From: Perpetua Egesimba
The Central Bank of Nigeria (CBN), on Tuesday, announced a $500 million intervention in the FX market using forwards.
The sale, according to a circular to all authorised dealers, will be in the form of a Special Wholesale Intervention Forward not exceeding 60 days and uthorised dealers are to send their request for sums not exceeding 7.5% of the amount on offer.
CBN further stated that Banks should not allocate funds for customers LCs that have already benefited from past SMIS that are yet to mature.
“No bank shall exceed its Net Trading Position limit. Successful banks account shall be debited immediately after the release of the intervention result at their quoted rates.
“Allowable spread between bid and offer shall be 50 kobo. Successful banks shall send their returns to the Director, Financial Markets Department, 24 hours after release of the intervention result.”
It reiterated that after release of the results, banks shall sell forward to match the forward purchases from the CBN, adding that the forward sale by banks to their customers shall be for mature or past due obligations. It added that Banks will be required to open equivalent amount of fresh LCs both confirmed and unconfirmed for any of their customers and send evidence of such fresh LCs within a week of release of the auction results.
According to CBN, all allotments must be trade backed, no multiple bid is allowed and CBN reserves the right to disqualify any bid that is unreasonable.