Naira Gains Strength Following CBN’s Major Dollar Sale Under Cardoso

Naira Gains Strength Following CBN’s Major Dollar Sale Under Cardoso

The naira gained marginally in official trading on Wednesday following the sale of $876.26 million by the Central Bank of Nigeria (CBN) in a retail auction aimed at shoring up the ailing currency.

According to data from FMDQ, the naira strengthened to N1596 per US dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) from N1601/$ the previous day.

The CBN, had in a circular Wednesday, disclosed that it sold a total of $876.26 million to end users whose bids were submitted by some 26 banks, at a discounted market rate of N1495 per dollar.

The amount sold is the single largest by the CBN under Governor Olayemi Cardoso who was appointed in October 2023.

“The sale provides a temporary breather for the naira,” one currency trader told BusinessDay.

“The market will however want to see a more defined pattern to the sales before we know what it means for the naira going forward,” the trader said.

Total bids at the retail auction came to US$1.18 billion which was received from 32 authorised dealer banks.

Of this, bids valued at US$876.26 million from 26 banks qualified, while bids valued at US$313.69 million from six banks were disqualified.

The disqualifications were due to four banks submitting bids after the 3:00 PMcutoff time and two banks failing to provide bids in the required template. Additionally, all bids with Form Q and unverifiable Forms A and M on the Trade Portal were disqualified.

The CBN approved a cut-off rate of N1495/US$ for the Retail Dutch Auction.

The detailed results and qualified bids will be published on the CBN’s website to ensure transparency.

Settlement for the successful bids is scheduled for Thursday, August 8, 2024.

Omolara Omotunde Duke, director of the Financial Markets Department, affirmed the CBN’s commitment to boosting FX liquidity and promoting price discovery through this auction process.

The sale follows “growing unmet foreign exchange demand” which has “continued to increase the demand pressure in the foreign exchange market, with adverse impact on the exchange rate of the naira,” the Abuja-based Central Bank of Nigeria said in a circular to lenders last week.

The naira has come under pressure through seasonal demand from summer tourism as well as businesses seeking the greenback to bring in goods in the import-dependent nation.