The Central Bank of Nigeria's Retail Dutch Auction System (RDAS)

The Central Bank of Nigeria (CBN) has announced plans to implement a Retail Dutch Auction System (RDAS) to address the growing foreign exchange (FX) demand from end users. Here are some key points about the RDAS:

*Purpose*: The RDAS aims to alleviate the growing pressure in the FX market and stabilize the naira's exchange rate.
*Implementation*: The system is scheduled to start on Wednesday, August 7, 2024.
*Participation*: All authorized dealer banks are required to participate in the RDAS.
*Requirements*: Banks must submit a detailed and legitimate list of outstanding FX demands from their end users, including customer information and transaction details.
*Auction Process*: The RDAS will be conducted through a Dutch auction system, where the CBN will sell FX to authorized dealer banks, who will then sell it to their end users.
*Goals*: The RDAS aims to mitigate the demand for eligible transactions, stabilize the FX market, and support the naira.

*Background*

- FX Demand: The CBN has noted a significant rise in unmet FX demands from end users, which has exacerbated the pressure on the FX market and adversely impacted the naira's exchange rate.
- Naira Exchange Rate: The naira has been facing severe demand pressure, closing at N1,617.08/$1 on Friday ¹.
- Previous Measures: The CBN has previously implemented measures to address FX shortages, including the sale of FX to authorized dealers and Bureau de Change (BDC) operators.

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