To meet rising demand and stabilize the foreign exchange (FX) market, the Central Bank of Nigeria (CBN) recently conducted a Retail Dutch Auction System (RDAS), where Zenith Bank, Access Bank, FBN Holdings, and seven other banks received the largest FX allocations, boosting the NGX Banking Index by 5.1%.
During the auction, the CBN allocated a total of $876.26 million to 26 qualified banks at a rate of N1,495 per dollar. This system allows commercial banks to bid on behalf of their customers, with the CBN supplying the foreign currency through an auction. Out of 32 participating banks, six were disqualified for incomplete bid templates, leaving 26 banks to share about 75% of the total $1.18 billion bid amount.
Zenith Bank received the highest allocation of $267.86 million, with bid ranges from N1,500 to N1,650 per dollar. First Bank, despite recent board changes under regulatory oversight, secured $228.99 million with bids between N1,500 and N1,600 per dollar. Access Bank followed closely with $79.09 million.
Fidelity Bank, continuing its market expansion, was allocated $43.62 million, while GTCO obtained $29.54 million. Standard Chartered Bank, known for its international reach, received $28.43 million after bidding within the N1,500 to N1,600 per dollar range.
Other notable allocations included Taj Bank ($19.11 million), Jaiz Bank ($16.71 million), Sterling Bank ($14.4 million), and Union Bank ($13.27 million). These allocations not only bolstered the financial stability of the banks but also pushed the Nigerian Exchange Limited (NGX) Banking Index up by 5.1%, bringing year-to-date returns to +31.7%.
This auction marks one of the most significant FX interventions under CBN Governor Olayemi Cardoso, who is focused on stabilizing the naira and addressing ongoing FX market volatility.
Victor Chiazor, Head of Research at FSL Securities, commented on the importance of these FX allocations, noting that they are crucial for banks to meet the demands of importers, businesses, and others requiring foreign currency for international transactions. He pointed out that banks with higher allocations generally have a larger customer base or greater demand for foreign currency, reflecting their effective bidding strategies in the auctions.
Chiazor also praised the CBN’s commitment to transparency and efficiency, as demonstrated by the exclusion of the six banks with incomplete bid submissions, signaling the CBN’s intention to maintain stringent standards in future auctions.
