FX – Pavestones Legal

Posts

Foreign Exchange Controls in Nigeria: Updated Rules for BDCs

February 20, 2026/in Pavestones Newsletters /by Pavestones Legal

BY SEUN TIMI-KOLEOLU AND PROMISE ITAH

Introduction

On February 10, 2026, the Central Bank of Nigeria (CBN) issued a circular on Participation of Licenced Bureau De Change in the Nigerian Foreign Exchange Market (NFEM) (the “Circular”) allowing licensed Bureau de Change (BDC) to operate as intermediaries in the NFEM (the official foreign exchange market). This represents a significant policy shift, as BDCs had been excluded from accessing foreign exchange (FX) through official channels since July 2021 due to practices deemed to have contributed to exchange rate instability.

The Circular builds on the 2024 regulatory reforms, which strengthened capital requirements, licensing standards, reporting obligations, and compliance expectations for BDCs. According to CBN, the decision to re-admit BDCs aims to improve FX liquidity and ensure that legitimate end users can access foreign exchange more reliably.

In this newsletter, we highlight the key rules for BDC participation in the foreign exchange market and their practical implications.

What Are the New Rules for BDC Participation?

Under the Circular, licensed BDCs may participate in the NFEM, subject to the following requirements.

a. Weekly FX Purchase Limit: To manage liquidity and prevent excessive exposure, each licensed BDC may purchase up to $150,000 per week from any authorized-dealer bank. All purchases must be conducted at the prevailing market rate, with no preferential pricing arrangements.

b. Mandatory Resale Timeline and Position Restrictions (NFEM-Sourced FX): Any FX acquired under this scheme must be sold or used within 24 hours. BDCs cannot hold NFEM-sourced FX in their accounts beyond this period, and any unused balances must be returned to the market the next day. This rule prevents speculative hoarding and ensures that FX flows efficiently to end-users.

c. Settlement and Payment Structure: All FX transactions must be processed through bank accounts at licensed financial institutions. BDCs cannot route FX through third parties or non-customer intermediaries. Cash settlement is permitted, but it is strictly limited to no more than 25% of the transaction value, with the remainder required to pass through the banking system. This ensures that FX flows are traceable and transparent.

d. Compliance and Regulatory Oversight: In addition to operational limits, BDCs remain subject to enhanced compliance obligations:

i. Authorised dealers must perform full Know Your Customer (KYC) and due diligence on any BDC client before selling FX.

ii. Licensed BDCs are required to submit timely electronic reports of their transactions to the CBN and comply fully with all Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) rules.

iii. Anonymous transactions or round-tripping (buying FX at official rates and reselling it elsewhere for profit rather than for legitimate use) are strictly prohibited.

The Circular further reinforces that BDCs must operate within the broader Regulatory and Supervisory Guidelines for Bureau de Change Operations in Nigeria 2024.

What Are the Practical Implications?

a. For BDC operators:

i. Immediate Turnaround: BDCs must find buyers immediately or face the administrative burden of selling funds back to the NFEM within 24 hours;

ii. Strategic Forecasting: To avoid the inconvenience and potential losses involved in returning unused funds, BDCs must accurately forecast customer demand before purchasing their weekly $150,000 limit;

iii. Digital Accountability: The new framework emphasizes a “digital footprint,” requiring BDCs to integrate their IT systems with the CBN for real-time monitoring and reporting.

b. For the market and the public:

i. Easier access: The participation of BDCs in the official exchange market is expected to make it easier for the average person (travelers, students etc.) to obtain FX. Since BDCs are widely accessible to these users and are required to sell NFEM-sourced FX within 24 hours, supply of FX is expected to circulate more quickly to end users.

ii. Price stability: By prohibiting the hoarding of FX, the rules are expected to help reduce the extreme price jumps often seen in the parallel market.

Conclusion

The reintegration of licensed BDCs into Nigeria’s FX market provides a transparent and reliable channel for accessing foreign exchange. For businesses, it is likely to enhance predictability and reduce reliance on informal sources, while for BDCs, it reinforces the need to operate strictly within the established regulatory framework. The CBN expects that, when properly implemented, this structure will promote smoother FX flows, support effective business planning, and contribute to overall market stability.

For further information on any of the issues covered in this newsletter, please contact us at info@pavestoneslegal.com. At Pavestones, we deliver quality and innovative legal support across diverse industries, helping businesses operate in compliance with applicable laws and regulations to drive sustainable business growth.

