United Bank for Africa (UBA), First City Monument Bank (FCMB), and Wema banks were excluded from participating in a recent retail Dutch Auction (rDAS) conducted by the Central Bank of Nigeria (CBN).
The auction, first, under Yemi Cardoso as the CBN governor, also witnessed exclusion of Stanbic IBTC, SunTrust and Rand banks for various offences.
The auction, which saw the CBN selling $876.26 million to 26 qualified banks, was part of the apex bank’s ongoing efforts to alleviate the demand pressure in the foreign exchange (FX) market and promote price discovery.
This auction, according to Nairametrics, marks one of the most significant FX interventions by Cardoso, who has been actively working to stabilize the naira and address the ongoing volatility in the nation’s FX market.
According to the CBN, a total of $1.18 billion was submitted in bids by 32 banks. However, bids amounting to $279.04 million from six banks were disqualified.
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, using the banks.
The successful bids were settled on August 8, 2024, as part of the T+2 settlement process.
CBN’s action, according to some analysts, highlights the strict regulatory requirements imposed by the CBN in its efforts to maintain transparency and efficiency in the FX market.
It also highlights the importance of adherence to submission deadlines and the accurate completion of bid templates for future auctions.
Specifically, UBA, one of the leading lenders had its bid of $13.21 million excluded due to a late submission.
Similarly, FCMB, which submitted the largest bid among the excluded banks, according to the platform, was due to late submission. The bank’s bid of $178.65 million was invalidated.
Stanbic IBTC, another prominent bank in the Nigerian financial landscape, submitted a bid of $57.86 million. However, like UBA and FCMB, Stanbic IBTC’s bid was excluded due to late submission.
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Wema Bank also faced exclusion as its bid of $21.94 million was rendered invalid due to late submission.
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.
Finally, 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.
Commenting on the auction recently, Bismarck Rewane, managing director of Financial Derivatives Company said, the system, which has been in existence before, now, is capable of stabilizing the exchange rate, but not necessarily in the immediate, advising that it requires transparency for its success.
Other analysts see the auction, which now makes the banks to bid on behalf of the end-users a welcome development, but, added that it’s capable of frustrating some end-users, who may at some point in time desperately be in need of the fx,, particularly, they added, situations, where the banks are complacent.
“Late submission of customers’ documents or not following the template, as the case may be, dies not create healthy relationships between the customers and their banks, unless if the mistakes are from the customers,” one of the analysts said.
Commenting further he said, “even if the delays are from the customers, the best option is not to submit them at all, except if this perception of ‘business as usual’ still pervades with some of the lenders.”
