Nigeria cleared from FATF grey list

Nigeria’s removal from the Financial Action Task Force’s “grey list” marks a turning point for the country’s financial system after two years of enhanced monitoring. The decision, announced on 24 October 2025, follows sustained anti-money-laundering and counter-terrorist-financing reforms, including the strengthening of compliance reporting across commercial banks and digital finance channels.

The FATF exit restores Nigeria’s international banking credibility, which had been dented by the 2023 designation that flagged deficiencies in supervision and beneficial ownership transparency. The Central Bank of Nigeria (CBN) and the Nigerian Financial Intelligence Unit (NFIU) coordinated a broad review of compliance frameworks, with new reporting obligations on correspondent banking and politically exposed persons. These actions, coupled with improved data-sharing with Egmont Group members, addressed key FATF recommendations ahead of schedule.

Markets responded positively. The naira (USDNGN) traded firmer near ₦1,485 per dollar in the interbank window, supported by improved capital inflows and a narrowing parallel-market gap. Sovereign Eurobond spreads compressed by roughly 25 basis points as investors priced in lower reputational and correspondent-risk premia. The move also reduces transaction costs for Nigerian banks, which had faced additional due-diligence layers under the grey-list regime.

Banking-sector analysts said the removal could enhance foreign-bank confidence, especially for trade-finance lines from European and Asian lenders that had been constrained since 2023. Fitch Ratings previously estimated that Nigeria’s AML deficiencies had indirectly raised external funding costs by 60–80 bps. The FATF decision is therefore expected to unlock cheaper cross-border liquidity and improve the settlement reliability of Nigerian Letters of Credit.

At the macro level, the timing coincides with the CBN’s tighter monetary stance and gradual reserve accumulation. Nigeria’s gross official reserves reached US$36.7 billion by mid-October, while the DXY index’s modest retreat eased dollar pressure on frontier currencies. Improved compliance also strengthens the case for incremental MSCI (MSCIEM) portfolio inflows, as regulatory normalization typically precedes benchmark upgrades.

The government has pledged to maintain reform momentum through 2026, focusing on the Financial Action and Cybercrime Enforcement Bill currently before Parliament. Finance Minister Wale Edun said Nigeria “will remain vigilant” to ensure AML reforms deepen integration with the global financial system.

While reputational benefits are immediate, structural challenges persist—particularly in informal cash circuits and cross-border remittance corridors where AML supervision remains weak. Sustained enforcement and digital traceability will determine whether the gains from delisting translate into long-term credibility and reduced cost of capital.