CBN bets on rules to stabilise FX market

For years, Nigeria’s foreign exchange market has been shaped as much by uncertainty as by supply and demand. Importers complained about delays and documentation bottlenecks. Exporters often questioned whether existing procedures encouraged them to repatriate earnings through official channels. Investors worried about policy reversals and access to foreign exchange. The banks found themselves navigating changing regulations, multiple directives, and periods of market stress.

Against that backdrop, the launch of the fourth edition of the CBN’s Foreign Exchange Manual represents more than a regulatory update. It is the latest stage in a broader effort by monetary authorities to build a foreign exchange market governed less by discretion and more by clear rules, transparency and accountability.

The revised manual, which became effective on 1 June, comes after nearly eight years since the previous edition was issued in 2018. During that period, Nigeria’s economy experienced a global pandemic, oil price volatility, foreign exchange shortages, exchange rate reforms and a shift towards a more market-driven currency regime. Those developments exposed weaknesses in the existing framework and increased calls for clearer operating standards.

Speaking at the launch, CBN Governor, Mr Olayemi Cardoso, argued that the changes were necessary to align foreign exchange administration with present realities.

“Foreign exchange is more than a financial instrument; it is a critical enabler in any open economy. It anchors price stability, facilitates the flow of goods and capital, and shapes investor sentiment,” Cardoso said.

He noted that both global and domestic economic conditions had changed considerably over the past decade, requiring regulators to update the framework guiding market operations.

“Ongoing foreign exchange market reforms have made it necessary to revise the Manual to provide a more coherent and forward-looking regulatory framework. The last edition was issued in 2018, making this review both timely and necessary,” he added.

Yet beyond the ceremonial launch, the revised manual raises a broader question. Can clearer rules and stronger compliance requirements help deliver the stable, transparent and liquid foreign exchange markets that policymakers have promised for years?

Rules driving confidence

The CBN’s current reform programme has largely focused on restoring confidence in the foreign exchange market. Since assuming office, Cardoso has repeatedly argued that transparency, market discipline and credible price discovery are prerequisites for attracting investments and improving liquidity.

The revised manual appears designed to provide the operational framework for those objectives.

According to the Deputy Governor, Economic Policy Directorate, Dr Muhammad Abdullahi, the review formed part of a wider strategy initiated at the beginning of the current administration of the apex bank.

“It is important to note that the reform and comprehensive review of Nigeria’s Foreign Exchange Manual was initiated by the CBN Governor, Mr Olayemi Cardoso, from the very beginning of his administration as part of a broader agenda to restore confidence, improve transparency, deepen liquidity, and strengthen the overall functioning of Nigeria’s foreign exchange market,” Abdullahi said.

His remarks suggest that the manual should not be viewed in isolation. Rather, it follows a series of reforms introduced over the past two years, including the adoption of the Electronic Foreign Exchange Matching System, the Nigerian Foreign Exchange Code and efforts to unify exchange rate determination within the official market.

Those reforms sought to address longstanding criticisms that Nigeria’s foreign exchange market was fragmented, opaque and vulnerable to discretionary practices.

“A modern FX market cannot thrive in an environment characterised by opacity, fragmentation, delays, uncertainty, or excessive administrative bottlenecks,” Abdullahi said. “It requires trust, transparency, liquidity, efficient market infrastructure, prudent regulation, and responsible market conduct.”

The deputy governor argued that the revised manual would help create those conditions by standardising procedures, clarifying documentation requirements and establishing clearer responsibilities for authorised dealers and market participants.

The objective is not simply regulatory compliance. It is to reduce uncertainty.

Foreign exchange markets function most efficiently when participants understand the rules and have confidence that those rules will be applied consistently. Where ambiguity exists, businesses tend to delay investment decisions, traders demand higher risk premiums, and investors become cautious.

For Nigeria, where foreign exchange remains central to trade, manufacturing, education, healthcare and capital flows, such uncertainty carries significant economic costs.

This explains why the CBN repeatedly emphasised transparency and consistency throughout the launch event.

Cardoso also described the revised manual as part of efforts to strengthen “clarity, consistency, and market efficiency” while promising stronger monitoring mechanisms to ensure accountability across the system.

