The Central Bank of Nigeria has disclosed that it is considering legal actions against the violators of the foreign exchange forward contracts after the completion of a forensic audit of those contracts.

CBN indicated this on Thursday in a document titled ‘Frequently Asked Questions on the Settlement of Undelivered Forward Contracts’, published on its website.

“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,” said the document.

The CBN Governor, Mr Olayemi Cardoso, had earlier revealed that the apex bank hired Deloitte to conduct a comprehensive forensic audit of all transactions.

in the Retail Secondary Market Intervention Sales, including undelivered forward contracts. The audit involved reviewing contract documentation and trade confirmations, verifying underlying trade transactions (e.g., import/export documentation, Form M, shipping and Customs records), confirming that contracts complied with applicable CBN circulars and FX market guidelines and ensuring that beneficiaries were genuine and eligible counterparties.

On the outcome of the audit, the CBN said, “The forensic audit uncovered significant irregularities in the execution of some of the foreign exchange forward contracts. Each finding was based on objective and verifiable data, and all affected counterparties were given an opportunity to respond before final decisions invalidating these contracts were made.”

Some of the irregularities found include the company name on the approved sales result being different from the company name on the Form M portal and the cumulative value of the approved FX Forward Sales on this Forex Form Number from Auction 1 in 2021 to the date of this auction exceeding the total value of the forex form number, sales higher than demand, non-permissible items of import, unauthorised companies importing milk, vague narration of the item of import, and sales without demand.

Others are incorrect forex form numbers, forex forms not indicated, blank Form M, rejected Form A applications on the Form A portal with approved sales, approved sales values higher than the cost of the import item on the Form A portal, and the approved sales value higher than the cost of the imported item on the Form M portal.

“No right to FX settlement can arise under Nigerian law where the underlying transaction is tainted by illegality, misrepresentation, or non-compliance with binding regulatory rules. Invalid contracts were cancelled in line with audit findings. No FX payments were made on these contracts, as they did not meet the required standards for settlement, as noted in point 8 above. The naira previously received from counterparties in respect of these invalid contracts has been returned.

“The CBN is currently engaging with law enforcement authorities to determine appropriate action in cases involving potential fraud, misrepresentation, or abuse of the FX system; paying invalid contracts would have rewarded non-compliance, encouraged abuse of the FX system, and unnecessarily depleted the nation’s FX reserves.

The CBN’s mandate is to maintain market integrity and protect Nigeria’s financial stability. Moreover, settling contracts that were legally void or irregular would have contravened the CBN’s statutory responsibilities and potentially exposed it to legal liability and loss of public trust,” stated the apex bank.

The Central Bank said that the outcome of the audit cannot be appealed, as “the audit conclusions were based on a rigorous process carried out by an independent forensic expert (Deloitte), acting pursuant to a transparent mandate. The auditor contacted the authorised dealer banks concerning those contracts to get their explanations of the infractions before reaching conclusions on them. The findings have therefore met procedural fairness standards. The case of undelivered forward contracts is now concluded and closed.”