Nigeria’s FX Window: Boosting investors’ renewed confidence?

22 Aug 2017

By Udo Udoma & Belo-Osagie

Nigerian law guarantees investors the unconditional transferability of proceeds of their investments in Nigeria in convertible currency, provided that inflow and repatriation are effected through Central Bank of Nigeria (CBN) authorised dealers - subject to meeting appropriate documentation requirements. There were, however, challenges with sourcing foreign exchange (FX) to make such repatriations in the recent past which has now eased.  That arose from, and were exacerbated by, the country’s main dependence on FX earnings from crude oil.

Since June 2016, when the CBN published new guidelines governing the operation of the Nigerian interbank FX market (FX market), certain steps have been taken by the CBN – such as the establishment of special windows for sale of FX for invisibles (school fees, medical fees, travel allowance etc), importation of items by SMEs, etc and regular supply of FX by the CBN to these windows – that have helped to increase the availability of FX.

To further liberalise the FX market, the CBN in April 2017 introduce a special investors’ and exporters’ FX window (window) in the FX market. Operations in the window commenced on 24th April.  According to the CBN, the window was established to boost liquidity in the FX market and ensure timely execution and settlement for eligible transactions. This further liberalisation of the FX market means that investors can convert capital brought into Nigeria for investment into Naira at a market-determined exchange rate, since rates are no longer fixed by the CBN, as was the case in the past. Rather, rates for FX transactions by participants in the window will be as agreed between counterparties - i.e. on a willing buyer and willing seller basis - as the CBN has neither set a band nor pegged a rate for transactions in the window.  Parties are permitted to access the window to obtain FX for invisible eligible transactions such as loan repayments and interest payments, dividends/income remittances, capital repatriation, various fees (technical, management, consultancy etc), expatriates home remittances etc.  Bills for collection transactions and any other trade-related payment obligations (at the instance of a customer) are also permitted.

Since the commencement of trading in the window, there appears to be sufficient liquidity as supply of FX is by portfolio investors, exporters, banks and other parties with foreign currency to exchange to Naira. The CBN will also participate in the window from time to time to promote liquidity and professional market conduct.  Portfolio investors that have been unwilling to make investments in Nigeria may now do so and convert their capital at a near spot market determined rate.  What does this mean for investors in Nigeria? 


The most significant effect of the window is that rates for FX transactions in the window will be as agreed between authorised dealers and their counterparties - i.e. on a willing buyer and willing seller basis.  The CBN has neither set a band nor pegged a rate for transactions in the Window.

Foreign Investment

Foreign investors that inflow foreign capital to make investments in Nigeria are now able to convert to Naira, in the window, at a rate agreed with the bank that is close to the actual spot market rate for the Naira and still be entitled to a certificate of capital importation (CCI) - the document that provides eligibility for access to the FX market when repatriation of profits or capital is contemplated. 


Exporters are, also, now able to sell their export proceeds to banks at the window.  The benefit for exporters is that the window creates a mechanism for which they are now able to agree a higher exchange rate with banks in connection with the purchase of export proceeds.  This would, potentially, have a positive effect on the earnings of investors in such companies.

FX Liquidity

Foreign investors in Nigeria that wish to repatriate the proceeds of their investments, or Nigerian companies that wish to make FX payments under contracts with foreign counterparties, and which had previously had challenges in procuring FX, are now able to obtain FX at the window in order to effect such repatriation/payments at a rate agreed with the Nigerian bank(s) that processes such transactions.

Trade Related Transactions

Nigerian corporates that have trade related transactions to fund have an option of accessing the window while they remain free to utilise the FX market.  Due to the liquidity constraint in the FX market – which is mainly funded by the CBN, if any corporate is unable to wait for the time that it will take to obtain FX in the FX market and is willing to pay a rate higher than what is available in the FX market, it could access the window to obtain FX to fund such trade transaction.

In accessing the window, participants seeking to repatriate funds or make other payments are still required to submit the appropriate transaction supporting documentation prescribed by the CBN.  The window is only accessible for eligible transactions.  Therefore, all the documentation requirements (including, where applicable, certificates of capital importation or approval of the National Office for Technology Acquisition and Promotion) for eligible transactions for the purchase of FX in the FX market continue to apply to transactions carried out in the window. 

Finally, with the window, availability challenges have been greatly reduced for persons seeking to purchase FX for repatriation from the FX market in the immediate to short term.  The CBN’s efforts have led to a convergence of rates at the FX market and the parallel – unofficial – market.  As a reflection of this, and following the relative stability in the prices of crude oil and the recent issuance of US$1.5bn Eurobonds by the Federal Government, we have seen some Nigerian banks beginning to raise FX capital.  We have also seen increase in trading activities in the Nigerian capital market and growing interest of foreign institutions to make equity or debt investments in Nigeria.


Written by Folake Elias-Adebowale, Partner, and Joseph Eimunjeze, Managing Associate, Udo Udoma & Belo-Osagie (UUBO)

For more information, please visit the UUBO website here

About the author

Udo Udoma & Belo-Osagie (UUBO) is a corporate and commercial law firm with offices in Nigeria's business centres, which has been described in international rankings as one of Nigeria's "Magic Triangle" law firms.

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