Global Trade Alert

The Central Bank of Nigeria on 28 July 2009, issued guidelines which restrict foreign exchange demand at the Wholesale Dutch Auction System (WDAS) auctions. The WDAS auction was introduced on the 13 July 2009 to replace the Retail Dutch Auction System (RDAS).A circular to all authorized dealers, signed by the Acting Director of the Central Bank's Trade and Exchange Department, Batari Musa, stated that 'This is to inform all authorized dealers that paragraph 3 (b) of the circular Ref: TED/FEM/FPC/GEN/01/110 of July 8, 2009 on the above subject has been amended as follows: 'All authorized dealers shall submit bids for only one (1) tranche per auction, while the central bank of Nigeria reserves the right to reject any bid that is deemed to be unrealistic.'The change took immediate effect.

With the introduction of WDAS, foreign exchange demand increased from US$960.96 million for six auction sessions held prior to 13 July 2009, to US$1.965 billion for the four sessions held under WDAS. Previously, banks were allowed to submit three tranches of bids per day and banks could collate foreign exchange bids every two or three hours from customers. Now, customers whose bids are not in the tranche will have to wait until the following day. Also, foreign exchange end users would be unable to use the day's exchange rate to determine their bid rate and in so doing reduce the upward pressure on the naira exchange rate.