Business News

Difference Between WDAS & RDAS

Published

7 years ago

October 6, 2013

The Central Bank recently introduced sweeping Foreign Exchange guidelines that is expected to eliminate or drastically reduce money laundering as we approach another election cycle. One of the changes announced was the replacement of the Wholesale Dutch Auction System (WDAS) with the Retail Dutch Auction System (RDAS) . In this blog post, I will attempt to differentiate between the WDAS and the RDAS.

What is a Dutch Auction System?

According to Investopedia A Dutch Auction System is

A public offering auction structure in which the price of the offering is set after taking in all bids and determining the highest price at which the total offering can be sold. In this type of auction, investors place a bid for the amount they are willing to buy in terms of quantity and price.
A type of auction in which the price on an item is lowered until it gets a bid. The first bid made is the winning bid and results in a sale, assuming that the price is above the reserve price. This is in contrast to typical options, where the price rises as bidders compete.

To break it down further, for example, the CBN during its auction offers a total dollar sale of $200M. The apex bank offers foreign currency twice a week to keep the naira within a range of three percentage points above or below ₦155 per dollar. With this in mind Authorised Dealers who have various needs for dollars approach the auction for dollar purchase. Some may be willing to buy $20M, others $10M etc. So during the auction each Authorised dealer tables an offer that may be below the ₦155/$1 or above it depending on the forces of demand and supply. Therefore if there are more bids above the CBN’s preferred ₦155 those bidders get to buy dollars while those who bid below lose out and vice versa.

At the end of the Bid the CBN releases its results in its website. The last Bid for WDAS which took place on September 30 was announced as follows

SUMMARY OF WDAS NO 74/2013 OF 30TH SEPTEMBER, 2013

Auction No	9/30/2013 held on 74
Total Amount Offered	US$ 300,000,000.00
Total Amount Demanded	US$ 0.00
Total Amount Sold	US$ 300,000,000.00
Highest Successfull Bid Rate	US$ 155.78
Lowest Bid Rate	155.75
No. of Successful	17
No. of Unsuccessful	0
Marginal Bid	US$ 155.75
Number of Banks	17

Who are the Authorised dealers?

The Authorised Dealers as the name implies are approved primary buyers of dollars from the CBN. They are dealers who have the authority to submit bids on behalf of the Bureau De Change (BDC) to the CBN for purchase of forex. Most commercial banks are registered Authorised Dealers with the CBN.

Now I get it. So What is WDAS?

WDAS is an acronym for the Wholesale Dutch Auction System. It is a subset of the Dutch Auction System whereby the CBN receives bids from Authorised Dealers for purchase of forex. The Authorised Dealers on behalf of BDC’s and other end users of forex (like corporates, importers etc) will submit bids to the CBN for purchase of forex during an auction. Once their bids are successful they then sell the dollars to the BDCs and other end users. The WDAS was introduced on on February 20, 2006. It is important to note however, that under the WDAS the Bids submitted by the Authorised Dealers need not match the total request by its end users. For example, the Authorised Dealers can purchase $2million from the CBN during an auction even though it only had confirmed requests of $1million from its BDC’s and other end users. Being a Wholesale Dealer it believe it can continue to sell the balance $1million (in the interbank market) as the need arises without having to go back to wait for another auction to Bid.

How does this process work?

According to the CBN the process works this way;

Private BDCs

Each licensed BDC was required, to open a Naira Current Account with an Authorized Dealer of its choice, for the purpose of buying forex.
A Bureau-de-Change is allowed to purchase forex from the CBN through a presentation of the CBN cheque issued by their banks twice a week (Tuesdays and Thursdays).
The Bureau-de-Change purchase equivalent amount of forex from the CBN up to a maximum limit of US$200,000.00 twice a week.

