The National Bank of Ethiopia (NBE) is scheduled to provide $125 million to commercial banks on Wednesday, August 26, following a massive $500 million special foreign exchange auction held earlier this month.
The NBE is moving forward with this injection to bolster foreign currency liquidity and address the persistent demand for US dollars within the domestic market.
This upcoming session marks the 27th regular foreign exchange auction conducted by the central bank. It is the first scheduled auction since the NBE executed a significant $500 million special FX sale on August 20.
This strategic move comes as the demand for foreign currency continues to outpace the volume typically provided through the central bank’s standard auction framework.
NBE to Proceed with Scheduled $125 Million Auction
The August 26 auction is a component of the NBE’s foreign exchange program for the first quarter of Ethiopia’s 2026/27 fiscal year. Under this program, the central bank has scheduled four regular auctions, each valued at $125 million, on the following dates:
- August 12
- August 26
- September 9
- September 23
These four sessions collectively represent $500 million in planned regular FX sales. The decision to proceed with the August 26 auction confirms that the $500 million special auction held last week was an additional intervention rather than a replacement for the standard quarterly program.
Commercial banks are required to submit their bids via the CSD-based FX Auction System between 10:00 a.m. and 12:00 p.m. on August 26. The NBE expects to announce the results at 3:00 p.m., with settlements anticipated by the end of the business day.
Persistent Imbalance Between Dollar Demand and Supply
The auction takes place amidst intense competition among commercial banks for foreign currency. During the previous regular auction on August 12, banks submitted bids totaling approximately $470.17 million, despite only $125 million being available. This indicated that demand was nearly 3.8 times the available supply.
At that August 12 auction, the weighted average exchange rate for successful bids reached 161.7994 birr per US dollar, with a marginal rate of 161.0050 birr. This extreme demand prompted the central bank to implement a much larger intervention the following week.
Impact of the $500 Million Special Intervention
On August 20, the NBE conducted a $500 million special foreign exchange auction, offering four times the usual amount. Commercial banks responded with bids totaling roughly $710.14 million, which still exceeded the available supply. The NBE fully allocated the $500 million, setting a marginal exchange rate of 160.2121 birr per dollar and a weighted average rate of 160.2144 birr per dollar.
While the special auction provided a substantial increase in liquidity, the upcoming regular auction will test whether the NBE can continue to manage a market characterized by such high demand levels.
Currency Trends: The Birr Remains Near the 160 Mark
Recent auction data provides insight into the birr’s valuation within the NBE system. The exchange rate climbed above 161 birr per dollar during the August 12 auction before the large-scale intervention on August 20 helped lower the marginal rate to approximately 160.21 birr.
Market participants and businesses will closely monitor the August 26 results to determine if the increased supply of foreign currency is successfully easing pressure on the birr. The resulting clearing and weighted average rates will serve as key indicators of how foreign currency demand is evolving.
The Significance of FX Auctions in Ethiopia
Launched in August 2024, the regular foreign exchange auction program is a pillar of Ethiopia’s transition toward a market-oriented exchange system. These auctions aim to supply the private sector with foreign currency while maintaining market stability and supporting the NBE’s monetary policy goals.
For the business community, the availability and cost of these funds are critical for financing imports, meeting international obligations, and securing essential inputs. For the broader economy, fluctuations in the birr-dollar rate directly influence import costs, inflation, and the domestic value of foreign-denominated obligations.
Key Metrics for August 26
The primary metrics to watch from Wednesday’s auction include the total bid value, the amount allocated, the marginal exchange rate, and the weighted average rate.
If demand continues to significantly outstrip the $125 million supply, it will signal that the recent $500 million injection has yet to curb the intense demand for dollars. Conversely, a drop in the bid-to-supply ratio could suggest that the NBE’s recent interventions are effectively stabilizing the market. The results, expected at 3:00 p.m. on Wednesday, will offer a vital assessment of the market’s response to recent liquidity injections.
