CBN concludes forensic audit of undelivered FX forwards, moves to sanction violators

The Central Bank of Nigeria (CBN) has concluded its much-anticipated forensic audit into undelivered foreign exchange forward contracts and is now preparing to initiate civil, administrative, or criminal proceedings against individuals and entities found to have breached Nigeria’s forex regulations.

This was made known in a document titled “Frequently Asked Questions (FAQ) on the Settlement of Undelivered Forward Contracts”, released on Thursday, August 7, 2025, via the apex bank’s official website.

According to the CBN, the audit revealed numerous violations involving the non-delivery of U.S. dollars for which naira payments had been made under the Retail Secondary Market Intervention Sales (RSMIS) window.

The transactions, many of which turned out to be invalid or unverifiable, have become a significant source of concern for Nigeria’s foreign reserves and financial credibility.

“The Central Bank of Nigeria is reviewing appropriate legal action against parties found to have violated applicable rules and regulations, based on the findings of the forensic audit. The Bank will collaborate with law enforcement and regulatory agencies to pursue civil, administrative, or criminal sanctions, as necessary,” the document stated.

The forensic investigation, which began in September 2023, was handled by Deloitte Management Consultant, one of the world’s leading auditing firms. It specifically examined forward contracts where companies paid naira in advance for future dollar disbursement, many of which never materialized.

CBN Governor Olayemi Cardoso had earlier hinted at the scale of the problem, disclosing that of the $7 billion FX backlog inherited by the current administration, $2.4 billion was found to be invalid.

In a separate letter dated August 4, 2025, signed by Okey Umeano, Acting Director of the Financial Markets Department, the CBN formally informed authorized dealer banks that naira payments for unverified or invalid FX contracts had been refunded.

The Bank also clarified that where forward contracts were validated, they had been fully honored, reflecting its commitment to meeting genuine obligations and restoring confidence in Nigeria’s FX market.

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Importantly, the CBN emphasized that affected counterparties were given an opportunity to respond to audit queries before contracts were disqualified. Those found to be non-compliant had their transactions reversed with a refund of naira, but no foreign exchange was provided.

The apex bank declared the audit “closed and final”, stressing that it will not be subject to appeal. It assured stakeholders that the process was handled with transparency, fairness, and due process.

Financial analysts and market observers have largely welcomed the CBN’s crackdown, describing it as a bold step toward restoring order in Nigeria’s embattled foreign exchange sector.

According to Lagos-based financial analyst Tola Bamidele, “This forensic audit is long overdue. By naming and possibly prosecuting violators, the CBN is sending a clear message: the era of forex abuse and impunity is over.”

Others say the move will improve investor confidence, encourage regulatory discipline, and bring greater efficiency and transparency to Nigeria’s forex management system.

“Nigeria’s FX market had long been plagued by rent-seeking behavior and speculative dealings. The clean-up is a foundational step for sustainable growth and global investor trust,” noted economic analyst Ngozi Umeh.