CBN may sue FX contract violators after audit

The Central Bank of Nigeria (CBN) says it is considering legal action against parties found to have violated regulations in the execution of foreign exchange forward contracts, following the conclusion of a forensic audit.

In a document titled “Frequently Asked Questions on the Settlement of Undelivered Forward Contracts” published on Thursday, the apex bank disclosed that the audit — conducted by Deloitte — uncovered significant irregularities in some transactions under the Retail Secondary Market Intervention Sales (SMIS) window.

“The CBN is reviewing appropriate legal action against parties found to have violated applicable rules and regulations… The Bank will collaborate with law enforcement and regulatory agencies to pursue civil, administrative, or criminal sanctions, as necessary,” the statement read.

Audit Findings

The forensic review examined contract documents, trade confirmations, import/export paperwork, Form M and Customs records, and compliance with CBN circulars and FX market guidelines. It also verified that beneficiaries were genuine and eligible counterparties.

Key infractions uncovered included:

• Mismatched company names between approved sales records and Form M entries

• FX forward sales exceeding approved forex form values

• Sales higher than demand or involving non-permissible imports

• Unauthorised companies importing restricted items like milk

• Vague or blank descriptions of goods, missing or incorrect forex form numbers

• Sales approved despite rejected Form A applications

• Approved values higher than the actual cost of imported items

No Settlement for Invalid Contracts

The CBN stressed that under Nigerian law, no right to FX settlement arises from transactions tainted by illegality or non-compliance. Consequently, such contracts were cancelled, no FX payments were made, and naira deposits from counterparties were refunded.

The bank emphasised that paying for these contracts would have “rewarded non-compliance, encouraged abuse of the FX system, and unnecessarily depleted the nation’s reserves.”

Next Steps

The CBN is now liaising with law enforcement to determine further action in cases involving potential fraud, misrepresentation, or abuse of the FX system.

It added that the audit’s conclusions are final and cannot be appealed, having been reached after a “rigorous process” by an independent expert, with affected parties given opportunities to respond.

With the review concluded, the apex bank reaffirmed its commitment to safeguarding market integrity and Nigeria’s financial stability, warning that it will not tolerate practices that undermine the FX market or public trust.