Reforms and Initiatives

Recent CBN Reforms and Initiatives

Standing before a 108-member Senate at a screening broadcasted live on all major television stations across Nigeria, the Governor of the Central Bank of Nigeria (CBN) Mr. Olayemi Cardoso outlined a 10-point reform agenda, as follows:

1. Compliance with the CBN Act 2007 to ensure monetary and price stability.

2. Instituting a zero-tolerance policy regarding corporate governance in the financial system.

3. Exiting quasi-fiscal functions with effect from October 2023.

4. The CBN will catalyse the creation of specialised institutions and financial products to support emerging sectors of the economy.

5. Facilitating new regulatory frameworks to unlock dormant capital in land and property holdings.

6. Enhancing Nigeria's payment systems and protecting customers' rights.

7. Accelerating access to consumer credit and expanding financial inclusion for the masses.

8. De-risking instruments to increase private sector investment in housing, textiles and clothing, the food supply chain, healthcare, and educational supplies.

9. Exercising the CBN's convening power to bring key multilateral and international stakeholders to participate in government and private sector initiatives.

10. Collaborating with fiscal authorities to enhance accretion to Nigeria's foreign reserves and ensure sustainable liquidity in the foreign exchange market.

KEY MILESTONES

Monetary Policy Reforms - Inflation Targeting

In November 2023, Governor Cardoso announced plans to introduce an Inflation Targeting Framework, marking a major shift in Nigeria's monetary policy mechanism. This framework is designed to tackle the country's persistent inflation problem, which has significantly eroded consumer purchasing power.

Inflation targeting, the cornerstone of Cardoso's strategy, is a monetary policy approach in which a central bank sets an explicit inflation target and adjusts interest rates and other tools to achieve this goal.

This approach provides a structured method for controlling inflation, especially in countries like Nigeria, where inflation has been a long-standing obstacle to economic stability.

This is evident in the leadership’s aggressive monetary policy stance aimed at tackling Nigeria's persistently high inflation rates as reflected in the series of decisions made by the Monetary Policy Committee (MPC).

Policies and Regulatory Framework within the 1st Year

• Lifting the restriction on access to foreign exchange for the importation of 43 commodities (October 12, 2023), a move aimed at promoting orderliness and professional conduct by all Nigerian Foreign Exchange Market participants to ensure market forces determine exchange rates on a ‘willing buyer, willing seller’ principle. Hinging on the theory of demand and supply, the Cardoso-led administration opined that aligning with free market principles and allowing the forces of demand and supply to allocate forex resources would eliminate market distortions caused by artificial controls.


• The Bank stabilised the foreign exchange market by unifying rates (October 12, 2023) by adopting a ‘willing buyer, willing seller’ model for trade transactions, thereby eliminating a system where different rates were offered for different transactions at multiple exchange rate windows. This led to the abolishment of FX market segmentation, and collapse of the previously existing segments into the Investors’ and Exporters’ (I&E) window, now renamed Nigerian Foreign Exchange Market (NFEM). This has primarily reduced arbitrage opportunities as well as improved investor confidence and enhanced transparency. By clearing the verified backlog of $7 billion foreign exchange obligations, the Cardoso team was able to reduce volatility in the foreign exchange market. It also increased external reserves to $37.9 billion as of July 2024, up from $33.6 billion in October 2023.


• Bank Recapitalisation: In its determination to bolster the banking system, safeguard the sector against risks, and realign the banks in line with the nation's overarching objective of establishing a trillion-dollar economy within the coming years, Cardoso's team, on March 28, 2024, unveiled new minimum capital requirements for banks. The minimum capital base for commercial banks with international authorisation was set at N500 billion, while those with national authorisation were set at N200 billion. The new requirement for regional banks was pegged at N50 billion.