Authorized Dealer BDCs

The Authorized Dealer applies to CBN through the WDAS window on Mondays and Wednesdays for a maximum of US$2.0 million.
The forex purchased by the Authorized Dealers is disbursed in cash and the BDCs in turn sell to end-users for eligible transactions only, such eligible transactions include:
- BTA at $5,000 per quarter and $20,000 per annum;
- PTA at $4,000 per quarter and $16,000 per annum; and others include:
  - Mortgage monthly payment;
  - School fees abroad;
  - Medical fees abroad;
  - Credit Card payment;
  - Utility bills; and
  - Life Assurance premium payment.

So What is the RDAS?

The RDAS is an acronym for the Retail Dutch Auction System and as the name implies is a direct sale of Forex by the CBN through the banks to the end users of the forex. Unlike the WDAS, the RDAS is based solely on actual demand of forex by the end users of the forex. As such, the Authorised dealers will only bid for forex based on the number of actual request it has received from its end users. For example, if an Authorised Dealer has received only $1million of confirmed dollar requests from its BDC’s and other end users it can only then bid for that $1million from the CBN auction unlike the WDAS where it can bid for more.

This is essentially Micro-managing??

Yes it is! The re-introduction of the RDAS is an effort by the CBN to micro-manage the sale and utilisation of forex in Nigeria.

Are there other essential differences between the RDAS and the WDAS?

Well, the CBN in their website differentates the two as follows;

under the retail DAS, end-users were allowed to bid through their banks.
under the WDAS, Authorised Dealer banks, bid on their accounts and the successful banks would then sell to their customers.

So what are the advantages of the RDAS?

The RDAS is basically a controlled form of forex transactions. By introducing this the CBN hopes to micro manage the sale and usage of forex. Some of the advantages are as follows

Only confirmed users of forex for legitimate uses will have access to forex
Round tripping is expected to be reduced as forex bought from the CBN is essentially monitored and can’t be used for reason other than those specified during bid application
Banks will not be able to speculate in the interbank market as all banks will basically know that the dollars bought in any particular auction will be utilised fully before the next auction
It will be difficult to sell forex bought from the CBN to the parallel market

Surely, the RDAS has some disadvantages too doesn’t it?

Well, we can start by looking at the advantages of the WDAS which is the reason why the CBN replaced the RDAS in 2006. However, there really isn’t many as the major difference between the two is that of control. If you therefore are against tight regulations then you will dislike the RDAS and vice versa.

But there is still one major disadvantage that the RDAS has which is that by virtue of its limited status it can create an artificial scarcity of forex. Because the CBN only sells forex to confirmed users other arbitrary users of forex will not be able to buy readily. For example, if you suddenly need to buy $10,000 cash for a transaction, you will have to buy only from a BDC who has that forex. Since, their activities are now heavily regulated it is likely that they may not have as they may have been expected to sell off their stock piles already.

This in turn fetes a parallel market. Therefore, it is likely that importers of forex like tourist or travellers will more than likely sell forex at higher rates to the black market than they would if they sell to the BDC.

Even the CBN acknowledges this point when they touted one of the major achievements of the WDAS. According to them “Sale of Foreign Exchange to Bureaux-de-Change operators in an effort to increase access of foreign exchange to small end-users, bridge the supply gap and develop the local Bureaux-de-Change (BDCs)“.

The New CBN guidelines re introducing the RDAS also introduced new guidelines. Their disadvantages or advantages depends on what side of the glass you are in. They are as follows;

