CBN’s new FX manual could boost dollar liquidity and strengthen market confidence

By Emeka Anaeto, Business Editor

The Central Bank of Nigeria (CBN) recently launched the fourth edition of its Foreign Exchange Manual in Abuja, with the new rules taking effect on 1 June 2026. The update aims to increase transparency, improve liquidity, and strengthen confidence in Nigeria’s foreign exchange market, in line with the CBN’s broader objective of providing businesses and individuals with equal, transparent access to foreign exchange.

The manual will serve as a regulatory guide for banks, importers, exporters, government agencies and other market participants. Nigeria’s foreign exchange market has long been a sensitive part of the economy, with movements in the naira affecting food prices, transport costs, school fees, medicine, fuel, manufacturing costs and the overall cost of living. Businesses rely on foreign exchange for raw materials and machinery, while investors assess market stability before committing capital.

In recent years, the naira has faced severe pressure, low liquidity, multiple exchange rates, speculative trading and declining investor confidence. These structural issues created uncertainty for businesses and contributed to inflation. Manufacturers have struggled to obtain foreign exchange for raw materials, airlines have had difficulty repatriating earnings, and foreign investors have delayed commitments due to concerns about profit repatriation. The new manual therefore represents more than a routine update; it is part of a broader effort to rebuild confidence in the Nigerian foreign exchange system after years of instability.

Policy vision and strategic direction

During the launch, Governor Olayemi Cardoso described the manual as part of a strategy to strengthen Nigeria’s macroeconomic foundation, improve transparency and restore confidence in the foreign exchange market. He emphasized that the market is not merely a platform for buying and selling dollars but a key driver of price stability, investment confidence and the smooth flow of goods and capital in an open economy.

Transparency, consultation, enforcement

Cardoso highlighted transparency as a core theme, stressing the need for openness, accountability and fairness. He noted that the manual was the result of extensive consultations with banks and other stakeholders, rather than a top‑down imposition. This collaborative approach addresses long‑standing complaints about sudden, inconsistent policy changes that have historically led to speculation and reduced confidence.

Market liquidity and evolutionary shift

Cardoso also focused on liquidity and market depth. He said the reforms aim to create a deeper, more liquid market where buyers and sellers can trade without major price disruptions. He noted that the market has evolved from a one‑way system dominated by central bank interventions to a more dynamic and transparent environment. Daily market turnover has risen from about $100 million at the start of the current administration to between $400 million and $600 million, with occasional daily transactions reaching $1 billion. These figures suggest stronger market activity and improved confidence.

Cardoso remarked that reserves are reserves and should not be used to fund the market. This signals a shift away from heavy reliance on foreign reserves to defend the naira, favoring a market‑driven system where supply and demand play a larger role while reserves serve as buffers against external shocks.

Understanding the policy manual

Deputy Governor for Economic Policy Mohammed Sani Abdullahi provided technical details on the manual’s operational provisions. He traced the reform initiative to the beginning of Cardoso’s administration, emphasizing the need for a framework that reflects current realities, aligns with international standards, reduces inefficiencies and supports a transparent, rules‑based, market‑oriented system. The manual is intended to strengthen the integrity, credibility and effectiveness of the foreign exchange ecosystem, serving as a single authoritative reference that harmonises procedures and standardises market practices across banks, corporates, exporters, regulators and government agencies.

Abdullahi highlighted that the review adopted an Ease of Doing Business approach, removing bottlenecks, ambiguities, delays and operational inefficiencies that have historically hindered importers, exporters, investors and families paying for foreign school fees. By reducing transaction friction and improving processing timelines, the CBN hopes to encourage greater participation in the regulated system rather than informal markets.

Views from stakeholders

The launch attracted comments from the Minister of Finance and Coordinating Minister of the Economy, banking industry leaders and major commercial bank executives, indicating a rare alignment between fiscal authorities, monetary regulators and the banking sector.

Permanent Secretary for Special Duties Mohammed Sanusi Danjuma, representing the Minister of Finance, described the manual as a major step in strengthening Nigeria’s foreign exchange management system. He noted that the launch comes at a strategic time as the country implements bold fiscal and non‑fiscal reforms under President Bola Ahmed Tinubu, including fuel subsidy removal, tax reforms and exchange rate liberalisation. These measures, while correcting long‑standing distortions, initially contributed to rising inflation and increased living costs. The finance ministry’s endorsement signals strong, continued alignment on the reform agenda, with Danjuma stressing that policy consistency and predictability are essential for investment and growth.

Oliver Alawuba, Chairman of the Body of Banks’ Chief Executives and Group Managing Director of United Bank for Africa, highlighted the manual’s role in a broader policy direction anchored on transparency, ethical conduct, stronger documentation and improved oversight. He linked it to earlier initiatives such as the Electronic Foreign Exchange Matching System and the Nigerian Foreign Exchange Code, designed to modernise market governance. Alawuba compared the current market to two or three years ago, noting that banks now ask customers whether they have foreign exchange to sell, rather than the reverse, reflecting significant improvement in liquidity and confidence in formal market participation. He praised the reforms and assured the apex bank that commercial banks would work closely to maintain a transparent market and support Nigeria’s long‑term aspiration of becoming a $1 trillion economy.

— Media Limited

EMEKA ANAETO
Business Editor
Phone: 081 251 89690, 081 040 56415

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