows rose to $25.4 billion between January and June, 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.
The foreign exchange market is also 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 segments of the market. 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. The CBN remains steadfast in its commitment to fostering a transparent, market-driven foreign exchange market, and it will continue to strengthen the market’s capacity to meet the needs of all legitimate participants.
