Central Bank of Nigeria (CBN) has identified irregularities related to unpaid foreign exchange (FX) forward contracts currently under investigation.
Gatekeepers News reports that in a document titled ‘Frequently Asked Questions (FAQ) on the Settlement of Undelivered Forward Contracts,’ the bank outlined several key issues discovered during their review. These include discrepancies in beneficiary identities, inflated requests for foreign exchange, incorrect or incomplete Form M submissions, and approvals for imports that are not allowed under existing regulations.
The Central Bank is preparing to take appropriate legal action against individuals or entities that have breached the relevant rules and regulations based on the results of the ongoing 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 CBN said the audit was necessary to verify the legitimacy of the contracts, protect FX reserves, and uphold regulatory standards.
“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 said the findings revealed that some undelivered forward contracts were found to be invalid for various infractions and reasons, such as company name on approved sales result being different from company name on the Form M portal.
“No right to FX settlement can arise under Nigerian law where the underlying transaction is tainted by illegality, misrepresentation, or non-compliance with binding regulatory rules.”
The regulator also said invalid contracts were cancelled in line with audit findings.
The bank said, “No FX payments were made on these contracts, as they did not meet the required standards for settlement”.
“Paying invalid contracts would have rewarded non-compliance, encouraged abuse of the FX system, and unnecessarily depleted the nation’s FX reserves,” the report further reads.
“The CBN’s mandate is to maintain market integrity and protect Nigeria’s financial stability. Moreover, settling contracts that were legally void or irregular would have contravened the CBN’s statutory responsibilities and potentially exposed it to legal liability and loss of public trust.”
The CBN also said the audit process is closed and not open to appeal, citing the independence and procedural fairness of the review.
“The audit conclusions were based on a rigorous process carried out by an independent forensic expert (Deloitte), acting pursuant to a transparent mandate,” the apex bank said..
“The auditor contacted the authorised dealer banks concerning those contracts to get their explanations of the infractions before reaching conclusions on them. The findings have therefore met procedural fairness standards.
“The case of undelivered forward contracts is now concluded and closed.”
The CBN urged banks and their clients to maintain proper documentation, adhere to FX regulations, and submit only valid transactions for settlement.
The apex bank reiterated its commitment to honour all valid obligations while strengthening oversight.