• On December 22, 2023, the Central Bank of Nigeria (CBN) issued guidelines for operating bank accounts for Virtual Asset Service Providers (VASPs), acknowledging the growing influence of virtual assets like cryptocurrencies and their potential impact on monetary stability. The regulation of VASPs became imperative to curb systemic risks and safeguard financial stability, as unchecked virtual asset activities could pose threats to the broader monetary system.


• The CBN also issued a framework for the licensing and operations of International Money Transfer Operators (IMTOs) and released an exposure draft of revisions to consumer protection regulations (January 31, 2024).


• Enhancement of oversight in the Bureau de Change (BDC) space: On May 22, 2024, the Bank updated licensing requirements, and capital standards, and introduced a franchise model to improve FX distribution and oversight. The CBN revoked the operating licenses of 4,173 Bureau de Change (BDC) operators who failed to meet regulatory provisions. This singular action tightened regulatory control over the forex market, thus reducing BDCs' illegal or noncompliant activities.
• Guidelines were issued on May 31, 2024 to International Oil Companies (IOCs) to cap the repatriation of export proceeds at 50% in the first instance, with the balance of 50% repatriated 90 days after the initial inflow. This directive aimed to ensure that a significant portion of export earnings is retained in the domestic market, providing much-needed exchange rate stability while improving forex availability.


• On March 1, 2024, the CBN also issued N1.053 trillion in short-term government securities, with 79% of the bids coming from foreign investors. This showcased the renewed confidence in Nigeria's financial sector from both native and foreign investors, further strengthening the financial markets while ostensibly providing funds for the government to pursue economic development.


• To further promote monetary stability, guidelines were issued on June 27, 2024, to Deposit Money Banks (DMBs) on the deposit of foreign currency, setting a maximum limit of $10 million for deposits of $100 and $50 bills and $1 million for lower denominations.
  DMBs were also warned against rejecting lower denominations of forex and mutilated naira notes, as these remain legal tender.


• The suspension of the Standing Lending Facility (SLF), which allows Deposit Money Banks to borrow from the Central Bank to handle short-term liquidity needs, was lifted. This decision was taken at the 296th meeting of the CBN Monetary Policy Committee held July 22 – 23, 2024. Consequently, authorised dealers could access the SLF through the Scripless Securities Settlement System (S4) at an interest rate of 31.75%.


• Improvement in coordination with other regulators through regular inter-agency meetings and collaborations on issues like cryptocurrency frameworks and infrastructure financing.


• In September 2024, the CBN also developed the Carbon Market Framework with the Nigerian Climate Change Council to attract sustainable finance and foreign investment.


• From October 2023 to September 2024,the Bank addressed 19,988 customer complaints within eight months. Of these, 15,306 complaints—representing 76.58%—were successfully resolved. During this time, the Bank facilitated refunds totalling approximately N7.05 billion and $714,569.03 to customers in disputes with financial service providers, underscoring its commitment to fair treatment. The CBN has also rigorously enforced sanctions to ensure compliance, deter unethical behaviour, and enhance transparency within the financial sector.


• Implementation of the Unified Complaints Tracking System (UCTS) and the development of a USSD code (*959#) for the verification of licensed financial institutions.


• On June 20, 2024, the CBN launched the Women Entrepreneurs Finance Initiative (We-FI) Code, aimed at closing the 9% gender gap in financial inclusion by improving access to financial services for women-owned MSMEs.


• Effective May 6, 2024,theCBNsuspended processing fees on cash deposits exceeding N500,000 for individuals and N3,000,000 for corporates until September 30, 2024. Additionally, a 3-month waiver (from January 15 to April 15, 2024) was granted to Deposit Money Banks (DMBs) for depositing lower denominations (N50 and below) with the CBN at no processing cost. This initiative encourages cash deposits, strengthens financial intermediation, and aids in the effective transmission of monetary policy.


