Bank of Ghana (BoG) forex forward auction has been hugely Oversubscribed by 379% . Meanwhile, it has rejected over Sixty million dollars ($60 million) of bids submitted in its recent Forex Forward Auction on July 27, 2021. In a statement released by the Bank of Ghana, the BoG got more bids than the amount offered during its Forex Forward Auction.
According to the BoG summary report, banks submitted a total of 128 bids and out of which only 34 bids were accepted by BoG. According to the results of Forex Forward Rates Auction, a whooping total of $94,750,000.00 worth of bids were submitted by the banks as against the stipulated target of $25 million by the BoG.
Details of the Transaction
As a result, only US$25 million worth of the bids were accepted. In keeping with the stipulated target, the BoG however, rejected $69,750,000 worth of bids submitted.
More so, the result also shows that the 7-Day tenor had the highest number of bids submitted by banks, recording a total of 63 bids, bringing in approximately 48 percent of total bids submitted by the banks.
In addition, detailing the number of bids banks submitted for each of the tenors, the report reveals that except for the 15-Day tenor which came close to the 7-Day tenor by recording 41 bids, all the other Tenors recorded low levels of bids submitted.
The report further asserted that even though the banks submitted up to 63 bids for the 7-day tenor, the Bank of Ghana accepted only 16 of the bids submitted amounting to $12,750,000.00
In a similar vein, only a fraction of the bids submitted for the 15-Day tenor was accepted, with only 12 bids being accepted out of the total of 41 bids submitted. The value for the amount accepted totals $8,750,000
Also, 5 bids got accepted out of the 17 that bids for the 30-Day tenor. Whiles, the 45-Day and 60-Day tenors also recorded very low levels of 4 bids and 2 bids respectively. However, the 75- Day tenor recorded just one bid that got rejected by BoG.
Furthermore, the bid’s cover ratio lingers around 3.79×. This means that the worth of total bids submitted made up 3.79 times the stipulated target set by the Bank of Ghana which is an indication of a weak demand compared to the last time’s forex auction where the ratio hovered around 3.43 times
The Rate of the Bid
Meanwhile, the result further disclosed that the bids were accepted at different rates. The 15-Day tenor logged in the highest minimum rate of 5.8625 percent. The 7-Day tenor on the other hand recorded the highest maximum rate of 5.9200. The remaining tenors also recorded a similar but marginally smaller range of rates. Meanwhile, the 60- day and 75-day tenors also had 5.8450 and 5.8350 minimum rates submitted respectively.
It can be recalled that the Bank of Ghana introduced the Forex Forward Auction initiative in October, 2019 to create more certainty for clients for future forex needs and also to alleviate unnecessary pressure on the foreign exchange market. Also, according to the Bank of Ghana, one of the reasons for introducing this initiative is to help businesses that need forex for transactions better plan.