CBN Concludes Audit of Failed FX Deals, Begins Naira Refunds to Banks

The Central Bank of Nigeria (CBN) has officially concluded its forensic audit of foreign exchange (FX) transactions that were previously flagged for irregularities or failure.

As part of its resolution strategy, the apex bank has now initiated refunds to affected Nigerian banks—settling the outstanding claims in naira rather than foreign currency.

This move marks the final phase of the CBN’s efforts to address the lingering FX backlog crisis that rattled investor confidence and strained Nigeria’s financial sector. The refund process applies to banks that had pending FX obligations originating from failed or uncleared transactions in previous years.

The development follows an independent audit conducted by global accounting firm Deloitte, which had been commissioned by the CBN to scrutinize approximately $7 billion worth of outstanding FX forward contracts. That review, concluded earlier in 2024, revealed that around $2.4 billion of the total sum involved transactions that were either dubious, non-compliant with FX guidelines, or lacked proper documentation.

In response to those findings, the CBN had declared that it would not honour the disputed FX commitments, pledging instead to resolve legitimate portions of the backlog.

The bank eventually cleared about $2.5 billion of valid claims, with the remaining amounts set aside for further verification and settlement.

With the audit now concluded, the CBN has opted to refund verified FX claims in naira. While specific figures on the refunds were not disclosed, the shift from settling in foreign currency to the local unit suggests a policy stance aimed at conserving Nigeria’s foreign reserves and gradually rebalancing FX obligations.

Analysts believe this refund strategy, though unconventional, is intended to ease pressures on Nigeria’s forex market and provide a soft landing for banks that were exposed to those unsettled transactions.

However, the decision to settle in naira instead of dollars may affect the foreign currency positions of some institutions and could influence their ability to meet external obligations.

Market watchers are also observing the ripple effects of this resolution on the overall FX market, particularly how it may impact confidence in the central bank’s policy consistency going forward.

While the refunds offer some closure to banks, questions remain around how this will affect interbank FX liquidity and whether similar naira settlements may be applied to future backlog clearances.

The CBN has not yet released a public statement detailing the exact modalities of the refund process or its implications for broader FX management.