Whether those goals are achieved will ultimately depend on implementation. Regulations alone rarely change markets. Consistent enforcement does.

What has changed?

The practical significance of the revised manual lies in its detailed operational provisions.

While many of the changes may appear technical, they affect a wide range of economic activities, from import transactions and export proceeds to travel allowances and tuition payments abroad.

Among the notable revisions is the harmonisation of Personal Travel Allowance and Business Travel Allowance disbursements with the revised Bureau de Change guidelines. Under the new arrangement, 75 per cent of PTA and BTA transactions will be processed electronically, while only 25 per cent may be disbursed in cash.

The manual also increases allowable advance payments for imports from 15 per cent to 30 per cent. For businesses that depend on imported inputs, this could improve transaction flexibility and reduce delays associated with supplier payment arrangements.

Another important provision concerns export transactions. Processing of Form NXP, the principal export documentation platform, will now be free of charge. The manual also introduces specific provisions governing service exports, technology-sector remittances and Pan-African Payment and Settlement System transactions.

These additions reflect changes in the structure of Nigeria’s economy.

A growing share of foreign exchange earnings now originates from services, technology exports and regional trade rather than traditional merchandise exports alone. Regulatory frameworks that fail to recognise those realities risk becoming outdated.

The revised manual also introduces Non-Resident Investment Accounts and Non-Resident Ordinary Accounts, while allowing foreign companies operating in the extractive sector to repatriate 100 per cent of export proceeds.

Perhaps more significant for individual account holders is the removal of the mandatory Form A requirement for remittances using ordinary domiciliary accounts.

Although authorised dealer banks will still be required to verify the legitimacy of transactions, the change eliminates an administrative layer that many market participants considered cumbersome.

The manual further provides for tuition fee payments of up to $25,000 per semester for undergraduate and postgraduate studies abroad and allows transfers between export proceeds domiciliary accounts and ordinary domiciliary accounts under specified conditions.

Collectively, these provisions indicate a regulatory approach focused on reducing bottlenecks while maintaining oversight.

“Our goal is to reduce transaction frictions, improve processing timelines, deepen market confidence, encourage formal market participation, and create a more seamless and efficient experience for legitimate users of Nigeria’s foreign exchange market,” Abdullahi said.

For businesses and investors, the real measure of success will be whether these changes translate into faster processing, reduced compliance costs and more predictable access to foreign exchange.

Banks back discipline

Among market participants, commercial banks are likely to play the most critical role in implementing the revised framework.

As intermediaries between customers and the foreign exchange market, banks will be responsible for applying documentation standards, processing transactions and ensuring compliance with the new requirements.

It was therefore notable that bank chief executives used the launch event to publicly endorse the reforms.

Speaking on behalf of the Body of Banks’ Chief Executive Officers, the Group Managing Director of United Bank for Africa, Mr Oliver Alawuba, described the revised manual as a continuation of the CBN’s recent market reforms.

“Coming after the introduction of the Electronic Foreign Exchange Matching System and the Nigerian Foreign Exchange Code, this revised manual reinforces a clear policy direction of the Central Bank of Nigeria, a policy direction that anchors on transparency, ethical conduct, credible foreign exchange discovery, stronger documentation, improved oversight, and greater confidence,” Alawuba said.

He argued that reforms introduced over recent years had altered perceptions within the market.

“One of the things I always ask anytime I ask questions about Nigeria is that two years ago or three years ago, as a banker, if you meet your customer, they will ask you, ‘Do you have foreign exchange for us?’ But today, when you meet your customer, you will be the one asking the customer whether they have foreign exchange,” he said.

His remarks reflected the CBN’s broader objective of encouraging foreign exchange inflows into the formal market rather than outside official channels.

However, Alawuba also stressed that reforms could not succeed without discipline, saying, “We can’t do this reform without discipline. So what this manual comes with is the discipline of operators and regulators and all stakeholders as we continue to have a sustainable foreign exchange market.”

A similar theme emerged in remarks by the Group Managing Director of Access Holdings Plc, Mr Roosevelt Ogbonna.