File: CBN
The Central Bank of Nigeria (CBN) has unveiled a sweeping revision of its foreign exchange regulatory framework, introducing a N100 million penalty for banks that process foreign exchange (FX) transactions without adequate documentation and tightening compliance requirements across the market.
Contained in the Fourth Edition of the Foreign Exchange Manual recently released, the new framework marked the first major review of the guide in nearly a decade and is aimed at strengthening transparency, improving market discipline and boosting confidence in Nigeria’s FX market.
Under the revised rules, authorised dealer banks found to have consummated foreign exchange transactions without adequate documentation will pay a N100 million fine in addition to N10 million for each affected transaction.
The apex bank said the manual was developed to promote transparency in foreign exchange inflows and outflows, establish clear documentation and reporting standards, strengthen enforcement mechanisms and ensure foreign exchange resources are channelled towards productive economic activities.
“The Central Bank remains resolute in ensuring that the foreign exchange market operates in a fair, transparent, and accountable manner,” the regulator stated in the document.
Beyond the monetary sanction, the manual introduces stricter documentation requirements for customer foreign exchange transactions, forward contracts and swap arrangements. Banks are required to obtain and verify relevant supporting documents before foreign currency can be delivered to customers or transactions settled.
The framework also strengthens reporting obligations for authorised dealers. Banks are required to submit daily returns on foreign exchange transactions and periodic reports on their foreign currency exposures, while maintaining compliance with approved net open position limits.
To enforce discipline in the market, the CBN outlined escalating sanctions for institutions that exceed approved foreign currency exposure limits. A first violation will attract a warning, while subsequent breaches could result in suspension from participation in the Nigerian Foreign Exchange Market (NFEM)
The revised manual also places renewed focus on import-related transactions. Importers are required to process Form M through authorised dealer banks and provide prescribed documentation, including certificates of origin, invoices, packing lists and shipping documents.
Henceforth, exchange control documents must be submitted to authorised dealer banks within 90 days of negotiating shipping documents.
Importers who fail to comply face increasingly severe restrictions. A first violation attracts a 90-day restriction from foreign exchange transactions, while second and third offences carry restrictions of 180 days and 360 days respectively.
A fourth violation could lead to a complete prohibition from further foreign exchange transactions.
The CBN warned that banks that fail to report such defaults would also face sanctions under the revised framework.
The manual equally reinforces obligations for exporters. Non-oil exporters are required to ensure export proceeds are repatriated and credited into their domiciliary accounts within 180 days from the bill of lading date, while proceeds from oil and gas exports must be repatriated within 90 days.
The apex bank said it would continue to monitor authorised dealer banks to ensure compliance with export proceeds repatriation requirements and other foreign exchange regulations.
Apart from enforcement measures, the revised framework introduces several operational changes designed to improve efficiency in the foreign exchange market.
Among them is an increase in the allowable advance payment for imports, with down payments now permitted up to 30 per cent of the free on board (FOB) value of a transaction, subject to prescribed conditions and documentation requirements.
The manual also removes charges associated with the processing of Form NXP, which exporters are required to obtain before shipping goods out of Nigeria.
In addition, the framework expands provisions relating to service exports, non-commercial exports, remittances, insurance payments, investment transactions and other foreign exchange operations.
According to the CBN, the revised manual serves as a comprehensive guide for authorised dealer banks, authorised buyers, exporters, investors and members of the public involved in foreign exchange transactions.
The regulator said the reforms were introduced to align Nigeria’s foreign exchange administration with current market realities, strengthen accountability, reduce market abuses and build a more transparent and rules-based foreign exchange system capable of supporting sustainable economic growth.
