CBN closes retail, wholesale Dutch auction windows

The Central Bank of Nigeria (CBN), on Wednesday, closed Retail Dutch Auction System (RDAS) and Wholesale Dutch Auction System (WDAS) windows of the foreign exchange.
CBN’s Director, Corporate Communication, Mr Ibrahim Mu’azu, confirmed this in a statement.
The statement explained that the closure was necessary “because of the gap between the RDAS window and interbank which had caused an undesirable situation in the system.
“The gap had led to practices that include round tripping, speculative demand, rent-seeking, and spurious demand.’’
It said another detriment was the inefficient use of scarce foreign exchange resources by economic agents.
It stressed that the CBN had been successful in the management of float exchange rate regime following the liberalization of the forex market and its stability.
“In recent times, the bank has observed a widening margin between the rates in the interbank and the RDAS window.
“This has engendered undesirable practices, including round tripping, speculative demand, rent-seeking, spurious demand and inefficient use of scarce foreign exchange resources by economic agents.
“This has continued to put pressure on the nation’s foreign exchange reserves with no visible economic benefits to the productive sector of the economy and the general public”, the statement said.
It added that the development had made it necessary to save the nation from having multiple exchange rate regimes and preserve the country’s foreign exchange reserves.
“In view of the foregoing, it has become imperative that appropriate actions be taken to avert the emergence of a multiple exchange rate regime and preserve the country’s foreign exchange reserves.
“Consequently, we wish to inform all authorized dealers and the general public that, with effect from Feb. 17, the RDAS/WDAS foreign exchange window at the CBN is hereby closed.”
The bank also said that, henceforth, all demands for foreign exchange should be channelled to the interbank foreign exchange market.
It, however, promised that the CBN would continue to intervene in the interbank foreign exchange market to meet genuine and legitimate demands.