The latest Foreign Exchange (FX) forward rates auction held on December 21, 2022, by the Bank of Ghana (BOG) has been oversubscribed by the forex licensed dealing institutions. The BOG had targeted $ 40 million in the foreign rates but received a whopping $171.95 million in oversubscription.

Per the Central Bank’s statistics, the Bank of Ghana accepted only 42 of the overall 166 bids made by authorized banks, accounting for 25.30 percent of the total bids. A total of $ 171.95 million in bids were received, with $40 million representing 23.26 percent of the overall FX forward rates auction offer amount being accepted.

Meanwhile, the FX forward rates auction saw some invalid bids, totaling $17.95 million, accounting for 10.44 percent of the total number of bids received.

“The multiple-price forward FX auction aims to improve price discovery, deepen the FX market, and reduce uncertainty about future availability of FX to meet the needs of banks’ clients. This is expected to ease pressure on the spot market and minimize front-loading of forex purchases by economic agents and thus reducing the pressure on the spot market.”
Bank of Ghana

Details of the Auction Results

The highest bids were made by dealers and bankers of the 7-day Tenor, who submitted 68 bids totaling $91.2 million. The Bank of Ghana, on the other hand, accepted only 15 bids and would pay them $20.5 million when the proposed timeframe arrives. The dealers offered 6.04 per cent as their highest rate for it and 6.07 per cent as their lowest rate.

Banks and dealers submitted 59 bids totaling $34 million for the 15-day Tenor. Only 14 offers were accepted by the central bank. The highest rate offered by those dealers and banks for it were 6.05 percent, while the lowest rate offered by those dealers and banks for them were 6.08 percent. In all, the Central bank will offer them $11.5 million when the day is due.

The 60-day Tenors, on the other hand, had all of their requests approved. Two offers totaling $1 million were received, with submitted bid rates ranging from 6.08per cent to 6.0875per cent.

Structure of the Forex Forward auction

The Foreign Exchange Forward Rate Auction, held by the Bank of Ghana, is restricted to 7-day, 15-day, 30-day, 45-day, 60-day, and 75-day tenors.

In addition to the auction procedures, the Central Bank stated that all Authorized Foreign Exchange Dealer Banks must follow the provisions of the Ghana Interbank Foreign Exchange Market Code of Conduct. The bank mentioned that if these laid-down procedures are not adhered to, the authorized dealers’ bids will be invalidated. This resulted in the $17.95 million invalid bills.

The Central bank on the forward forex auction

The auction, according to the Bank of Ghana, is intended to help businesses prepare for their forex needs and to relieve strain on the country’s forex spot market. This auction, according to the Bank, has also aided in the stabilization of the Ghana cedi.

Managers of the auction have also dismissed claims that they have failed to meet the demand of dealers and commercial banks in some instances. The Bank of Ghana, on the other hand, has argued that in most cases, they had to deny some bids because they were poorly positioned and that this had nothing to do with the regulator’s lack of cash to satisfy demand.