Authorised Dealers/Banks will no longer have substantial stock pile of dollars to meet the insatiable need of forex by customers
The CBN will have to dedicate enormous resources towards micro managing the activities of the Authorised Dealers and the BDC’s
Authorised Dealers and BDC’s will also have to fill huge amount of paper work brought thus increasing their operational cost
Authorised Dealers will continue to sell dollars to the maximum of $250,000 per week to BDC’s. However, KYC forms of the BDC’s will need to be filed and updated regularly.
Importer and Exporters of products and services who rely regularly on forex will now need to also dedicate time and resources to strict documentation processes.
Increasing scrutiny in the application and usage of forex by all parties. The CBN scrutinises the Authorised Dealers who in-turn scrutinise the activities of the BDC’s and the End users etc.
Debit/ Credit card transactions in forex has now been increased from $40,000 per annum to $150,000 per annum. This means if you are traveling you no longer need to buy forex from the black market. With your local debit cards you can go to any ATM abroad to withdraw forex at the prevailing exchange rate locally.
Beneficiaries of Western Union and other money transfer networks can only now receive cash in Naira rather than in forex.
Corporates who import dollars into the country through banks will now have to declare this import and reasons for brining it in. The forex imported will be converted to Naira immediately upon entry and a Certificate of Capital Importation (CCI) will be issued immediately. Before now, importers of forex need not apply for a CCI.
Importers intending to pay for imports of non-regulated products of not more than $250,000 per annum using telegraphic transfers shall only complete the “e-Form M online” supported with a pro forma invoice. However, shipping documents must be submitted by the importer through its processing bank not later than 90 days from the date of the transfer.

Like I mentioned, a lot of these new developments may seem like an over kill or necessary depending on your informed perspective.

Nairametrics

Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

2 Comments

Francis Ejike

January 26, 2015 at 11:49 pm

The question is ; Do we necessarily need to introduce the RDAS in our present circumstance that the value of naira is dropping too fast.
We have devalued but no export products to win more F/X for the country. So a lot more challenges will rear their heads.
Unfortunately too, the only product {Oil}price{s} are low due to circumstances beyond our control.
The question above becomes more relevant when we know that this is an import oriented country. Consequently we are going to have or we have more F/X arbitrary buyers.This is not due to import oriented contry issue but as a result policies in duty payment, current election isuues and bmore. So the primary effect of more demand than supply will push up the price,beyond acceptable limits.

Reply
Anonymous

April 24, 2016 at 10:18 pm

Thanks a lot! This was really helpful.

Reply

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Coronavirus

COVID-19 Update in Nigeria

On the 8th of July 2020, 460 new confirmed cases and 15 deaths were recorded in Nigeria.

Published

6 hours ago

July 9, 2020

Samuel Oyekanmi

The spread of novel Corona Virus Disease (COVID-19) in Nigeria continue to record significant increase as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 30,249 confirmed cases.

On the 8th of July 2020, 460 new confirmed cases and 15 deaths were recorded in Nigeria, having carried out a total test of 169,629 samples across the country.

To date, 30,249 cases have been confirmed, 12,373 cases have been discharged and 684 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 169,629 tests have been carried out as of July 6th, 2020 compared to 152,952 tests a day earlier.

COVID-19 Case Updates- 8th July 2020,

Total Number of Cases – 30,249
Total Number Discharged – 12,373
Total Deaths – 684
Total Tests Carried out – 169,629

According to the NCDC, the 460 new cases were reported from 21 states- Lagos (150), Rivers (49), Oyo (43), Delta (38), FCT (26), Anambra (20), Kano (20), Plateau (18), Edo (14), Bayelsa (13), Enugu (13), Osun (12), Kwara (10), Borno (8), Ogun (7), Kaduna (6), Imo (4), Bauchi (3), Gombe (3), Niger (2), Adamawa (1).

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 11,670, followed by Abuja (2,348), Oyo (1,573), Edo (1,503), Delta (1,323), Kano (1,291), Rivers (1,284), Ogun (1,057), Kaduna (889), Katsina (628), Borno (563), Ondo (550), Gombe (524), Bauchi (519), Ebonyi (503), Plateau (478), Enugu (431), Abia (400), Imo (356), Jigawa (318).

Kwara state has recorded 307 cases, Bayelsa (282), Nasarawa (234), Osun (210), Sokoto (153), Niger (124), Benue (121), Akwa Ibom (112), Adamawa (100), Anambra (93), Kebbi (86), Zamfara (76), Yobe (61), Ekiti (45), Taraba (27), while Kogi and Cross River state have recorded 5 cases each.

