In a dramatic turn within Nigeria’s foreign exchange market, the Central Bank of Nigeria (CBN) has concluded a forensic audit into undelivered FX forward contracts, valued at around $2 billion, igniting serious questions about market integrity, custodial responsibilities, and the fate of these stalled commitments.
FX forwards function as pre-agreed deals: counterparties hand over naira today for a guaranteed dollar amount at a future rate—an arrangement designed to shield businesses from sudden exchange-rate shocks.
The recent audit, carried out by Deloitte beginning in September 2023, went beyond surface probing, it meticulously compared contractual documents to Form M filings, trade confirmations, and customs data
Among the findings were glaring irregularities: companies receiving dollars despite discrepancies in Form M, inflated FX request values, unauthorized import approval (such as milk imports by ineligible entities), blank or incorrect documentation, and trades lacking actual import demand.
Taken together, these rendered many contracts ineligible for FX settlement.
In response, the CBN honoured all legitimate contracts, delivering dollars where due, but invalid contracts were cancelled. Naira deposits from these flagged deals were returned in naira, without interest or FX delivery, leaving counterparties to take the hit.
The audit process is now officially closed, with no provision for appeal.
With breaches flagged and audits concluded, the CBN is moving to hold violators accountable. Plans are underway to enlist law enforcement and regulatory bodies, ranging from civil to criminal sanctions, to penalise offenders.
The fallout is already rippling through Nigeria’s industrial sector. Trade groups like MAN and NACCIMA have raised alarms, warning that the non-settlement of these FX forwards has exposed businesses to billions in additional operating costs and interest burdens—some estimating up to N2.4 trillion losses, with potential knock-on effects on production, tax revenues, and employment stability
Meanwhile, voices like CPPE’s Muda Yusuf have urged the CBN to extend a fair hearing to companies whose contracts were invalidated, arguing that transparency and procedural fairness demand that affected firms be permitted to present their documentation and rebut the audit findings
So, what really happened? In summary:
Misconduct in documentation and verification resulted in numerous ineligible forward contracts.
The CBN refunds in naira those deals deemed invalid, honouring only those backed by clear, compliant records.
Losses are borne by businesses and banks whose contracts failed validation; no compensation via FX or interest has been provided.
The episode underscores the CBN’s renewed emphasis on market discipline, transparency, and safeguarding dwindling FX reserves.
For Nigeria’s forex landscape, this audit marks both a reckoning and a reset. The message is clear: FX transactions must be documented, compliant, and above reproach, or risk outright nullification.
