The Central Bank of Nigeria (CBN) has uncovered extensive irregularities in undelivered foreign exchange (FX) forward contracts following a forensic audit conducted by Deloitte.
The review, which examined transactions under the Retail Secondary Market Intervention Sales (RSMIS) window since September 2023, identified systemic breaches and compliance failures that undermined the integrity of Nigeria’s FX market.
FX forward contracts, which require upfront naira payments for future dollar delivery, were often never fulfilled. The CBN stressed that the review aimed to verify transaction legitimacy, protect foreign reserves, and enforce regulatory standards across the financial sector.
This was revealed in a document titled “Frequently Asked Questions (FAQ) on the Settlement of Undelivered Forward Contracts“ released Thursday, on the apex bank’s website.
The audit revealed multiple compliance breaches, including mismatched beneficiary identities, inflated FX requests, and approvals for imports banned under Nigerian law. Some contracts involved blank or vague Form M submissions, incorrect or missing forex form numbers, and approvals for previously rejected Form A applications.
In certain cases, approved FX sales exceeded actual import demand, while in others, the approved value surpassed the listed cost of imported goods.
The CBN cited one example where cumulative approved FX forward sales exceeded the total value of the associated forex form number across multiple auctions.
All contracts deemed invalid were cancelled, and no FX payments were made to counterparties involved. The CBN explained that settling these deals would have rewarded non-compliance, encouraged systemic abuse, and depleted Nigeria’s FX reserves.
Under Nigerian law, no right to FX settlement arises when transactions involve illegality, misrepresentation, or regulatory violations. The CBN emphasized that paying such claims would have breached its statutory duties and eroded public trust.
The apex bank confirmed that it may pursue legal action against violators in collaboration with law enforcement and other regulatory agencies. Sanctions could include civil, administrative, or criminal penalties, depending on the severity of the infractions.
The CBN also clarified that the audit process, conducted independently by Deloitte, is final and closed to appeal. Authorized dealer banks were contacted for explanations before any conclusions were drawn, ensuring procedural fairness.
Reiterating its role in safeguarding Nigeria’s financial stability, the CBN urged banks and market participants to maintain proper documentation and adhere strictly to FX regulations. The bank assured that all valid FX forward obligations will be honoured while oversight mechanisms will be strengthened to prevent future abuses.
“The CBN’s mandate is to maintain market integrity and protect Nigeria’s financial stability,” it stated, warning that strict compliance is now non-negotiable for all stakeholders in the FX market.
