Banks face N100m penalty for forex violations under new CBN manual

The Central Bank of Nigeria (CBN) has established a significant N100 million penalty for banks that engage in foreign exchange transactions without adequate documentation. This measure is part of a comprehensive compliance regime detailed in the newly released fourth edition of the Foreign Exchange Manual.

The updated manual, issued by the CBN's Trade and Exchange Department, aims to enhance oversight of Nigeria's foreign exchange market, bolster compliance standards, and prevent abuses. It serves as a crucial regulatory guide for banks, authorized buyers, exporters, investors, and the public involved in forex dealings. The manual emphasizes promoting transparency in forex inflows and outflows, setting clear documentation requirements, and strengthening enforcement mechanisms.

Beyond the substantial fine for inadequate documentation, the manual introduces a range of penalties for other violations. Banks exceeding their approved Net Open Position limits face increasingly severe consequences, starting with a warning letter, followed by a 10-working-day suspension from the forex market for a second offense, and a 90-day suspension for a third violation.

Furthermore, the CBN has tightened reporting obligations for authorized dealers. Banks must now submit daily transaction returns by 10 a.m. for the previous day and monthly returns within five working days after month-end. Late rendition of returns incurs a N500,000 penalty, while non-rendition carries a minimum fine of N5 million, escalating by N500,000 for each day the violation persists. The CBN also warned banks against reallocating forex funds without approval, which could lead to fines, suspension, or even revocation of their dealership licenses.