As Africa’s largest economy, Nigeria offers vast investment opportunities driven by its population of over 200 million and a rapidly growing consumer market. The country boasts of abundant natural resources, including oil, gas, and minerals, and is actively diversifying into agriculture, technology, and manufacturing. With expanding infrastructure and increasing privatization, Nigeria stands out as a compelling destination for investors seeking high returns.
1. Legal framework
1.1. What laws and regulations govern exchange control regime in your jurisdiction?
- Foreign Exchange (Monitoring and Miscellaneous Provisions) Act CAP. F34, LFN 2004 (FEMM Act)
- Central Bank of Nigeria of Nigeria (Establishment) CAP. C4, LFN 2004
- Money Laundering (Prohibition) Act, 2022
- Revised Central Bank of Nigeria Foreign Exchange Manual, 2018
1.2. Which bilateral and multilateral exchange control instruments have an effect in your jurisdiction? How is regulatory cooperation and consolidated supervision ensured?
- Nigeria is a signatory to the International Monetary Fund (IMF) Articles of Agreement.
- Regulatory corporation and supervision are achieved through the Central Bank of Nigeria’s (CBN) collaboration with international bodies like the IMF and regional economic blocs like the Economic Community of West African States (ECOWAS)
1.3. What are the current priorities of regulators and how do they work with the banking industry?
- The current priority of the regulators currently is stabilizing the foreign exchange market.
- Engagement is usually through the issuance of circulars and guidelines.
2. Exchange control regime
2.1. Can a subsidiary or affiliate repatriate money to a non-resident parent company?
- Yes, subsidiaries or affiliates can repatriate cash (capital, dividends, profits, bonuses, and interest) to non-resident parent companies out of Nigeria without restrictions through an authorized dealer (the bank). To qualify, the capital investment (equity or loan) would have been imported through an authorized dealer (the bank) and a certificate of Capital Importation was obtained in respect of the investment.
- Subsidiaries can also make payments to non-resident payment companies on transactions relating to technology transfer, patent, royalties, and licencing through an authorized dealer to a non-resident parent company where the necessary approval from the National Office for Technology Acquisition and Promotion (NOTAP) is obtained.
- Also, payment of director’s fees can be made through an authorised dealer.
2.2. Is there limitation of transfer of foreign currency to procure goods or payment for services to non-resident person?
Transfers are subject to CBN approval and documentation requirements.
2.3. Can a subsidiary easily make payments for intra-group transactions?
Subsidiaries can make payments for intercompany transactions but must comply with transfer pricing regulations and ensure proper documentation to avoid tax and exchange control issues. However, there are limitations on payment for items not supported for importation by CBN.
2.4. Are there rules against intercompany netting off?
No.
2.5. Are permits required to transfer money to a third party or non-resident entity for procurement of goods or services?
Yes, CBN Form A (for service transactions) and Form M (for products) are required to transfer funds to non-residents for procurement purposes.
2.6. What requirements or documentation must be in place before banks authorize requests for international transfers?
To apply for Form A and Form M, you need to submit the following documents:
- Duly completed Forms A or M.
- Pro forma invoice
- Locally sourced Insurance Certificate
- Regulatory Certificates/Permits
- Tax Identification Number (TIN) from FIRS
- Certificate of Incorporation of your company from CAC
- Import Permit from the regulatory agency related to the industry.
2.7. Have there been recent directives issued by your Central Bank on Exchange Control?
- Revised Guidelines for the Nigerian Foreign Exchange Market
- Nigerian Foreign Exchange Code Book: Draft Exposure
- Circular on Introduction of Electronic Foreign Exchange Matching System in Interbank Foreign Exchange Market
3. Exchange control contraventions
Enforcement
3.1. Which entities are responsible for enforcing the relevant laws and regulations? What powers do they have?
- The Central Bank of Nigeria
- Nigerian Financial Intelligence Unit
- Economic and Financial Crimes Commission (EFCC)
- The State and Federal High Court Sanctions
3.2. What sanctions are applicable in the event of a violation of the exchange control regime?
- Monetary fines
- Suspension and revocation of operating licences for financial institutions
- Criminal prosecution under the FEMM Act or Money Laundering Act
4. Trends and forecasts
4.1. How would you describe the current exchange control regime and trends in your jurisdiction? Are there any plans for further developments in the next 12 months, including proposals for legislative reforms?
Over the next 12 months, reforms may include further unification of exchange rates and relaxation of diaspora remittances.
4.2. Does your jurisdiction regulate cryptocurrencies? Are there any legislative developments with regard to cryptocurrencies or financial technologies in general?
Yes, cryptocurrencies are regulated to some extent in Nigeria, though the regulatory framework remains in development:
- Central Bank of Nigeria (CBN): The CBN has issued a directive prohibiting banks and other financial institutions from facilitating cryptocurrency-related transactions. However, this is not an outright prohibition on individuals engaging in cryptocurrency trading or holding.
- Securities and Exchange Commission (SEC): The SEC treats cryptocurrencies as securities unless an issuer can demonstrate otherwise. Where cryptocurrencies are traded on a Recognized Investment Exchange or issued as an investment, they may be classified as commodities.