• September 2024: Intensification of its Anti-Money Laundering (AML), Combating the Financing of Terrorism (CFT), and Cybersecurity measures. It enhanced supervision and conducted spot checks on Nigerian banks and their foreign subsidiaries to expedite Nigeria's removal from the Financial Action Task Force (FATF) Grey List. These efforts aim to create a more secure investment environment, attract foreign investment, and bolster Nigeria's global financial reputation.


• In July 2024, the CBN introduced guidelines to improve the management of dormant accounts, unclaimed balances, and other financial assets. The objective is to identify and reunite these assets with their rightful owners, holding the funds in trust until they can be claimed.


• Improvement in Early Warning Systems to monitor systemic risks and vulnerabilities. These measures facilitate timely interventions to manage potential contagion risks, ensuring the safety and soundness of the financial sector.


• Data-driven decision-making: The Bank has utilised big data for more informed monetary policy decisions through tools like Dynamic Integrated Analytic Modeling (DIAMoND) and the Macro Diagnostic Framework. It has maintained high forecast accuracy and developed news-based indices to gauge policy uncertainty. The project, which was unveiled on Thursday, October 19, 2023, was championed by the Bank's Research Department in collaboration with Information Technology and Strategy Management Departments.

CBN, IFC Partner to Boost Local Currency Financing

The Central Bank of Nigeria (CBN) and the International Finance Corporation (IFC), a member of the World Bank Group, signed an agreement to increase local currency financing to enable private businesses in Nigeria grow and thrive. This collaboration was reached and signed on the sidelines of the IMF Meetings at Washington D.C., USA, on October 28, 2024.

The partnership will allow IFC to manage currency risks and increase its investment in the Nigerian naira across priority sectors of the economy, including agriculture, housing, infrastructure, energy, small and medium enterprises and the creative and youth economy.

IFC aims to significantly scale up its financing of critical sectors in Nigeria to provide more than $1 billion in the coming years. Many of these sectors require local currency financing, and IFC's partnership with the CBN is a critical tool in expanding access.

New Guidelines for Electronic Foreign Exchange Matching System (EFEMS)

To ensure transparent, fair and efficient foreign exchange (FX) trading, minimize counterparty risk and ensure compliance with regulations, the Central Bank of Nigeria (CBN) on November 25, 2024, issued new guidelines for the Electronic Foreign Exchange Matching System (EFEMS).

The guidelines regulate interbank FX trading operations via the Electronic Foreign Exchange Matching System (EFEMS). The Bank has approved the Bloomberg BMatch as the designated platform to support the EFEMS for interbank trading.

The guidelines list the participants to include all authorized dealer banks licenced by the CBN; other participants who have secured CBN's approval to access the EFEMS platform and execute agreements with the platform provider; and participants responsible for maintaining accurate and updated profiles; amongst others.

Trading and operational requirements; Governance and Data Reporting requirements are also highlighted. For instance, the minimum tradable amount is US$100,000.00, with incremental clip sizes of US$50,000.00. Participants must comply with the Nigerian Foreign Exchange Code and other CBN regulations.

According to the guidelines, EFEMS shall be used exclusively for executing spot FX transactions involving the Nigerian Naira (NGN) against the United States Dollars (USD). Other currency pairs may be introduced upon the CBN's directive.

Non-Resident Nigerians Get Remittances Account

On January 10, 2025, the Bank introduced the Non-Resident Nigerian Ordinary Account (NRNOA) and Non-Resident Nigerian Investment Account (NRNIA), respectively, to provide non-resident Nigerians with a platform to remit their foreign earnings to Nigeria, manage funds, and invest in Nigerian assets in foreign and local currencies.

Launch of the Nigerian Foreign Exchange (FX) Code

On January 28, 2025, the CBN launched the Nigerian Foreign Exchange (FX) Code to promote a stable financial ecosystem and ensure that the authorised dealer banks deal ethically and comply with international best practices in foreign exchange transactions.

The FX Code represents a set of principles generally recognised as good practice in the FX Market. These principles include Ethics, Governance, Execution, Information Sharing, Risk Management and Compliance, and Confirmation and Settlement Processes.

