The Central Bank of Nigeria (CBN) has announced plans to sell U.S. dollars via auction to alleviate pressure on the local currency. Known as the Dutch auction system, the auction aims to offset the impact of rising demand for U.S. dollars on the exchange rate.

Despite previous measures, such as injecting foreign exchange at concessionary rates, the naira has continued to depreciate since the beginning of the year. Additionally, Nigeria has taken action against crypto exchanges, which were accused of fueling the currency’s decline in the first quarter of 2024. However, recent reports indicate that the naira hit a new all-time low in July.

In response, the CBN has decided to reintroduce the foreign exchange auction system which it abandoned in 2015.

“The CBN will undertake a Retail Dutch Auction System to mitigate the demand for eligible transactions. The reintroduced retail forex auction will take place on Aug. 7,” the central bank said in a statement.

The central bank has called on authorized dealer banks to share their respective lists of outstanding forex demand by end users. Since the ouster of former governor Godwin Emefiele, the Nigerian central bank has allowed the naira to gradually depreciate against the greenback.

Although this move has narrowed the gap between the official and parallel market exchange rates, it has nonetheless pushed up living costs. The spiraling living costs have, in turn, sparked deadly protests.

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