James Emejo writes that the recent unveiling of the revised Foreign Exchange Manual by the Central Bank of Nigeria is a watershed in ongoing effort to restore order, rebuild confidence and deepen transparency in the country’s foreign exchange transactions.
At a time when the country is seeking to stabilise macroeconomic conditions, attract sustainable capital inflows and strengthen investor confidence, the revised framework provides a clearer rulebook for all participants in the FX ecosystem.
For years, the country’s FX market had been weighed down by opacity, distortions, weak liquidity, multiple pricing practices and heavy dependence on central bank interventions. Market confidence was often undermined by uncertainty around access to foreign exchange, delays in settlement, documentation inconsistencies and concerns over market discipline. Against this backdrop, the revised FX Manual represents more than an administrative update to part of a broader institutional attempt to create a more transparent, rules-based and market-oriented foreign exchange system.
CBN Governor, Mr. Olayemi Cardoso, made this intention clear at the official launch of the fourth edition of the FX Manual in Abuja, where he described the framework as a cornerstone of ongoing reforms aimed at strengthening transparency, deepening liquidity and restoring confidence in the market.
His remarks reflected a central theme running through the reforms currently being pursued by the apex bank: that credibility in the foreign exchange market cannot be sustained without clear rules, compliance, accountability and collaboration among stakeholders.
The significance of the revised manual lies partly in its timing. The last edition was issued in 2018, before major structural shifts reshaped both the global economy and Nigeria’s domestic economic environment. Since then, global financial markets have experienced heightened volatility, while Nigeria has grappled with inflationary pressures, foreign exchange shortages, declining investor confidence and persistent pressure on external reserves.
The revised manual therefore emerges as an attempt to align Nigeria’s FX governance framework with current realities, while also addressing long-standing inefficiencies within the system.
Cardoso stressed FX was more than a financial instrument, describing it as a critical enabler in any open economy because it anchors price stability, facilitates trade and capital flows, and shapes investor sentiment. That position underscored why reforms in the FX market had become central to broader macroeconomic management.
One of the strongest messages from the launch was the emphasis on transparency and predictability. According to the CBN governor, the revised manual is expected to improve clarity, consistency and efficiency in foreign exchange administration. These elements are particularly important in rebuilding investor confidence because market participants typically respond positively to environments where rules are transparent and predictable.
The revised framework also appears intended to reduce uncertainty in market operations by introducing more structured procedures for transactions, reporting and documentation. Among the operational changes are adjustments to import payment thresholds, digital disbursement structures for travel allowances, enhanced reporting requirements for service exports and technology firms, streamlined documentation processes and improved access to domiciliary accounts.
These measures indicate a push toward modernisation and digitalisation within the market, while also tightening oversight in areas previously vulnerable to abuse or weak compliance.
However, perhaps the most striking feature of the revised manual is its strong compliance and enforcement architecture. The manual contains extensive sanctions targeting infractions ranging from round-tripping and false documentation to non-rendition of returns and violations of foreign currency trading position limits.
This signals a deliberate shift toward stricter market discipline.
Round-tripping, which has long been viewed as one of the most damaging practices in FX market, attracts some of the harshest sanctions under the revised framework.
Banks found engaging in such activities face suspension of their authorised dealership licence for a minimum of six months with “full effect,” refund obligations calculated above prevailing rates, referral to the Sub-Committee on Ethics of the Bankers’ Committee, possible police prosecution and eventual licence revocation for repeat offences.
The severity of these penalties reflects the CBN’s determination to deter speculative and unethical practices that distort the market and weaken confidence.
Similarly, the manual imposes sanctions for failure to deliver funds in agreed transactions, false rendition of returns, use of foreign exchange for non-eligible purposes and inadequate transaction documentation.
The framework also addresses breaches relating to approved foreign currency trading positions. Banks exceeding assigned limits face escalating penalties beginning with warning letters, followed by suspension from the foreign exchange market and eventual withdrawal of authorised dealership licences for repeated violations.
Importantly, the revised manual introduces accountability requirements that go beyond institutional sanctions. Under the “full effect” provisions, banks are expected to establish management and board investigative panels to determine the involvement of staff in malpractice, punish guilty officials and provide undertakings against future violations.
This suggests that the CBN is seeking not only institutional compliance but also behavioural change within financial institutions.
Stronger Compliance Measures and Market Discipline
Another important aspect of the reforms is the renewed focus on export proceeds repatriation and non-oil export compliance. The manual imposes penalties for exporters who fail to repatriate export proceeds within 180 days, while banks and pre-shipment inspection agents also face sanctions for delays in documentation, remittances and issuance of certificates. This emphasis aligns with the broader objective of diversifying foreign exchange earnings and strengthening non-oil exports as a sustainable source of liquidity for the market.
