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Ethiopia’s Central Bank Announces $50m FX Auction as Liquidity Pressures Persist

Ethiopia’s central bank is injecting $50m into the market this week, giving banks brief FX relief but the move also underscores the deeper structural shortages and persistent parallel-market pressures still weighing on the economy.

Nigat Post Staff Writer
5 min read
Ethiopia’s Central Bank Announces $50m FX Auction as Liquidity Pressures Persist

The National Bank of Ethiopia (NBE) has announced it will inject $50 million into the foreign exchange market through its eleventh auction of the year, scheduled for Tuesday, December 2, 2025. The move forms part of the central bank’s bi-weekly auction program designed to support market liquidity and stabilize the exchange rate amid ongoing foreign currency shortages.

According to the NBE notice, commercial banks will submit bids between 10:00 AM and 12:00 noon, with results released at 3:00 PM and settlement finalized the same day.

Short-Term Relief for Tight Liquidity

The fresh injection of hard currency is expected to provide temporary breathing room for banks and import-dependent businesses facing prolonged FX rationing. For banks, the auction offers:

  • A clearer, rules-based allocation mechanism
  • Improved short-term liquidity planning
  • A market signal helping them price customer demand more efficiently

For businesses, even a modest improvement in banks’ FX positions can ease backlogs in areas such as raw material imports, manufacturing inputs, and essential commodities.

Market analysts say the regularity of the auctions now occurring every two weeks creates a degree of predictability that Ethiopia’s FX ecosystem has lacked for years.

Persistent Structural Challenges

Despite these injections, Ethiopia continues to grapple with deep-rooted structural problems in its foreign exchange market:

  • Demand far outweighs supply, leaving banks unable to satisfy private-sector needs.
  • A wide parallel-market premium continues to distort pricing and incentivize off-book transactions.
  • Export earnings while growing still remain weak, limiting the supply of fresh FX into the system.
  • External debt servicing obligations continue to compete directly with private-sector FX needs.

These dynamics mean that while the $50 million auction offers short-term liquidity support, it does not materially resolve the fundamental imbalance underlying Ethiopia’s FX shortage.

A Market in Transition NBE’s commitment to maintaining a predictable auction calendar signals a shift toward greater transparency and rule-based market operations a prerequisite for the broader FX market reforms Ethiopia plans to roll out as part of its macroeconomic liberalization agenda.

Yet, for businesses and banks alike, the message remains clear: even with regular injections, the road toward a fully functioning, market-responsive foreign exchange system will depend on structural reforms export competitiveness, diaspora inflows, investment attraction, and a narrowing of the parallel market gap.

For now, the auction provides short-term liquidity, but the broader correction the market needs remains a work in progress.