Why CBN auctioned dollars to authorised dealer banks

• The naira has strengthened for three consecutive days in the official market following the sale of FX by CBN
• The naira traded at N1,596 per dollar on Wednesday, August 7, 2024, from the N1,601 it traded the previous day
• The Central Bank of Nigeria (CBN) sold about $876.26 at auction to 26 dealer banks on Wednesday, August 7, 2024

Legit.ng’ Pascal Oparada has reported on tech, energy, stocks, investment, and the economy for over a decade.

The Nigerian currency, the naira, continued its winning streak for two days on Wednesday, August 7, 2024, following the sale of $876.26 million by the Central Bank of Nigeria (CBN) in a retail auction.

Information from FMDQ shows that the naira strengthened to N1,596 per dollar in the official market from the N1,601 it recorded the previous day.

Naira continues gain in the official market after CBN auctions dollars Credit: Bloomberg/Contributor
Source: Getty Images

CBN sells dollars cheaply to banks

The apex bank disclosed in a circular on Wednesday, August 7, 2024, that it sold $876.26 million to end users whose bids were submitted by 26 banks at N1,495 per dollar.

According to reports, this is the single largest sale by CBN under Olayemi Cardoso, the current governor.

Reports say total bids at the retail auction came to about $1.18 billion, received from 32 authorized dealer banks.

CBN disqualifies banks

Out of the number, bids valued at $876.26 million from 26 banks qualified, while bids valued at $313.69 million from six banks were rejected.

Per the CBN circular, the disqualification was due to the late submission of bids after the 3 p.m. cutoff time, and two banks still needed to provide bids using the required template.

Also, all bids with Form Q and unverified Forms A and M on the trade portal were disqualified

CBN said the settlement for the successful bids is scheduled for Thursday, August 8, 2024.

Meanwhile, traders in the official foreign exchange market traded the dollar at a high of N1,628 per dollar and a low of N1,520.

Foreign exchange turnover at NAFEM stood at $93.92 million

Naira crashes in the black market

However, the naira depreciated in the parallel market, trading at N1,620 per dollar, down from N1,603 the previous day.

Financial experts believe that the $313.619 million disqualified bids found their way into the parallel market to swell demands

Janet Ogochukwu, a senior banker and financial analyst, disclosed that the demands in the parallel market crashed the naira further in that segment.

“I believe that when those bids were disqualified, buyers found their way into the parallel market. My bank was one of those with unsuccessful bids. Somehow, we have to source for forex for customers,” she said.

Banks, traders crash dollar rate in official, black markets

Legit.ng earlier reported that the Nigerian currency, the naira, recorded an impressive performance against the US dollar for the first time in two weeks.

The naira appreciated against the dollar in the Nigerian foreign exchange market on Thursday, August 1, 2024, to trade at N1,570 per dollar, representing a 2.47% increase from the previous day’s gain of N1,698.73 per dollar.

The current performance of the naira is the first time since July 24, 2024, when the Central Bank of Nigeria sold Forex to 29 authorized dealers.

Source: Legit.ng