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The Central Bank of Nigeria (CBN) has announced it found “irregularities” in the country’s outstanding foreign exchange (FX) forward contracts. According to a recent audit, the CBN claims that some of these contracts, which were intended to help manage the country’s currency risk, were not legitimate. The CBN has stated that it will be sanctioning those responsible.
In a document titled ‘Frequently Asked Questions (FAQ) on the Settlement of Undelivered Forward Contracts according to the document published on CBN’s website on Thursday, the regulator said some of the irregularities include mismatches in beneficiary identities.
Other irregularities noted included exaggerated foreign exchange requests, incorrect or blank Form M submissions, and approvals for non-permissible imports.
Read also: CBN plans legal action against FX rules violators after forensic audit
“The Bank will collaborate with law enforcement and regulatory agencies to pursue civil, administrative, or criminal sanctions, as necessary,” the document reads.
The audit, said to have been conducted by Deloitte from September 2023, reviewed transactions under the retail secondary market intervention sales (RSMIS) window.
The apex bank said the contracts involved upfront naira payments in exchange for promised dollar delivery on future dates — “many of which went unfulfilled”.
“The forensic audit uncovered significant irregularities in the execution of some of the foreign exchange forward contracts,” the bank said.
“Each finding was based on objective and verifiable data, and all affected counterparties were given an opportunity to respond before final decisions invalidating these contracts were made.”
The CBN noted that the audit revealed that some undelivered forward contracts were found to be invalid for various infractions and reasons, such as the company name on the approved sales result being different from the company name on Form M portal.
“The cumulative value of the approved FX Forward Sales on this Forex Form Number from Auction 1 in 2021 to date of this auction exceeds the total value of the forex Form Number,” the CBN said.
According to the bank, these invalid contracts were canceled to prevent rewarding non-compliance and to protect the nation’s FX reserves. The CBN confirmed that no payments were made on these contracts since they failed to meet the necessary settlement standards.
“Sales Higher Than Demand, Non-permissible Item of Import, Unauthorized Companies Importing Milk, Vague Narration of the Item of Import, Sales Without Demand, Incorrect Forex Form Number, Forex Form not Indicated, Blank Form M.
Read also: As recapitalisation advances, CBN focuses on bank stability
“Rejected Form A Application on Form A Portal with Approved Sales. Approved Sales Value Higher than the cost of import item on Form A portal.
“Approved Sales Value Higher than the cost of import item on Form M portal.
The Central Bank of Nigeria (CBN) has stated it will not settle any foreign exchange (FX) contracts that are found to be illegal, fraudulent, or non-compliant with its regulations.