FOREIGN CURRENCY DISCLOSURE, DEPOSIT, REPATRIATION, AND INVESTMENT SCHEME: CENTRAL BANK OF NIGERIA IMPLEMENTATION GUIDELINES

November 15, 2024/1 Comment/in Pavestones Newsletters /by Pavestones Newsletters

By Aderonke Alex-Adedipe and Olawale Atanda

Download Publication

Introduction

On November 5, 2024, the Central Bank of Nigeria (CBN) released its Implementation Guidelines on the Foreign Currency Disclosure, Repatriation, and Investment Scheme (the “Guidelines”). These Guidelines complement the Foreign Currency Disclosure, Deposit, Repatriation, and Investment Scheme Guidelines, 2024 (the “Scheme”), issued by the Minister of Finance and Coordinating Minister of the Economy on April 8, 2024. The Scheme was introduced to operationalize Presidential Executive Order No. 15 (Modification Notice), aimed at facilitating the voluntary disclosure, deposit, and repatriation of foreign currencies held by Nigerians, whether within or outside the country.

The Guidelines outline the role of Commercial, Merchant, and Non-Interest Banks (“Banks”) in the Scheme. It details how foreign currencies are to be disclosed, deposited, repatriated, or invested.

In this article, we examine the key provisions of the Guidelines and their role in implementing the Scheme effectively.

1.Objectives of the Scheme

The Scheme aims to enhance financial transparency by formalizing legitimate foreign currency assets held by Nigerians and legal residents. It provides a framework for the voluntary disclosure of internationally tradable foreign currency, whether held in cash or electronic form, onshore or offshore. Also, it establishes mechanisms for depositing disclosed foreign currency into participating financial institutions in Nigeria and repatriating offshore-held currency through approved channels. The Scheme seeks to promote investment in designated sectors and instruments, leveraging these disclosed assets to boost economic resilience, drive infrastructure development, and foster job creation.

2.Operation of the Scheme

2.1 Procedure for Application

To participate in the Scheme, applicants must provide Banks with required details, including their full name, Bank Verification Number (BVN), National Identification Number (for natural persons), or Tax Identification Number (for legal entities). Applicants must also disclose the amount of foreign currency they intend to deposit, details of their designated domiciliary account, and any additional information requested by the Bank.

2.2. Deposit and Repatriation of Foreign Currency

Upon verifying compliance with the application requirements, the Bank will receive the foreign currency into the participant’s designated domiciliary account. The Bank must then submit a report to the CBN detailing the receipt of the funds.

2.3. Withdrawals and Termination of Investment

Banks are prohibited from imposing restrictions on withdrawals from a participant’s designated domiciliary account (except as otherwise provided in the Scheme)* or on the termination of investments made in Permissible Investment Sectors or Instruments** under the Scheme.

2.4 Conversion of Deposited Foreign Currency

Participants may convert part or all of the foreign currency in their designated domiciliary accounts into Naira at the prevailing exchange rate. Banks are to ensure that such conversions are properly disclosed and reported in their foreign exchange returns.

3.Responsibilities of Stakeholders

3.1 Responsibilities of Banks

Banks participating in the Scheme are required to open designated domiciliary accounts for customers, process applications in line with the Guidelines, and accept deposits of disclosed foreign currencies directly or through nominated entities. They must issue receipts acknowledging the country of origin for deposited funds within 24 hours and track participants’ investments in permissible instruments or sectors. Also, Banks must ensure compliance with relevant laws and maintain strict confidentiality of participants’ information in line with data protection laws.

3.2. Responsibilities of Participants

Participants must open designated domiciliary accounts for Scheme-related transactions and invest only in permissible sectors or instruments. They are required to confirm the legality of deposited funds, provide accurate and complete information, and consent to the sharing of relevant account data with the CBN and other legally authorized parties.

3.3.Responsibilities of the CBN

The CBN regulates Banks’ participation in the Scheme, collects monthly reports from them, and provides templates for transaction reporting. It also shares data with the Ministry of Finance on the operation of the Scheme at both industry and individual bank levels.

4.Treatment of Uninvested Funds

Banks may utilize uninvested foreign currencies deposited under the Scheme for trading purposes, provided the funds remain accessible to the participant whenever required. Interest on balances in designated domiciliary accounts will be paid in accordance with the provisions of the Guide to Charges by Banks and Other Financial Institutions in Nigeria.

5. Compliance with Anti-Money Laundering and Counter-Terrorism Regulations

Transactions under the Scheme are subject to the Money Laundering (Prevention & Prohibition) Act, 2022; Terrorism (Prevention and Prohibition) Act, 2022, and various CBN regulations, including AML/CFT/CPF regulations and Customer Due Diligence guidelines. These laws prohibit the introduction of funds derived from illegal or criminal activities into Nigeria’s financial system.

Banks participating in the Scheme must ensure compliance with all relevant AML/CFT/CPF regulations by:

i.Conducting comprehensive Customer Due Diligence (CDD) on applicants, including identifying the beneficial owners of the funds.

ii.Verifying the ownership of accounts receiving funds under the Scheme.

iii.Ensuring deposits via wire transfers comply with applicable regulatory requirements.

iv.Applying enhanced due diligence for funds repatriated from jurisdictions that do not meet Financial Action Task Force (FATF) Recommendations.