License Renewal Fee for BDCs Waived

On January 24, 2025, the Bank in its efforts to stabilise and streamline operations in the country's foreign exchange market and ease the financial burden of Bureau De Change (BDC) operators, waived the 2025 non-refundable annual license renewal fee.

The waiver is particularly significant as it aligns with the CBN's updated Regulatory and Supervisory Guidelines for Bureau De Change Operations in Nigeria, which was introduced in 2024. The aim is to help BDCs transition smoothly into the new structure, enabling them to allocate resources to comply with the revised guidelines.

Suspension of the Extension of Export Proceeds Repatriation

The Bank declared a suspension of extensions on the repatriation of export proceeds for oil and non-oil exports. The directive took effect from January 8, 2025.

The suspension is in keeping with the provisions of Memorandum 10A (23a), and Memorandum 10B (20a) of the Foreign Exchange Manual Revised Edition (March 2018), which provide that export proceeds must be repatriated and credited to exporters' domiciliary accounts within specified time frames: 180 days for non-oil exports and 90 days for oil and gas exports from the bill of lading date.

The decision was driven by widespread non-compliance among exporters, some of whom had habitually sought repeated extensions for repatriation, often stretching over several years. The Bank emphasised that adherence to the existing regulations is critical to ensuring economic stability, particularly in reducing the pressure on the nation's foreign exchange reserves.

Review of ATM Transaction Fees

On February 10, 2025, the Bank reviewed the ATM transaction fees prescribed in Section 10.7 of the extant CBN Guide to Charges by Banks, Other Financial and Non-Bank Financial Institutions, 2020 (the Guide).

For withdrawals from another institution's ATM in Nigeria (Not-On-Us), a charge of N100 per N20,000 withdrawal applies for On-site ATMs, while a charge of N100 plus a surcharge of not more than N500 per N20,000 withdrawal is applicable for Off-site ATMs. However, the surcharge, which is the income of the ATM deployer/acquirer, shall be disclosed at the point of withdrawal to the consumer.

The review came as a response to rising costs and the need to improve the efficiency of ATM services in the banking sector.

PAPSS Rules Eased to Boost Nigeria's Intra-African Trade

The Pan-African Payment & Settlement System (PAPSS) has welcomed a new circular issued by the Central Bank of Nigeria (CBN) on April 28, 2025, that significantly simplifies the documentation process for PAPSS transactions in Nigeria. This policy aims to make cross-border payments faster, cheaper, and more accessible for Nigerians and Nigerian businesses, especially Small and Medium Enterprises (SMEs) trading within Africa under the African Continental Free Trade Area (AfCFTA).

This policy aims to make cross-border payments faster, cheaper, and more accessible for Nigerians and Nigerian businesses, especially Small and Medium Enterprises (SMEs) trading within Africa under the African Continental Free Trade Area (AfCFTA).

According to the new rules, individuals and businesses can complete PAPSS transactions with fewer delays caused by excessive paperwork. Only basic Know Your Customer (KYC) and Anti-Money Laundering (AML) documents will be needed for payments up to $2,000 per month for individuals and $5,000 for companies. This change removes significant documentation barriers, making it easier for Nigerian SMEs to trade across African countries.

Additionally, the new rules allow Nigerian commercial banks to source foreign exchange for PAPSS transactions through the country's official Foreign Exchange market. This will improve liquidity and support smoother cross-border transactions.

Non-Resident Bank Verification Number (NRBVN) platform

The Central Bank of Nigeria (CBN) in collaboration with the Nigeria Inter-Bank Settlement System (NIBSS), has officially launched the Non-Resident Bank Verification Number (NRBVN) platform on May 13, 2025. This innovative digital gateway enables Nigerians in the diaspora to obtain a BVN remotely, eliminating the need for a physical presence in Nigeria.