UBA, others disqualified from CBN’s Dutch auction

• Published On: 10 August 2024 at 19:46

The Central Bank of Nigeria recently hosted a retail Dutch Auction in which six big banks were excluded, including United Bank for Africa, Wema Bank, and Stanbic IBTC.

The CBN organised the auction, in which it sold $876.26 million to 26 qualified banks. This was a component of the central bank’s continual initiatives to relieve demand pressure in the foreign exchange (FX) market, according to Nairametrics.

This auction represents one of the CBN’s most critical FX interventions under the guidance of Governor Yemi Cardoso, who has been aggressively seeking to stabilize the naira and address the persistent volatility in the FX market.

According to the CBN, a total of $1.18 billion was submitted in bids by 32 institutions. However, bids amounting to $279.04 million from six institutions were invalidated for various reasons.

One of the major financial organisations in Nigeria, United Bank for Africa, had their $13.21 million proposal denied for being submitted too late.

First City Monument Bank (FCMB), which submitted the highest bid out of all the institutions that were eliminated, also suffered from a late submission. After the bank’s $178.65 million request was found illegal, its hopes of earning a part of the CBN’s authorised foreign exchange were severely hampered.

Stanbic IBTC, another important bank in the Nigerian financial sector, placed an offer of $57.86 million. However, like UBA and FCBM, Stanbic IBTC’s offer was invalidated due to late submission. The denial of such a significant proposal from a key participant in the industry further illustrates the high compliance standards established by the CBN

Wema Bank was also excluded, despite its growth and innovation trajectory, especially with its ALAT digital banking platform. The bank’s $21.94 million bid was considered worthless as it was submitted too late.

SunTrust Bank, filed a bid of $7.38 million. However, unlike the other banks who were removed, SunTrust's proposal was declared unsuitable owing to an omitted bid rate rather than a delayed submission.

Finally, Rand Bank was eliminated because it did not submit a proposal. As a result, the bank was not linked to any amount in this auction.

The CBN held a retail Dutch auction on August 6, 2024, with the purpose of distributing FX to end users, including those with trade-backed demands, as part of its naira stabilisation strategy.

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