The Central Bank of Nigeria (CBN) has reaffirmed its commitment to providing liquidity in the foreign exchange market by reintroducing the Retail Dutch Auction System (RDAS).
This move aims to enhance transparency and foster a more efficient market, reducing information asymmetry and supporting price discovery.
In a recent auction, the CBN offered $876 million to fulfill bids submitted by customers, demonstrating its ongoing commitment to supporting the proper functioning of the foreign exchange market.
This approach complements the two-way quote system deployed over the past few months, which has sold over $305 million of foreign exchange to authorized dealers in the last three weeks.
In a recent statement, the apex bank noted that it’s policy objectives are yielding tangible results, with net foreign exchange flows rising to $25.4 billion between January and June, marking a 55% year-over-year increase.
According to the statement, his 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, 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 reintroduction of RDAS is a testament to the CBN’s commitment to fostering a transparent, market-driven foreign exchange market.
By providing direct access to foreign exchange for end-users, the CBN aims to reduce the risk of information asymmetry and promote price discovery.
The CBN remains steadfast in its commitment to strengthening the market’s capacity to meet the needs of all legitimate participants.
With the RDAS in place, the apex bank is poised to continue providing liquidity and supporting the proper functioning of the foreign exchange market.
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