Foreign Exchange Agreement (Nigeria)

A Foreign Exchange Agreement in Nigeria records the obligations the parties accept and the terms governing their arrangement.

The FEMM Act establishes the legal framework for all FX transactions in Nigeria, designating the CBN as the apex regulatory authority and prescribing the roles of Authorised Dealers (commercial banks, merchant banks, and finance houses licensed by the CBN under the Banks and Other Financial Institutions Act 2020 — BOFIA 2020), Authorised Buyers (Bureau de Change operators), and end-users. Section 29 of the FEMM Act criminalises unlicensed dealing in foreign currency, with penalties including fines and imprisonment.

The Foreign Exchange Agreement specifies whether a transaction is a spot deal (settlement within T+2 business days), a forward contract (settlement on a future agreed date under FMDQ OTC derivatives rules), or a swap arrangement. It identifies the currency pair, the notional amount in US Dollars (USD) or other specified foreign currency, the agreed exchange rate or the rate-fixing mechanism referencing the CBN I&E Window benchmark rate published on the FMDQ Terminal on the value date, and the settlement account details including the SWIFT BIC of the correspondent bank.

The agreement addresses documentary requirements under CBN prescribed forms: Form A (current account transactions — services, dividends, repatriation), Form M (import of goods, filed on the Nigeria Single Window Trade Portal), Form NXP (export proceeds filed with the Nigerian Export Promotion Council — NEPC), and the Electronic Certificate of Capital Importation (eCCI) issued by an Authorised Dealer for equity or loan capital brought into Nigeria under Section 24 of the FEMM Act. The eCCI is the key instrument protecting the foreign investor's right to repatriate investment proceeds.

Compliance obligations extend to AML/CFT requirements under the Money Laundering (Prevention and Prohibition) Act 2022 (MLPPA 2022), reporting to the Nigerian Financial Intelligence Unit (NFIU), and FIRS transfer pricing scrutiny of cross-border payments involving Related Party transactions under the Transfer Pricing Regulations 2018. The Economic and Financial Crimes Commission (EFCC) monitors FX transactions for money laundering indicators under the EFCC (Establishment) Act 2004.

For regulated financial institutions — commercial banks, discount houses, and finance companies regulated by the CBN under Section 9 of the Banks and Other Financial Institutions Act 2020 (BOFIA 2020), and capital market operators licensed by the Securities and Exchange Commission (SEC Nigeria) under the Investment and Securities Act 2007 Cap I24 LFN 2004 — the FX agreement must align with CBN prudential guidelines, open position limits, and the minimum capital requirements under BOFIA 2020. The Nigerian Financial Intelligence Unit (NFIU) under the NFIU Act 2018 monitors FX transactions for money laundering indicators. The Economic and Financial Crimes Commission (EFCC) under the EFCC (Establishment) Act 2004 investigates FX-related financial crimes. Section 29 of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act Cap F34 LFN 2004 criminalises unlicensed FX dealing.

A Foreign Exchange Agreement (Nigeria) becomes necessary whenever a Nigerian entity or individual undertakes a cross-border transaction requiring the conversion of Nigerian Naira (NGN) into a foreign currency or vice versa under CBN-regulated conditions.

Importers procuring raw materials, machinery, or finished goods from abroad must execute an FXA with their Authorised Dealer bank and file Form M on the Nigeria Single Window Trade Portal before the CBN will release foreign currency from the I&E Window. Manufacturers importing industrial equipment from Asia or Europe — such as Dangote Industries, BUA Group, or Flour Mills of Nigeria — depend on properly documented FX agreements to access foreign currency at the official window and avoid the more expensive parallel market.

Exporters receiving proceeds from the sale of goods or services abroad must repatriate export earnings into a Domiciliary Account or through the I&E Window within the CBN-prescribed repatriation period. Non-oil exporters receiving NEPC export incentives and the Federal Government's export expansion grant under the Export (Incentives and Miscellaneous Provisions) Act Cap E19 LFN 2004 require FX documentation to access their incentive payments.

Foreign investors bringing equity capital or loan funds into Nigeria obtain an eCCI through their Authorised Dealer, and the underlying FXA documents the terms of conversion and the right of the investor — including foreign portfolio investors (FPIs) registered with the Securities and Exchange Commission — to repatriate principal, dividends, interest, and capital gains in future.

Oil and gas companies operating under Production Sharing Contracts (PSCs) with the Nigerian National Petroleum Company Limited (NNPC Limited) under the Petroleum Industry Act 2021 (PIA 2021) execute master FX framework agreements that govern routine crude oil proceeds receipts, domestic cost recovery conversions, and lifting entitlement payments denominated in USD.