Conclusion

The Guidelines provide a structured framework to facilitate the inflow of foreign currency currently outside the Nigerian financial system. The goal is to promote local investment in key economic sectors and approved investment instruments. By aligning with relevant regulatory provisions, the Scheme aims to bolster economic resilience while preserving the integrity of the financial system in Nigeria.

Footnotes

*The Scheme requires participants to commit to retaining the disclosed and deposited foreign currency for a minimum period of five (5) years from the deposit date. Withdrawal is only permitted for investment in Permissible Investment Sectors or Instruments.

**Permissible Investment Sectors are those designated by the President to drive economic growth, infrastructure development, and job creation. Permissible Investment Instruments are foreign currency-denominated financial instruments issued under relevant executive orders or as determined by the President.

REGULATORY UPDATE: THE NIGERIA FOREIGN EXCHANGE (FX) CODE

October 11, 2024/in Pavestones Newsletters /by Pavestones Legal

By Seun Timi-Koleolu and Qasim Ogunjimi

DOWNLOAD PUBLICATION

Introduction

In light of ongoing challenges in the Nigerian foreign exchange market, including recent distortions driven by speculators and illicit traders, the need for a robust regulatory framework has become increasingly urgent. In view of this, the Central Bank of Nigeria (CBN) has introduced the Nigeria Foreign Exchange Code (the “FX Code”), effective October 14, 2024, to enhance the integrity and operational efficiency of the Nigerian Foreign Exchange Market (NFEM). This comprehensive framework establishes robust guidelines for licensed banks and financial institutions, including Bureau de Change (BDC) operators, International Money Transfer Operators (IMTOs), FinTechs and others organisations engaged in wholesale foreign exchange transactions (“Market Participants”).

The FX Code aligns with the principles set forth in the FX Global Code maintained by the Global Foreign Exchange Committee (GFXC) and aims to promote ethical conduct and best practices within Nigeria’s foreign exchange landscape.

At the core of the FX Code are six key principles: Ethics; Governance; Execution; Information Sharing; Risk Management and Compliance; and Confirmation and Settlement Processes. These principles not only ensure high standards of ethical conduct and operational excellence but also allow for a transparent, competitive, and fair market environment. The focus of this newsletter is to examine the compliance requirements outlined in the FX Code, emphasizing its six key principles.

COMPLIANCE REQUIREMENTS UNDER THE FX CODE

To ensure that Market Participants align with the FX Code, several compliance requirements have been established. These requirements are designed to promote accountability, transparency, and adherence to high ethical standards in the foreign exchange market. The key compliance obligations include:

Self-Assessment and Reporting: Market Participants are required to conduct a thorough self-assessment of their adherence to the FX Code and submit a detailed compliance report to CBN by December 31, 2024. This assessment must evaluate their current practices against the standards set forth in the FX Code. This report should highlight their level of compliance, strengths and identify any areas requiring improvement.
Implementation Plan: Alongside the self-assessment, each Market Participant is required to submit to CBN by December 31, 2024, a compliance implementation plan that has been approved by its Board of Directors. This plan should detail the strategies and steps the institution will take to achieve full compliance with the FX Code.
Quarterly Reporting Mechanisms: Following the initial compliance assessments and plans, Market Participants must also provide ongoing updates to the CBN. They are obligated to submit quarterly reports on their level of compliance to the Financial Markets Department of CBN within 14 days after the end of each calendar quarter. This process ensures continuous monitoring and reinforces the commitment to uphold the principles of the FX Code.
Other Compliance Requirements: In addition to the primary obligations outlined above, Market Participants are expected to adhere to several other compliance requirements, including but not limited to:

Training and Awareness: Conduct regular training sessions for employees to ensure their understanding of the FX Code and its principles.
Internal Controls: Establish robust internal control mechanisms to continuously monitor adherence to the FX Code and detect potential violations.
Record Keeping: Maintain accurate and comprehensive records of all transactions, communications, and compliance activities to demonstrate adherence during audits.
Risk Management Framework: Implement a framework to identify, assess, and mitigate risks associated with FX activities, including monitoring market conditions and counterparty exposure.
Governance Structures: Establish clear governance structures outlining roles and responsibilities related to compliance, including appointing compliance officers and ensuring Board oversight.

Enforcement of the FX Code: Please note that the FX Code provides that CBN may take appropriate enforcement and other administrative action including monetary penalties as provided for under the CBN Act 2007 and Banks and Other Financial Institution Act 2020 against any Market Participant for failure to comply with the FX Code.

CONCLUSION

The introduction of the Nigeria Foreign Exchange Code marks a significant milestone in the ongoing effort to stabilize and enhance the Nigerian Foreign Exchange Market. It is important for all Market Participants to familiarize themselves with the provisions of the FX Code and actively work towards meeting its compliance requirements.

For further readings on the Nigerian foreign exchange market, you can refer to our previous articles

Tag Archive for: FX

Posts