CBN tightens forex oversight, hits banks with N100m fine

The Central Bank of Nigeria (CBN) has announced tougher penalties for banks that process foreign exchange (forex) transactions without proper documentation.

Under the new rules, any authorised dealer bank found carrying out forex transactions without the required supporting documents will be fined N100 million. In addition, the bank will pay N10 million for each transaction involved.

The sanctions are contained in the fourth edition of the Foreign Exchange Manual, which serves as a guide for participants in Nigeria’s forex market.

According to the CBN, the updated manual aims to improve compliance, increase transparency, and strengthen confidence in the foreign exchange system.

Banks are now required to obtain, verify, and keep all necessary documents before releasing foreign currency to customers. Similar documentation requirements apply to forward and swap transactions, where proof of the underlying trade or obligation must be provided before settlement.

For import transactions, importers must continue to provide documents such as Form M, invoices, certificates of origin, packing lists, and shipping documents. They must also submit Exchange Control Documents within 90 days after negotiating shipping documents through overseas correspondent banks.

The CBN warned that failure to meet documentation requirements will attract escalating sanctions. A first violation will result in a 90-day suspension from forex transactions, a second violation will attract a 180-day suspension, and a third offence will lead to a one-year suspension. A fourth violation could result in a complete ban from participating in forex transactions.

Banks that fail to report cases of default to the CBN will also face sanctions.

The apex bank further tightened reporting requirements. Institutions that submit required daily or monthly returns late will be fined N500,000, while those that fail to submit returns at all will pay a minimum of N5 million, plus an additional N500,000 daily until compliance is achieved.

The revised manual also strengthens oversight of banks’ foreign currency exposure. Financial institutions that exceed approved Net Open Position limits will receive a warning for the first offence, a 10-working-day suspension from the Nigerian Foreign Exchange Market for the second offence, and a 90-day suspension for the third violation.

The CBN also imposed sanctions on unauthorised reallocation of foreign exchange funds. Any bank found engaging in such practices will be fined N10 million per transaction and may face additional disciplinary action under the Bankers’ Committee ethics framework.

According to the CBN, the new measures are aimed at promoting transparency, strengthening market discipline, reducing abuses, and improving investor confidence in Nigeria’s foreign exchange market.