Introduction
On November 5, 2024, the Central Bank of Nigeria (CBN) released its Implementation Guidelines on the Foreign Currency Disclosure, Repatriation, and Investment Scheme (the “Guidelines”). These Guidelines complement the Foreign Currency Disclosure, Deposit, Repatriation, and Investment Scheme Guidelines, 2024 (the “Scheme”), issued by the Minister of Finance and Coordinating Minister of the Economy on April 8, 2024. The Scheme was introduced to operationalize Presidential Executive Order No. 15 (Modification Notice), aimed at facilitating the voluntary disclosure, deposit, and repatriation of foreign currencies held by Nigerians, whether within or outside the country.
The Guidelines outline the role of Commercial, Merchant, and Non-Interest Banks (“Banks”) in the Scheme. It details how foreign currencies are to be disclosed, deposited, repatriated, or invested.
In this article, we examine the key provisions of the Guidelines and their role in implementing the Scheme effectively.
1. Objectives of the Scheme
The Scheme aims to enhance financial transparency by formalizing legitimate foreign currency assets held by Nigerians and legal residents. It provides a framework for the voluntary disclosure of internationally tradable foreign currency, whether held in cash or electronic form, onshore or offshore. Also, it establishes mechanisms for depositing disclosed foreign currency into participating financial institutions in Nigeria and repatriating offshore-held currency through approved channels. The Scheme seeks to promote investment in designated sectors and instruments, leveraging these disclosed assets to boost economic resilience, drive infrastructure development, and foster job creation.
2. Operation of the Scheme
2.1 Procedure for Application
To participate in the Scheme, applicants must provide Banks with required details, including their full name, Bank Verification Number (BVN), National Identification Number (for natural persons), or Tax Identification Number (for legal entities). Applicants must also disclose the amount of foreign currency they intend to deposit, details of their designated domiciliary account, and any additional information requested by the Bank.
2.2. Deposit and Repatriation of Foreign Currency
Upon verifying compliance with the application requirements, the Bank will receive the foreign currency into the participant's designated domiciliary account. The Bank must then submit a report to the CBN detailing the receipt of the funds.
2.3. Withdrawals and Termination of Investment
Banks are prohibited from imposing restrictions on withdrawals from a participant's designated domiciliary account (except as otherwise provided in the Scheme)1 or on the termination of investments made in Permissible Investment Sectors or Instruments2 under the Scheme.
2.4 Conversion of Deposited Foreign Currency
Participants may convert part or all of the foreign currency in their designated domiciliary accounts into Naira at the prevailing exchange rate. Banks are to ensure that such conversions are properly disclosed and reported in their foreign exchange returns.
3.Responsibilities of Stakeholders
3.1 Responsibilities of Banks
Banks participating in the Scheme are required to open designated domiciliary accounts for customers, process applications in line with the Guidelines, and accept deposits of disclosed foreign currencies directly or through nominated entities. They must issue receipts acknowledging the country of origin for deposited funds within 24 hours and track participants' investments in permissible instruments or sectors. Also, Banks must ensure compliance with relevant laws and maintain strict confidentiality of participants' information in line with data protection laws.
3.2. Responsibilities of Participants
Participants must open designated domiciliary accounts for Scheme-related transactions and invest only in permissible sectors or instruments. They are required to confirm the legality of deposited funds, provide accurate and complete information, and consent to the sharing of relevant account data with the CBN and other legally authorized parties.
3.3.Responsibilities of the CBN
The CBN regulates Banks' participation in the Scheme, collects monthly reports from them, and provides templates for transaction reporting. It also shares data with the Ministry of Finance on the operation of the Scheme at both industry and individual bank levels.
4.Treatment of Uninvested Funds
Banks may utilize uninvested foreign currencies deposited under the Scheme for trading purposes, provided the funds remain accessible to the participant whenever required. Interest on balances in designated domiciliary accounts will be paid in accordance with the provisions of the Guide to Charges by Banks and Other Financial Institutions in Nigeria.
5. Compliance with Anti-Money Laundering and Counter-Terrorism Regulations
Transactions under the Scheme are subject to the Money Laundering (Prevention & Prohibition) Act, 2022; Terrorism (Prevention and Prohibition) Act, 2022, and various CBN regulations, including AML/CFT/CPF regulations and Customer Due Diligence guidelines. These laws prohibit the introduction of funds derived from illegal or criminal activities into Nigeria's financial system.
Banks participating in the Scheme must ensure compliance with all relevant AML/CFT/CPF regulations by:
- Conducting comprehensive Customer Due Diligence (CDD) on applicants, including identifying the beneficial owners of the funds.
- Verifying the ownership of accounts receiving funds under the Scheme.
- Ensuring deposits via wire transfers comply with applicable regulatory requirements.
- Applying enhanced due diligence for funds repatriated from jurisdictions that do not meet Financial Action Task Force (FATF) Recommendations.
Conclusion
The Guidelines provide a structured framework to facilitate the inflow of foreign currency currently outside the Nigerian financial system. The goal is to promote local investment in key economic sectors and approved investment instruments. By aligning with relevant regulatory provisions, the Scheme aims to bolster economic resilience while preserving the integrity of the financial system in Nigeria.
Footnotes
1. The Scheme requires participants to commit to retaining the disclosed and deposited foreign currency for a minimum period of five (5) years from the deposit date. Withdrawal is only permitted for investment in Permissible Investment Sectors or Instruments.
2. Permissible Investment Sectors are those designated by the President to drive economic growth, infrastructure development, and job creation. Permissible Investment Instruments are foreign currency-denominated financial instruments issued under relevant executive orders or as determined by the President.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
