The Central Bank of Nigeria (CBN) has announced its intention to pursue civil, administrative, or criminal sanctions against individuals and entities implicated in fraudulent foreign exchange transactions.
This disclosure was made on Thursday in a document titled “Frequently Asked Questions (FAQ) on the Settlement of Undelivered Forward Contracts”.
According to the CBN, the findings mark a critical phase in its ongoing effort to sanitise the FX market and restore credibility to Nigeria’s monetary system.
“The Central Bank of Nigeria is reviewing appropriate legal action against parties found to have violated applicable rules and regulations, based on the findings of the forensic audit,” it said. “The Bank will collaborate with law enforcement and regulatory agencies to pursue civil, administrative, or criminal sanctions, as necessary.”
What You Should Know
The Central Bank explained that the audit, initiated in September 2023 and conducted by global consulting firm Deloitte, examined transactions carried out through its Retail Secondary Market Intervention Sales (RSMIS) window, a facility designed to manage foreign exchange demand and liquidity.
According to the CBN, these forward contracts involved businesses paying in naira upfront for U.S. dollar disbursements at future dates. However, a significant number of the contracts were not fulfilled, prompting concerns within the Bank over widespread non-compliance, potential abuse, and violations of regulatory guidelines.
The CBN initiated the forensic review to verify the legitimacy of these deals, protect Nigeria’s foreign reserves, and uphold regulatory compliance across the financial system.
Audit Uncovers Widespread Infractions
According to the audit findings, the breaches were extensive and systemic. Deloitte identified a range of irregularities that rendered many of the FX forward contracts invalid under Nigerian law.
Infractions included:
- Mismatches in beneficiary identities
- Inflated foreign exchange requests
- Submission of blank or incorrect Form M documents
- FX approvals for non-permissible imports
- Companies applying for FX without appropriate authorisation
In some cases, the approved FX transaction value was higher than the declared cost of the goods being imported, indicating possible misrepresentation or falsification of supporting documents.
The CBN confirmed that only verified and compliant contracts were settled. For transactions found to be in breach, the naira initially paid was refunded to the authorised dealer banks, while no FX was disbursed.
What This Means
The Central Bank of Nigeria has firmly stated that the audit process is now closed and not open to appeals. The audit involved consultations with authorised dealer banks and allowed implicated parties to respond before any contract was declared invalid.
“The auditor contacted the authorized dealer banks concerning those contracts to get their explanations of the infractions before reaching conclusions on them,” the CBN said. “The findings have therefore met procedural fairness standards. The case of undelivered forward contracts is now concluded and closed.”
By declaring the matter closed, the CBN says it aims to draw a clear line under a long-standing controversy that has plagued Nigeria’s foreign exchange regime and investor confidence.
FX Market Reform
According to experts, the actions of the Central Bank of Nigeria form part of broader efforts to restore transparency in the FX market. Earlier in March 2024, the CBN announced the complete clearance of valid FX backlogs.
This followed a public statement in February by CBN Governor Olayemi Cardoso, who revealed that $2.4 billion of the reported $7 billion FX backlog was invalid, based on the forensic audit.
Cardoso noted that only $4.6 billion in FX obligations were deemed legitimate and would be honoured by the central bank.
CBN Reaffirms Commitment to Market Stability
The CBN stressed that it remains committed to honouring all valid obligations while ensuring that regulatory frameworks are enforced to protect the integrity of Nigeria’s financial system.
This latest crackdown, according to industry leaders, reflects the bank’s firmer stance under the current administration and its resolve to confront years of FX mismanagement, regulatory arbitrage, and fraudulent documentation practices.
Experts say, by signalling its willingness to apply legal consequences, the Central Bank of Nigeria is sending a strong message that the era of impunity in Nigeria’s foreign exchange market is coming to an end.
Talking Points
The Central Bank of Nigeria’s decision to pursue legal action over undelivered FX forward contracts signals a firm stance on regulatory enforcement and market discipline.
By involving law enforcement and regulatory agencies, the CBN is not only addressing past infractions but also sending a strong deterrent message to future violators of FX guidelines.
At Techparley, we see that the forensic audit by Deloitte reveals deep-rooted structural issues in the FX market, including documentation fraud, over-invoicing, and abuse of import approvals, highlighting the need for stricter compliance oversight.
For businesses and banks, this development is a wake-up call to strengthen internal compliance controls, especially when dealing with forward contracts and foreign exchange documentation.
The CBN’s move may also boost international confidence in Nigeria’s monetary policy, particularly among institutional investors who have long called for transparency in FX management.
Ultimately, the challenge lies in ensuring this accountability drive is sustained across future transactions, backed by real-time monitoring, clear guidelines, and consistent enforcement.