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020.

Date	Confirmed case	New cases	Total deaths	New deaths	Total recovery	Active cases	Critical cases
July 8, 2020	30249	460	684	15	12373	17192	7
July 7, 2020	29789	503	669	15	12108	17012	7
July 6, 2020	29286	575	654	9	11828	16804	7
July 5, 2020	28711	544	645	11	11665	16401	7
July 4, 2020	28167	603	634	6	11462	16071	7
July 3, 2020	27564	454	628	12	11069	15867	7
July 2, 2020	27110	626	616	13	10801	15693	7
July 1, 2020	26484	790	603	13	10152	15729	7
June 30, 2020	25694	561	590	17	9746	15358	7
June 29, 2020	25133	566	573	8	9402	15158	7
June 28, 2020	24867	490	565	7	9007	14995	7
June 27, 2020	24077	779	558	4	8625	14894	7
June 26, 2020	23298	684	554	5	8253	14491	7
June 25, 2020	22614	594	549	7	7822	14243	7
June 24, 2020	22020	649	542	9	7613	13865	7
June 23, 2020	21371	452	533	8	7338	13500	7
June 22, 2020	20919	675	525	7	7109	13285	7
June 21, 2020	20242	436	518	12	6879	12847	7
June 20, 2020	19808	661	506	19	6718	12584	7
June 19, 2020	19147	667	487	12	6581	12079	7
June 18, 2020	18480	745	475	6	6307	11698	7
June 17, 2020	17735	587	469	14	5967	11299	7
June 16, 2020	17148	490	455	31	5623	11070	7
June 15, 2020	16658	573	424	4	5349	10885	7
June 14, 2020	16085	403	420	13	5220	10445	7
June 13, 2020	15682	501	407	8	5101	10174	7
June 12, 2020	15181	627	399	12	4891	9891	7
June 11, 2020	14554	681	387	5	4494	9673	7
June 10, 2020	13873	409	382	17	4351	9140	7
June 9, 2020	13464	663	365	4	4206	8893	7
June 8, 2020	12801	315	361	7	4040	8400	7
June 7, 2020	12486	260	354	12	3959	8173	7
June 6, 2020	12233	389	342	9	3826	8065	7
June 5, 2020	11844	328	333	10	3696	7815	7
June 4, 2020	11516	350	323	8	3535	7646	7
June 3, 2020	11166	348	315	1	3329	7522	7
June 2, 2020	10819	241	314	15	3239	7266	7
June 1, 2020	10578	416	299	12	3122	7157	9
May 31, 2020	10162	307	287	14	3007	6868	7
May 30, 2020	9855	553	273	12	2856	6726	7
May 29, 2020	9302	387	261	2	2697	6344	7
May 28, 2020	8915	182	259	5	2592	6064	7
May 27, 2020	8733	389	254	5	2501	5978	7
May 26, 2020	8344	276	249	16	2385	5710	7
May 25, 2020	8068	229	233	7	2311	5524	7
May 24, 2020	7839	313	226	5	2263	5360	7
May 23, 2020	7526	265	221	0	2174	5131	7
May 22, 2020	7261	245	221	10	2007	5033	7
May 21, 2020	7016	339	211	11	1907	4898	7
May 20, 2020	6677	284	200	8	1840	4637	7
May 19, 2020	6401	226	192	1	1734	4475	7
May 18, 2020	6175	216	191	9	1644	4340	7
May 17, 2020	5959	388	182	6	1594	4183	7
May 16, 2020	5621	176	176	5	1472	3973	7
May 15, 2020	5445	288	171	3	1320	3954	4
May 14, 2020	5162	193	168	3	1180	3815	4
May 13, 2020	4971	184	164	6	1070	3737	4
May 12, 2020	4787	146	158	6	959	3670	4
May 11, 2020	4641	242	152	10	902	3589	4