Multinational corporations remitting management fees, royalties, and dividends to parent companies require Authorised Dealer certification of Form A transactions. The FIRS applies 10% withholding tax on such outbound payments under Section 81 of the Companies Income Tax Act (CITA Cap C21 LFN 2004), and the FXA provides the evidentiary basis for FIRS compliance review.

Corporate treasury departments hedging NGN exposure through FMDQ-listed naira-settled OTC FX futures or plain-vanilla forward contracts must document each transaction under an ISDA Master Agreement with a Nigeria-specific FXA schedule that incorporates CBN regulatory conditions. The National Industrial Court of Nigeria (NICN) and the Federal High Court have jurisdiction over disputes arising from FX transactions under their respective constitutional mandates.

An effective Nigerian Foreign Exchange Agreement must contain the following key elements to be CBN-compliant and legally enforceable.

Authorised Dealer Identification: The full legal name, CBN licence number, CBN-assigned Dealer Code, and FMDQ membership status of the Authorised Dealer. Only CBN-licensed Authorised Dealers may legally execute FX transactions under the FEMM Act Cap F34 LFN 2004. The Authorised Dealer's SWIFT BIC code should be stated for settlement instructions.

Customer Identification and KYC: The customer's full legal name, Tax Identification Number (TIN) issued by the Federal Inland Revenue Service (FIRS), Bank Verification Number (BVN) for individuals, and Corporate Affairs Commission (CAC) RC Number for companies under CAMA 2020. This is mandatory under the CBN KYC Manual 2023 and the Money Laundering (Prevention and Prohibition) Act 2022 (MLPPA 2022).

Transaction Type and Instrument: Specification of whether the transaction is a spot deal (T+2 settlement), a forward contract (future settlement under FMDQ OTC derivatives rules with forward points agreed at deal inception), a swap, or a naira-settled NDF futures contract traded on the FMDQ platform. For derivative transactions, reference to the ISDA Master Agreement (2002 edition) and applicable FMDQ Rules.

Currency Pair, Notional Amount, and Rate: The specific currency pair (e.g., USD/NGN, EUR/NGN, GBP/NGN), the notional amount of foreign currency, and the agreed exchange rate or the benchmark rate-fixing mechanism (e.g., the CBN I&E Window rate on the FMDQ Terminal as at the value date).

CBN Form Reference: The applicable CBN regulatory form — Form M number (for goods importation), Form A approval reference (for services, dividends, or capital repatriation under Purpose Codes in the CBN FX Manual 2018), Form NXP reference (for exports filed with NEPC), or eCCI number (for capital importation). The agreement must not be executed without the relevant form approval.

Settlement Instructions: The SWIFT BIC of the correspondent bank, the beneficiary's IBAN or account number, the purpose code from the CBN FX Manual 2018, and the value date. For domestic NGN settlement, the Nigerian Interbank Settlement System (NIBSS) sort code and account details apply.

AML/CFT Representations: The customer's representation that the FX transaction does not involve proceeds of crime, that the funds are from a legitimate source, and that the customer consents to reporting to the NFIU under the MLPPA 2022 and the NFIU Act 2018 if the transaction triggers reporting thresholds.

Withholding Tax and VAT: The allocation of withholding tax obligations at 10% under Section 81 of CITA and VAT at 7.5% under the Value Added Tax Act Cap V1 LFN 2004 (as amended by the Finance Acts 2019 and 2020) on fees and charges payable under the agreement. Forms-legal.com provides this Foreign Exchange Agreement (Nigeria) template as a starting point for CBN-compliant documentation — review with a qualified Nigerian lawyer for significant transactions.

Force Majeure and CBN Policy Changes: Provisions addressing CBN policy changes affecting exchange rate, FX access restrictions, naira redesign or redenomination events, SWIFT sanctions affecting correspondent banks, and other force majeure events that may prevent settlement.

Dispute Resolution: Nigerian law as governing law, with disputes referred to the Federal High Court (which has exclusive jurisdiction over CBN regulatory matters under Section 251(1)(d) of the Constitution of the Federal Republic of Nigeria 1999) or to arbitration under the Arbitration and Mediation Act 2023, administered by the Lagos Court of Arbitration or the FMDQ Dispute Resolution Procedures.

Statutory Compliance: Confirmation that the transaction complies with the FEMM Act Cap F34 LFN 2004, the CBN Foreign Exchange Manual 2018, BOFIA 2020, the MLPPA 2022, and all applicable CBN circulars and directives issued by the CBN Governor under Section 47 of the CBN Act 2007. The Securities and Exchange Commission (SEC Nigeria) must also approve FX transactions linked to capital market instruments under the Investment and Securities Act 2007.