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- The Central Bank of Nigeria has been urged to refrain from intervening in the forex market through auctions
- This occurred as the CBN auctioned $876.26m to end users via a retail Dutch auction
- It stated that granting market participants more freedom in their forex trading will contribute to market's depth
Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.
The Central Bank of Nigeria has been advised by the World Bank against using forex auctions as a means of interfering in the foreign exchange market.
Source: Getty Images
Additionally, the World Bank suggested that the commitment to exchange rate flexibility be consistently reaffirmed by implementing a thorough, methodical, and open framework for foreign exchange interventions.
The policy advisory issued by the World Bank was included in the Nigeria Development Update, offering recommendations to stabilise the naira against foreign currencies.
This occured as the CBN auctioned $876.26m to end users via a retail Dutch auction, a major move away from its traditional sales of foreign exchange to Bureau De Change operators on August 26, 2024.
Zenith Bank, FirstBank and Access Bank were the top three banks to get FX from the Dutch auction. Other banks in the top 10 included Fidelity Bank, Guaranty Trust Bank, Standard Chartered Bank, Taj Bank, Jaiz Bank, Sterling Bank and Union Bank.
This auction marked one of the most significant FX interventions by the CBN under the leadership of Governor Yemi Cardoso, who has been actively working to stabilise the naira and address the ongoing volatility in the FX market.
World Bank tells CBN to refrain form ad-hoc FX auctions
In its latest report, the World Bank noted that permitting market participants to trade FX with more flexibility across time would also contribute to deepening the FX market.
The report read,
“Exchange rate policy should continue to be geared towards maintaining a unified, market reflective exchange rate, whilst deepening the FX market. The CBN should continue efforts towards deepening the official FX market, including by facilitating formal remittances inflows, allowing international oil companies to fully concentrate their FX sales in the official market, restoring intermediated market access to bureaux de change, and refraining from ad-hoc FX auctions.It suggested that giving market players greater flexibility in their FX trading over time will also help to deepen the FX market.
The bank also stated that in order to more precisely assess the fair value of the naira in relation to other currencies and provide a steady and predictable economic climate that facilitates both domestic and international trade, efforts should be made to strategically increase foreign reserves.
World Bank faults NNPC’s report
Legit.ng reported that the Nigerian National Petroleum Company Limited's (NNPCL) submissions to the Federal Account Allocation Committee (FAAC) lacked essential information about its activities and were inconsistent, the World Bank
This was disclosed in the bank's May 17, 2024, Accelerating Resource Mobilization Reforms (ARMOR) Report, according to a ChannelsTV report.
The World Bank claims that in addition to lower net oil revenues, NNPCL's opaque governance has seriously hampered the federation's ability to receive oil payments.
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Source: Legit.ng
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