May 10, 2020	4399	248	142	17	778	3479	4
May 9, 2020	4151	239	127	11	745	3278	4
May 8, 2020	3912	386	118	10	679	3115	4
May 7, 2020	3526	381	108	4	601	2818	4
May 6, 2020	3145	195	104	5	534	2507	1
May 5, 2020	2950	148	99	5	481	2370	4
May 4, 2020	2802	245	94	6	417	2291	2
May 3, 2020	2558	170	88	2	400	2070	2
May 2, 2020	2388	220	86	17	351	1952	2
May 1, 2020	2170	238	69	10	351	1751	2
April 30, 2020	1932	204	59	7	317	1556	2
April 29, 2020	1728	196	52	7	307	1369	2
April 28, 2020	1532	195	45	4	255	1232	2
April 27, 2020	1337	64	41	0	255	994	2
April 26, 2020	1273	91	41	5	239	994	2
April 25, 2020	1182	87	36	3	222	925	2
April 24, 2020	1095	114	33	1	208	855	2
April 23, 2020	981	108	32	3	197	753	2
April 22, 2020	873	91	29	3	197	648	2
April 21, 2020	782	117	26	3	197	560	2
April 20, 2020	665	38	23	1	188	466	2
April 19, 2020	627	86	22	2	170	436	2
April 18, 2020	541	48	20	2	166	356	2
April 17, 2020	493	51	18	4	159	317	2
April 16, 2020	442	35	13	1	152	277	2
April 15, 2020	407	34	12	1	128	267	2
April 14, 2020	373	30	11	1	99	263	2
April 13, 2020	343	20	10	0	91	242	2
April 12, 2020	323	5	10	0	85	228	2
April 11, 2020	318	13	10	3	70	238	2
April 10, 2020	305	17	7	0	58	240	2
April 9, 2020	288	14	7	1	51	230	2
April 8, 2020	274	22	6	0	44	226	2
April 7, 2020	254	16	6	1	44	204	2
April 6, 2020	238	6	5	0	35	198	2
April 5, 2020	232	18	5	1	33	194	2
April 4, 2020	214	5	4	0	25	185	0
April 3, 2020	209	25	4	2	25	180	0
April 2, 2020	184	10	2	0	20	162	0
April 1, 2020	174	35	2	0	9	163	0
March 31, 2020	139	8	2	0	9	128	0
March 30, 2020	131	20	2	1	8	121	0
March 29, 2020	111	22	1	0	3	107	0
March 28, 2020	89	19	1	0	3	85	0
March 27, 2020	70	5	1	0	3	66	0
March 26, 2020	65	14	1	0	2	62	0
March 25, 2020	51	7	1	0	2	48	0
March 24, 2020	44	4	1	0	2	41	0
March 23, 2020	40	10	1	1	2	37	0
March 22, 2020	30	8	0	0	2	28	0
March 21, 2020	22	10	0	0	1	21	0
March 20, 2020	12	4	0	0	1	11	0
March 19, 2020	8	0	0	0	1	7	0
March 18, 2020	8	5	0	0	1	7	0
March 17, 2020	3	1	0	0	0	3	0
March 16, 2020	2	0	0	0	0	2	0
March 15, 2020	2	0	0	0	0	2	0
March 14, 2020	2	0	0	0	0	2	0
March 13, 2020	2	0	0	0	0	2	0
March 12, 2020	2	0	0	0	0	2	0
March 11, 2020	2	0	0	0	0	2	0
March 10, 2020	2	0	0	0	0	2	0
March 9, 2020	2	1	0	0	0	2	0
March 8, 2020	1	0	0	0	0	1	0
March 7, 2020	1	0	0	0	0	1	0
March 6, 2020	1	0	0	0	0	1	0
March 5, 2020	1	0	0	0	0	1	0
March 4, 2020	1	0	0	0	0	1	0
March 3, 2020	1	0	0	0	0	1	0
March 2, 2020	1	0	0	0	0	1	0
March 1, 2020	1	0	0	0	0	1	0
February 29, 2020	1	0	0	0	0	1	0
February 28, 2020	1	1	0	0	0	1	0

Coronavirus

Update: FG suspends reopening of schools, students won’t write 2020 WAEC exams

The Minister of Education, Adamu Adamu, said that WAEC should suspend exams.

