Banks face N100m penalty for forex violations

The Central Bank of Nigeria has set a N100m penalty for banks that process foreign exchange transactions without adequate documentation as part of a sweeping compliance regime unveiled in its newly released Foreign Exchange Manual.

Under the offences and sanctions section of the fourth edition of the manual, the apex bank stated, “Authorised dealers shall pay N100m in addition to N10m per transaction” for consummating foreign exchange transactions with inadequate documentation.

The sanction forms part of a broader framework aimed at tightening oversight of Nigeria’s foreign exchange market, strengthening compliance standards, and curbing abuses among authorised dealers and other market participants.

The revised manual, issued by the CBN’s Trade and Exchange Department in May 2026, is the first major update since 2017. It serves as a regulatory guide for banks, authorised buyers, exporters, investors, and members of the public participating in foreign exchange transactions.

According to the CBN, the manual seeks to promote transparency in foreign exchange inflows and outflows, establish clear documentation and reporting requirements, strengthen enforcement mechanisms, and support national economic priorities by ensuring foreign exchange is channelled to productive uses.

Beyond the N100m sanction, the manual introduces a range of penalties for violations in the Nigerian Foreign Exchange Market.

Banks that exceed their approved Net Open Position limits face escalating punishments. A first offender will receive a warning letter, while a second offence attracts a 10-working-day suspension from the foreign exchange market. A third violation will result in a 90-day suspension from the market.

The apex bank also tightened reporting obligations for authorised dealers. Banks are required to submit daily returns on foreign exchange transactions by 10 a.m. for the preceding day and monthly returns within five working days after month-end. Failure to comply attracts sanctions.

Under the new rules, late rendition of returns will attract a penalty of N500,000, while non-rendition carries a minimum fine of N5m and an additional N500,000 for every day the violation continues.

The CBN further warned banks against reallocating foreign exchange funds without regulatory approval, stating that such actions could attract monetary fines, suspension of authorised dealership licences for at least six months, or outright licence revocation, depending on the severity of the breach.

Import-related transactions also received significant attention in the revised framework. The manual requires importers to submit Exchange Control Documents within 90 days of negotiating shipping documents with overseas correspondent banks. Importers who fail to comply will be restricted from conducting valid and non-valid foreign exchange transactions, including the processing of Form M applications.

First-time offenders will face a 90-day restriction, rising to 180 days for a second offence and 360 days for a third. A fourth violation will attract a complete ban from the foreign exchange market.

Where banks fail to report such defaults, they risk sanctions, including a warning and a N10m penalty for each affected transaction.

The manual also imposes stricter obligations on exporters. For non-oil exports, proceeds must be repatriated and credited to exporters’ domiciliary accounts within 180 days of shipment, while oil and gas export proceeds must be received within 90 days.

Exporters that fail to repatriate proceeds within the stipulated period will pay a penalty equivalent to one per cent of the naira value of the outstanding proceeds, while banks that fail to ensure compliance will be fined 0.5 per cent of the outstanding amount.

The manual further empowers the CBN to sanction banks for late approvals of export documentation, non-remittance of export supervision levies, and failure to render returns on export proceeds.

In addition to the sanctions, the revised framework introduces several operational reforms designed to improve market efficiency.

Among the changes are an increase in allowable advance payment for imports from 15 per cent to 30 per cent, the introduction of a permissible import shortfall or excess margin of plus or minus 10 per cent of the Cost and Freight value on Form M, and the removal of processing fees for Form NXP used for exports.

The CBN also introduced provisions covering service exports, technology-related remittances, Pan-African Payment and Settlement System transactions, non-resident investment accounts, and tuition fee remittances of up to $25,000 per semester for undergraduate and postgraduate studies abroad.

The manual additionally removed the mandatory requirement for Form A in remittances funded through ordinary domiciliary accounts, although banks are still required to verify the legitimacy and purpose of such transactions.

The apex bank said the reforms were developed after extensive consultations with banks, exporters, corporates, regulators, and development partners and are intended to support a transparent, rules-based, and market-oriented foreign exchange system.

According to the CBN, the revised manual is expected to improve compliance, reduce transaction bottlenecks, deepen market confidence, attract investment inflows, and strengthen the integrity of Nigeria’s foreign exchange market.

The Governor of the CBN, Mr Olayemi Cardoso, earlier said the initiative reflected the apex bank’s commitment to strengthening macroeconomic stability and modernising Nigeria’s foreign exchange administration.

He said the revised manual became necessary following evolving global economic conditions, domestic structural adjustments, and ongoing reforms in Nigeria’s foreign exchange market.

The Deputy Governor, Corporate Services Directorate of the CBN, Dr Muhammad Abdullahi, said the revised manual formed part of broader reforms initiated under Cardoso’s leadership to restore confidence, improve transparency, deepen liquidity, and strengthen market efficiency.

He said the review was undertaken to align Nigeria’s foreign exchange framework with current market realities and international best practices.

“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,” he said.