Liquidity, Market Depth and the Shift from Intervention
Cardoso repeatedly highlighted liquidity as the “end game” of the reforms. According to him, a deeper and more liquid market would reduce distortions, strengthen investor confidence and reduce dependence on central bank interventions. This reflects a significant shift from the earlier structure of the FX market, where participants largely depended on periodic interventions by the CBN. The CBN governor noted that the market had evolved from what he described as a “one-way market” into a more dynamic and open system.
The improvement in market turnover cited by the governor provides one of the clearest indicators of the changing structure of the market.
Average daily turnover, according to him, had risen from about $100 million at the start of the current administration to between $400 million and $600 million, with occasional peaks reaching $1 billion.
That increase is significant because turnover levels often served as a proxy for market depth, liquidity and confidence. Higher transaction volumes generally indicate greater participation by market players and stronger willingness to trade within the formal market.
The CBN’s ambition to achieve sustained daily turnover above $1 billion further reflectd its intention to position Nigeria’s FX market closer to more advanced emerging market systems.
The apex bank’s comments on reserves also provided insight into the broader reform philosophy, pointing out that reserves are buffers rather than direct funding sources for the market.
Cardoso appears to be signalling a move away from the previous intervention-heavy model toward a framework driven more by market liquidity and participant confidence.
That distinction is important because over-reliance on reserves for market funding can create vulnerabilities during periods of external shocks or declining inflows.
Need to Deepen Collaboration with Stakeholders
Cardoso repeatedly emphasised that stability and credibility in the FX market cannot be achieved through unilateral action by the central bank alone. Instead, he stressed the need for cooperation among authorised dealer banks, corporates, importers, exporters, regulators and government agencies.
That collaborative approach was echoed by the Dean of Bank CEOs, Mr. Oliver Alawuba, who is the Group Managing Director/Chief Executive, United Bank for Africa (UBA).
He described the revised framework as timely and necessary, particularly in light of recent reforms in the FX market, noting that confidence among market participants had improved considerably compared to two or three years ago, attributing the change to policy consistency and the commitment of the CBN to reforms.
Essentially, the banking industry’s endorsement of the framework remained significant given that successful implementation will depend heavily on the conduct of authorised dealers and financial institutions that facilitate most FX transactions.
The decision to make the manual available free of charge to authorised dealers also reflectd the regulator’s focus on compliance and accessibility. By removing cost barriers, the CBN appeared intent on ensuring that all market participants fully understand the revised requirements and operational standards.
CBN Deputy Governor, Economic Policy Directorate, Dr. Muhammad Sani Abdullahi, pointed to the extensive consultation process behind the manual adding that the review involved banks, exporters, regulators, corporates and development partners.
He said such broad engagement may help strengthen acceptance of the framework because stakeholders are more likely to support reforms in which they participated.
Abdullahi also linked the revised manual directly to the broader reform agenda initiated under Cardoso’s leadership, stressing that the framework was designed to address inefficiencies, reduce bottlenecks and support a more rules-based and market-oriented system capable of improving price discovery and attracting sustainable inflows. That objective is particularly important for the country at a time when foreign investor confidence remains closely tied to perceptions of policy consistency, transparency and market accessibility.
Ultimately, the success of the revised FX Manual will depend less on the quality of the document itself and more on the consistency of implementation. Nigeria’s FX market had historically suffered not only from policy uncertainty but also from uneven enforcement and weak compliance culture.
The revised framework attempts to address this challenge through stricter sanctions, clearer operational procedures and stronger monitoring mechanisms.
However, sustained credibility will require the CBN to apply the rules consistently across all market participants without exceptions.
The transition period before the June 1, 2026 commencement date may therefore become a critical test of regulatory resolve.
Cardoso’s warning that the transition phase should not be treated as an opportunity for regulatory arbitrage indicates the central bank’s awareness of potential attempts to exploit loopholes before full implementation.
If effectively enforced, the revised manual could strengthen market discipline, reduce speculative distortions and encourage more transactions to move through formal channels. In turn, that could help deepen liquidity, improve price discovery and strengthen confidence among both domestic and foreign investors.
At a broader level, the reforms also signaled the CBN’s effort to reposition the FX market as a more transparent and competitive system capable of supporting economic growth, trade, investment and macroeconomic stability.
For businesses, exporters, manufacturers, students and ordinary Nigerians who depend on the market for legitimate foreign exchange needs, the promise of a more efficient and predictable system carries significant implications.
The revised FX Manual therefore represents more than a technical policy update and represents part of a larger attempt to rebuild trust in the Nigerian foreign exchange market through clearer rules, stronger governance, stricter discipline and deeper market liquidity.
But succeeds will depend on how effectively those principles are translated from policy into consistent market practice.