Published

12 hours ago

July 8, 2020

Chike Olisah

The Federal Government has just announced that schools under its control will not be reopening for the forthcoming West African Examination Council (WAEC) exams.

This was disclosed in a tweet post by the aide to President Muhammadu Buhari on New Media, Tolu Ogunlesi from his official Twitter handle on Wednesday, July 8, 2020.

According to Ogunlesi, the Minister of Education, Adamu Adamu, said that WAEC should suspend exams and also urges State Governments to toe the line of the Federal Government as this is not the right time to reopen.

According to the tweet post, ‘’Minister of Education has just announced that schools under control of the Federal Government will not be reopening for the forthcoming WAEC exams. Says WAEC should suspend exams and urges State Governments to toe Federal Government line. This is not the right time to reopen,’’

Adamu, while addressing state house correspondents after the virtual Federal Executive Council meeting on Wednesday, July 8, 2020, said that none of the schools under the control of his ministry will resume until schools are considered safe enough

The Minister appealed to the State Governments that have already announced the resumption of schools to reconsider that as it is not safe and the students should be protected. He said that he would prefer that students lose an academic year than expose them to dangers.

He also debunked an earlier report that claimed that the Minister of State for Education, Emeka Nwajiuba, announced that schools will be resuming on August 4, 2020. Adamu said that the Minister of State must have been misquoted as the schools under the supervision of the ministry will not be opening on August 4 or anytime soon.

Going further, Adamu pointed out that WAEC will not determine what Nigeria will do as he will rather have the country lose a school year than exposing the students to danger.

Tech News

Tizeti reinstates Kendall Ananyi as CEO after investigation into alleged sexual misconduct

The investigations into the allegations could not establish a case of sexual harassment, .

Published

14 hours ago

July 8, 2020

Ruth Okwumbu

Tizeti, MainOne extend partnership to expand highspeed WiFi services in Africa, Tizeti reinstates Kendall Ananyi as CEO after investigation into alleged rape

Following the conclusion of the independent special investigation, Tizeti Board of directors have reinstated Kendall Ananyi as Chief Executive Officer.

With this development, the interim Co-CEOs Ifeanyi Okonkwo and Patricia Aiyedun, will return to their respective positions as Chief Operating Officer, and Chief Financial Officer.

According to a statement published on its website, the company stated that investigations into the allegations of sexual harassment could not establish a case of sexual harassment.

The board had on June 7 appointed an Independent Special Investigation Committee of its Board of Directors to investigate allegations of sexual harassment made against Kendall Ananyi, the embattled CEO.

To ensure the independence of the committee, the CEO stepped down and was walled off from communications with the Independent Special Investigation Committee and any matters related to the investigation, the statement read.

After a month of investigations, the committee led by Senior Advocate of Nigeria Olumide Sofowora, SAN, C.Arb. of Olumide Sofowora Chambers, stated that no clear case of sexual harassment had been established, and recommended that the CEO be reinstated.

According to the statement, the committee researched “what actions would constitute sexual harassment, gathered relevant information from a number of sources in both Nigeria and Ghana, and conducted a number of interviews, including separately interviewing both the accuser and Mr. Ananyi”.

It was based on this that the independent legal counsel concluded that a clear case of sexual harassment had not been established.

The company promised that a sexual harassment policy would be put in place going forward.

“Tizeti remains fully committed to high ethical standards, gender equality, providing a workplace that is free from sexual harassment and ensuring that its diverse team feels comfortable and safe at all times.

“Tizeti wants to ensure that it has best in class policies and procedures going forward. As a result, Tizeti will be updating its code of conduct and putting in place a sexual harassment policy that is in line with best practices and encourages the reporting of any potential incidents,” it said.