CBN Retail Dutch Auction

The CBN retail Dutch Auction was recently held and excluded six notable banks from participating, among them were Stanbic IBTC, United Bank for Africa (UBA), and Wema Bank.

As part of its continuing efforts to encourage price discovery and reduce demand pressure in the foreign exchange (FX) market, the apex bank held an auction in which 26 qualifying institutions were given $876.26 million.

Under Governor Yemi Cardoso’s leadership, the Central Bank of Nigeria has been working hard to stabilize the naira and address the persistent volatility in the FX market. This auction marks one of their most substantial interventions in the market.

The CBN reports that 32 financial institutions put forward bids totaling $1.18 billion. Nevertheless, six banks’ bids totaling $279.04 million were rejected for different reasons.

Banks disqualified

1. United Bank for Africa (UBA), one of Nigeria’s leading financial services institutions, had its bid of $13.21 million excluded due to a late submission.

2. First City Monument Bank (FCMB), which submitted the largest bid among the excluded banks, is on this list due to late submission. The bank’s bid of $178.65 million was invalidated.

3. Stanbic IBTC Plc, another prominent bank in the Nigerian financial landscape, submitted a bid of $57.86 million. However, like UBA and FCBM, Stanbic IBTC’s bid was excluded due to late submission.

4. Wema Bank, which has been on a trajectory of growth and innovation, particularly with its ALAT digital banking platform, also faced exclusion. The bank’s bid of $21.94 million was rendered invalid due to late submission.

5. SunTrust Bank, a relatively newer entrant in the Nigerian banking sector, submitted a bid of $7.38 million. However, unlike the other banks on this list, SunTrust’s bid was invalidated not for late submission, but for failing to provide bid rates.

6. Rand Bank was excluded for failing to submit any information on its bids. As a result, there was no amount associated with the bank in this auction.

In total, this exclusion resulted in $279.04 million unsuccessful bids from the auction.

What you should know 

1. The CBN’s retail Dutch auction, which was conducted on August 6, 2024, aimed to distribute FX to end-users, including those with trade-backed demands, as part of its strategy to stabilize the naira.

2. The successful bids were settled on August 8, 2024, as part of the T+2 settlement process.

3. This exclusion of major banks like UBA, Wema, and Stanbic highlights the strict regulatory requirements imposed by the CBN in its efforts to maintain transparency and efficiency in the FX market.

4. It also highlights the importance of adherence to submission deadlines and the accurate completion of bid templates for future auctions.

Frequently Asked Questions On Who Is Not Taking Part in the CBN Retail Dutch Auction?

Q: What is the CBN Retail Dutch Auction?

A: It’s a system used by the Central Bank of Nigeria (CBN) to sell foreign exchange (FX) to authorized dealer banks.

Q: Why did the CBN introduce the Retail Dutch Auction?

A: To manage foreign exchange demand and promote price discovery in the FX market.

Q: Who can participate in the CBN Retail Dutch Auction?

A: Only authorized dealer banks can participate in the auction.

Q: Why were some banks disqualified from the recent auction?

A: Some banks were disqualified due to late submissions and failure to comply with auction guidelines.

Q: What are the consequences of being disqualified?

A: Disqualified banks cannot participate in the auction and may face other penalties as determined by the CBN.

Q: How can banks avoid disqualification in future auctions?

A: Banks should adhere to the CBN’s guidelines, submit bids on time, and ensure compliance with all requirements.

Q: How does the auction impact the FX market?

A: The auction helps to stabilize the FX market by providing a transparent mechanism for FX allocation.

Q: What is the role of authorized dealer banks in the auction?

A: Authorized dealer banks act as intermediaries between the CBN and end-users of foreign exchange.