CBN Introduces N100 Million Fine for Forex Transactions Without Proper Documentation

The Central Bank of Nigeria (CBN) has unveiled a stringent new compliance framework for the foreign exchange market, introducing a N100 million penalty for financial institutions that process foreign exchange transactions without adequate supporting documentation.

The measure is contained in the fourth edition of the Foreign Exchange Manual, recently released by the CBN’s Trade and Exchange Department. The revised manual represents the most significant update to Nigeria’s foreign exchange regulations since the previous edition was issued in 2017.

Under the new guidelines, authorised dealers found conducting foreign exchange transactions backed by insufficient documentation will face a N100 million fine in addition to a N10 million penalty for each affected transaction.

According to the apex bank, the revised framework is aimed at strengthening regulatory oversight, improving transparency in foreign exchange transactions, enhancing compliance standards, and curbing market abuses within Nigeria’s foreign exchange system.

The manual serves as a comprehensive regulatory guide for banks, licensed foreign exchange dealers, exporters, investors, businesses, and individuals participating in the foreign exchange market.

Tougher Sanctions for Market Violations

The updated regulations introduce a range of penalties for various infractions committed by authorised dealers and other market participants.

Banks that exceed their approved Net Open Position (NOP) limits will face escalating sanctions. A first violation will attract a written warning, while a second offence will result in a 10-working-day suspension from the foreign exchange market. A third violation will lead to a 90-day suspension.

The CBN has also tightened reporting requirements for financial institutions. Banks are now required to submit daily foreign exchange transaction returns by 10:00 a.m. for the previous business day and file monthly returns within five working days after the end of each month.

Failure to comply with these reporting obligations will attract financial penalties. Late submission of returns will incur a N500,000 fine, while failure to submit returns altogether will result in a minimum penalty of N5 million, plus an additional N500,000 for every day the violation continues.

The regulator further warned against the diversion of foreign exchange allocations from their approved purposes without prior authorisation. Depending on the severity of the offence, sanctions may include monetary fines, suspension of an authorised dealer licence for at least six months, or outright revocation of the licence.

Stricter Rules for Importers and Exporters

Import-related transactions received significant attention in the revised framework.

Importers are now required to submit Exchange Control Documents within 90 days of negotiating shipping documents with overseas correspondent banks. Failure to comply will result in restrictions on access to both valid and non-valid foreign exchange transactions, including the processing of Form M applications.

Sanctions for repeated violations become progressively harsher, beginning with a 90-day restriction for a first offence, extending to 180 days for a second violation, 360 days for a third, and culminating in a permanent exclusion from the foreign exchange market for a fourth offence.

Banks that fail to report importer defaults may also face penalties, starting with formal warnings and escalating to fines of N10 million per transaction.

For exporters, the CBN has reinforced repatriation requirements. Non-oil export proceeds must now be repatriated and credited to domiciliary accounts within 180 days of shipment, while oil and gas export proceeds must be returned within 90 days.

Exporters who fail to comply will be charged a penalty equivalent to one percent of the naira value of the outstanding amount. Financial institutions that fail to enforce compliance among their customers will be fined 0.5 percent of the outstanding sum.

New Operational Reforms

Alongside the compliance measures, the revised manual introduces several reforms designed to improve market efficiency and reduce transaction bottlenecks.

Among the changes, the allowable advance payment for imports has been increased from 15 percent to 30 percent. The framework also permits a variation of up to ±10 percent between actual imports and the Cost and Freight value declared on Form M.

Additionally, the CBN has eliminated processing fees associated with Form NXP, which is used for export declarations.

The revised manual also contains updated provisions covering service exports, technology-related remittances, transactions under the Pan-African Payment and Settlement System (PAPSS), non-resident investment accounts, and overseas tuition payments of up to $25,000 per semester for undergraduate and postgraduate students.

Another notable change is the removal of the previously mandatory Form A requirement for remittances funded through personal domiciliary accounts, although banks are still required to verify the legitimacy and purpose of such transactions.

Boosting Transparency and Market Confidence

The CBN said the revised framework emerged from extensive consultations with banks, exporters, businesses, regulators, and development partners. The objective is to create a more transparent, market-driven, and rules-based foreign exchange system.

According to the apex bank, the reforms are expected to improve compliance, reduce transaction delays, attract greater investment inflows, strengthen market confidence, and enhance the overall integrity of Nigeria’s foreign exchange market.

CBN Governor, Olayemi Cardoso, described the revised manual as part of the bank’s commitment to strengthening macroeconomic stability and modernising foreign exchange administration in response to evolving global and domestic economic realities.

Similarly, Muhammad Abdullahi, Deputy Governor in charge of Corporate Services, said the framework forms part of broader reforms aimed at rebuilding trust, improving transparency, deepening market liquidity, and aligning Nigeria’s foreign exchange system with international best practices.

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