Commercial banks failed to take up all the foreign currency offered by the National Bank of Ethiopia in a regular auction for the first time since the central bank began publishing the series, leaving five million US dollars without demand even as participation expanded fourfold from the previous round.
The result marks a striking reversal from the acute competition seen only a month earlier, when banks submitted bids approaching four times the amount available. It provides the clearest indication yet that the central bank’s unusually large foreign-currency injections in August may have temporarily absorbed banks’ accumulated demand.
At Foreign Exchange Auction No. 28, conducted on September 9, the NBE made 125 million US dollars available, but commercial banks submitted bids totalling only 120 million US dollars. All 20 participating banks were successful, according to the result announced by the central bank.
The five-million-dollar shortfall means demand covered only 96 percent of the amount offered. It also implies that no more than 120 million US dollars could have been taken up, although the NBE’s announcement described 125 million US dollars as the “allotted amount”.
At the auction’s weighted-average successful rate of 160.5357 birr per US dollar, the foreign currency demanded by banks was worth approximately 19.26 billion birr. The five million US dollars left without bids was equivalent to about 803 million birr at the same rate.
The undersubscription is particularly significant because the NBE has spent much of the auction programme rationing limited foreign currency among competing banks. In several earlier auctions, the total value of bids substantially exceeded the amount supplied and only a fraction of participating banks secured allocations.
A review of the published auction results indicates that Auction No. 28 is the first regular auction explicitly reported as undersubscribed. A special auction held in February 2026 also left foreign currency untaken, when banks absorbed 455.29 million US dollars out of 500 million US dollars offered. That special operation left 44.71 million US dollars, or about nine percent of the offer, without demand.
The latest result does not necessarily mean Ethiopia’s longstanding foreign-currency shortage has ended. Instead, the sequence of auctions suggests that the timing and scale of the central bank’s interventions have temporarily changed the demand held by commercial banks.
On August 12, during Auction No. 25, 28 banks submitted bids totalling 470.17 million US dollars for an offer of only 125 million US dollars. Demand was therefore 3.76 times the amount supplied. Only nine banks secured allocations.
Eight days later, the NBE conducted a separate special auction offering 500 million US dollars. That operation attracted bids of 710.14 million US dollars from 22 banks, with 21 receiving foreign currency.
The two auctions injected a combined 625 million US dollars into the banking system within eight days.
When the NBE returned to its regular calendar on August 26, demand had already weakened sharply. Only five banks participated in Auction No. 27, submitting bids totalling 170.51 million US dollars for the same 125-million-dollar offer. Two banks were successful.
Auction No. 28 deepened that shift. Compared with August 26, the number of participating banks rose from five to 20, but the total value of bids declined by 50.51 million US dollars, or almost 30 percent.
Compared with the August 12 auction, total demand has fallen by 350.17 million US dollars—or about 74.5 percent—in less than a month.
The combination of broader participation and lower aggregate demand is important. It shows that the latest undersubscription was not caused by most banks staying away from the auction. Instead, a much larger group participated but submitted substantially smaller orders on average.
The average bid per participating bank declined to six million US dollars in Auction No. 28. It stood at approximately 34.1 million US dollars in the previous auction and about 16.8 million US dollars during Auction No. 25.
This suggests that the 500-million-dollar special auction conducted on August 20 may have cleared a considerable portion of the accumulated demand held by major commercial banks. Institutions that obtained large allocations in August may now require only smaller supplementary amounts.
Other factors could also have contributed, including banks’ available birr liquidity, their expectations about future exchange-rate movements, the documentation supporting customers’ import requests and the availability of foreign currency from exports, remittances and other market sources.
The pricing results, however, present a more complicated picture than the undersubscription alone.
The marginal rate—the lowest accepted rate—fell to 158.3500 birr per US dollar, compared with 160.2070 birr in Auction No. 27. That represents an appreciation of the birr by 1.857 birr, or approximately 1.16 percent, at the cut-off point.
But the weighted-average rate moved in the opposite direction. It increased from 160.2070 birr in the previous regular auction to 160.5357 birr per US dollar.
In other words, banks collectively demanded fewer dollars, yet the average price paid by successful bidders rose by 0.3287 birr. This indicates that the low bid that established the marginal rate did not represent the pricing of most of the dollars requested.
The difference between the marginal rate and the weighted-average rate widened to 2.1857 birr—the largest visible pricing divergence in the recent sequence of auctions.
Bids ranged from 158.3500 birr to 160.7556 birr per US dollar, creating a spread of 2.4056 birr. That contrasts sharply with Auction No. 27, when bids were compressed between 160.1833 birr and 160.2071 birr, a difference of less than three cents.
The latest dispersion suggests banks entered the auction with significantly different assessments of the dollar’s appropriate price. Some bidders appeared willing to pay close to 160.76 birr, while at least one successful bid cleared at 158.35 birr.
Despite the five-million-dollar undersubscription, the weighted-average rate remained above the 160.2144 birr recorded in the August 20 special auction and the 160.2070 birr registered on August 26. It was, however, below the 161.7994 birr weighted average recorded during the heavily oversubscribed August 12 auction.
The sequence shows that the birr strengthened after the August 12 demand surge but has since remained around 160 birr per US dollar at the weighted-average auction level. The latest auction therefore signals reduced demand volume without providing equally strong evidence of a sustained appreciation of the currency.
The NBE introduced foreign-exchange auctions after Ethiopia shifted to a market-determined exchange-rate system in July 2024. Under the reform, commercial banks were allowed to negotiate exchange rates with customers, while the central bank moved away from administratively fixing the value of the birr.
The auctions have since served several purposes: supplying liquidity to banks, directing foreign currency towards documented demand, supporting price discovery and allowing the central bank to intervene without returning to a fixed exchange rate.
The reform was a central component of Ethiopia’s four-year, 3.4-billion-US-dollar programme with the International Monetary Fund. It was intended to reduce the gap between official and parallel-market rates, attract foreign-currency inflows into formal channels and ease the allocation problems created by years of administrative controls.
The NBE’s auction rate has climbed from 107.9 birr per US dollar in the first auction in August 2024 to 160.5357 birr in the latest round. The birr has consequently lost about one-third of its value against the dollar when the two auction rates are compared.
Recent auction movements have been considerably smaller. Published results show the weighted-average rate rising from around 154.48 birr in late December 2025 to about 155 birr during January and February 2026, before moving close to 160 birr by May and August.
Although an undersubscribed auction can indicate easing immediate demand, a single result is insufficient to establish that Ethiopia’s structural foreign-currency constraints have disappeared. Banks’ demand can change sharply between auctions depending on the size of earlier allocations, import-payment schedules and the central bank’s intervention calendar.
The next auction will therefore provide an important test. Another undersubscription would strengthen the case that demand conditions have materially eased. A return to heavy oversubscription, however, would suggest the September 9 result was mainly a temporary consequence of the extraordinary 500-million-dollar injection made three weeks earlier.
The NBE said its next foreign-exchange auction would proceed according to the previously announced schedule.
