Nigerian Banks Tighten Forex Policies for SMEs

In recent months, Nigerian small and medium-sized enterprises (SMEs) have faced increasing challenges in accessing foreign exchange (forex) from local banks. Several commercial banks have introduced tighter forex policies, citing pressure from the Central Bank of Nigeria (CBN) to stabilize the naira and reduce speculative trading in the parallel market.

For SMEs that depend heavily on imported raw materials, spare parts, and machinery, the new restrictions have created a difficult operating environment. Many business owners report delays in processing their forex applications, higher transaction fees, and stricter documentation requirements. While banks argue that these measures are necessary to ensure transparency and curb misuse, entrepreneurs say the policies risk stifling growth at a critical moment in Nigeria’s economy.

### Why Banks Are Tightening Forex Access

Nigerian banks are under growing scrutiny as the CBN pushes reforms aimed at controlling forex leakages. One senior banker, speaking anonymously, said: “The CBN has made it clear that all forex applications must now undergo rigorous checks. Any bank found complicit in round-tripping or speculative allocation will face sanctions. We have no choice but to comply.”

Round-tripping—where forex allocated at official rates is diverted to the black market for quick profits—has been a longstanding issue in Nigeria’s forex management. To curb the practice, banks have introduced multi-layered verification processes. Customers seeking dollars for imports must now provide invoices, evidence of past transactions, and in some cases, proof of end-use before approvals are granted.

### Impact on SMEs

For many SMEs, these policies mean delays and higher costs. A Lagos-based furniture manufacturer explained that it now takes him up to four weeks to access forex for importing wood finishing materials: “By the time approval comes, my suppliers abroad are already asking for penalties due to late payments. It’s killing our competitiveness.”

Another entrepreneur in Kano, who imports spare parts for agricultural machinery, said banks are now demanding additional documentation that his small business struggles to provide. “They are asking for tax clearance certificates and audited statements. But as a small company, we don’t always have audited accounts. This effectively shuts us out of the system.”

The Nigerian Association of Small and Medium Enterprises (NASME) has raised concerns, warning that the policy could force many SMEs to resort to the parallel market where the naira trades at a much weaker rate. “We understand the government’s need to stabilize the economy, but SMEs should not be the ones paying the heaviest price,” the association said in a statement.

### Broader Economic Context

The tighter forex rules come at a time when Nigeria is grappling with a fragile economic recovery. Inflation remains high, hovering around 28%, while the naira has experienced multiple devaluations in the past two years. With oil revenues fluctuating and external reserves under pressure, the CBN sees stricter forex controls as necessary for maintaining macroeconomic stability.

Economists, however, caution that while the measures may bring short-term relief to forex reserves, they risk undermining long-term growth. “SMEs are the backbone of Nigeria’s economy, contributing nearly 50% of GDP and employing over 80% of the workforce. Restricting their access to forex hampers productivity and limits job creation,” said Dr. Yemi Adegbite, an economist at the University of Lagos.

### Coping Strategies for SMEs

Despite the hurdles, many SMEs are finding ways to adapt. Some are diversifying supply chains to source more materials locally. Others are pooling resources to negotiate better forex access through cooperative groups. A few tech-savvy businesses are exploring cryptocurrency as an alternative payment method, though this remains risky given regulatory uncertainty in Nigeria.

Export-oriented SMEs are also finding opportunities. By earning foreign currency through exports of agricultural produce, textiles, or tech services, these businesses can bypass local forex restrictions. The Nigerian Export Promotion Council (NEPC) has been encouraging more SMEs to explore export markets, offering incentives and advisory support.

### The Role of Technology

Financial technology firms are stepping in to bridge some of the gaps. Several fintech startups now provide digital platforms where SMEs can manage cross-border payments more efficiently. Although they cannot fully replace banks in accessing official forex, these platforms reduce paperwork and speed up settlements. Over time, experts believe that fintech innovation could ease some of the forex bottlenecks facing small businesses.

### What Lies Ahead

Looking ahead, analysts predict that forex access will remain tight until Nigeria significantly increases dollar inflows. This will require boosting non-oil exports, attracting foreign direct investment, and improving diaspora remittances. The CBN has already launched initiatives to encourage remittances through official channels, but much more needs to be done to restore confidence in the system.

For SMEs, the hope is that policymakers strike a balance between stabilizing the naira and supporting local businesses. Without such a balance, Nigeria risks a scenario where small businesses—long regarded as the drivers of innovation and employment—are forced into survival mode rather than growth.

### Conclusion

The tightening of forex policies by Nigerian banks reflects broader efforts to stabilize the nation’s economy amid global and domestic challenges. While necessary in the eyes of regulators, the impact on SMEs has been severe, threatening to weaken a sector that provides the foundation for Nigeria’s future growth. To avoid stifling entrepreneurship, policymakers must ensure that reforms are complemented with targeted support for SMEs—whether through simplified documentation, forex windows dedicated to small businesses, or incentives for exporters.

Ultimately, Nigeria’s economic resilience depends not just on controlling forex markets, but on empowering SMEs to thrive. As one business owner put it: “If small businesses fail, the whole economy fails. We need policies that protect the naira without destroying the people who keep it alive.”