The National Bank of Ethiopia (NBE) has announced major amendments to its foreign exchange directive to eliminate bureaucratic bottlenecks and align trade finance fees with global standards.
Effective immediately, commercial banks can now approve Letters of Credit (LC) and Cash Against Documents (CAD) on acceptance for foreign currency and retention account holders without seeking prior approval from the central bank.
Furthermore, eligible businesses are authorized to initiate goods shipments under CAD arrangements before getting bank permission, though final payments remain subject to standard document verification.
This policy shift amends Directive No. FXD/01/2024, building upon the sweeping market-based foreign exchange reforms originally introduced by the East African nation in July 2024.
To protect traders, the NBE has also restructured how commercial banks levy fees on LC transactions, which it noted were previously inconsistent with global norms.
Under the new rules, LC fees must be calculated on an annualized, pro-rata basis aligned with the document’s specific tenor, and cannot exceed maximum limits set by the central bank.
Central Bank Governor Mamo Mihretu’s administration noted that these measures will cut transaction costs for importers and exporters while enhancing Ethiopia’s overall trade competitiveness.
The NBE concluded its public notice by stating it will closely monitor market developments and introduce further interventions as necessary to ensure macroeconomic stability.
These updates arrive as Ethiopia continues to liberalize its tightly regulated economy under an IMF-backed reform program. By shifting administrative power to commercial banks, the central bank aims to eliminate chronic delays in the import-export supply chain.
While the business community welcomes the reduction of bureaucratic hurdles, market analysts warn that the move could strain foreign exchange reserves if commercial banks lack the robust risk management frameworks needed to handle unsupervised approvals. Additionally, price cap enforcement on commercial banks has historically led to informal service fees elsewhere, a loophole the NBE must actively police.