As Cardoso Maps out Plans for Nigeria’s Exit from FATF Grey List

In continuation of his reform efforts, Governor of the Central Bank of Nigeria, Mr. Olayemi Cardoso, at the 59th Annual Dinner of the Chartered Institute of Bankers of Nigeria (CIBN) gave a time frame for the exit of Nigeria from the Financial Action Task Force grey list, thereby making the country more conducive for investment, writes Festus Akanbi

Right from September 23, 2023, when he was confirmed as the Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso had never hidden his resolve to reform the entire financial sector of the Nigerian economy.

Apart from the professionalism which he has brought to bear at the apex bank, financial experts said the regime of positive economic data emanating from the National Bureau of Statistics should be viewed as an index of Cardoso’s effectiveness in his duty post.

So, it was a confident CBN Governor who mounted the rostrum on November 29, 2024, to address bankers and their guests at the 59th Annual Dinner of the Chartered Institute of Bankers of Nigeria (CIBN) held in Lagos.

Characteristics of an achiever, Cardoso who grabbed attention at the well-attended event, did not dwell on his landmark achievements at the apex bank alone but laid out plans to make the Nigerian economic climate conducive for investment.

Exiting FATF Grey List

For instance, one of the high points of his address was the bit-by-bit plan to make Nigeria exit the Financial Action Task Force (FATF) grey list by the second quarter of 2025.

The FATF is an independent intergovernmental organisation that develops and promotes policies to protect the global financial system.

The FATF identifies jurisdictions with weak measures to combat money laundering and terrorist financing (AML/CFT) in two FATF public documents that are issued three times a year. The FATF’s process to publicly list countries with weak AML/CFT regimes has proved effective.

South Africa and Nigeria, along with 21 other jurisdictions, have been ‘grey-listed’ by FATF as of February 24, 2023. Countries on the FATF grey list have been identified as having strategic deficiencies in their anti-money laundering, terrorist financing, and proliferation financing regimes, have been given a warning to address those deficiencies, but have formally committed to resolving these deficiencies quickly, within agreed timeframes, and subject to increased monitoring. The implications for the grey-listing of two of the biggest economies in Africa may be far-reaching.

FATF notes that although Nigeria has made some progress since the adoption of its Mutual Evaluation Report in August 2021, it is required to implement FATF’s action plans. This FATF grey listing adds another layer of risk and complexity to businesses that already perceive Nigeria as a high-risk country for anti-corruption and other financial crime risks.

 This may put businesses with connections to Nigeria under more regulatory scrutiny, as regulators may expect them to implement more stringent AML/CFT compliance measures to mitigate the risks associated with grey-listing. 

Furthermore, the grey-listing may result in higher compliance costs and increased due diligence requirements for businesses, making transactions with Nigerian counter-parties more difficult.

Analysts said that being on the grey list can restrict cross-border transactions; lead to difficulties for a state obtaining credit, and limit inward foreign investment. In addition to economic consequences, grey-listing damages a country’s reputation and reduces its international standing.

But speaking at the CIBN dinner, Cardoso said with what the current administration has put in place so far, he was optimistic that Nigeria will exit the FATF grey list by the second quarter of the year. 

He said: “Regarding Nigeria’s inclusion on the Financial Action Task Force (FATF) grey list, we fully recognise the problems this presents and are addressing legacy deficiencies with utmost urgency. Building a robust culture of compliance remains central to our efforts. We are optimistic that Nigeria will exit the grey list by Q2 of 2025!

“Today, we face significant challenges: money laundering, cybersecurity threats, fraud, corruption, and disparities in financial inclusion. The cost of inaction is profound—fraud undermines confidence, corruption erodes trust, and money laundering perpetuates organised crime. As you may have noticed by now, compliance is a recurring theme in this speech, reflecting its critical importance to our mission.”

Compliance Culture

Cardoso pointed out that the compliance culture he envisions is one where executives and boards set the tone by making compliance a strategic priority, championing zero tolerance for breaches—not just in policy, but in practice; where financial institutions anticipate vulnerabilities and proactively address risks in areas susceptible to abuse.

His other expectations include that teams are educated to recognise red flags and encouraged to report concerns about fraud, money laundering, or unethical behaviour, knowing they are protected; where institutions know their customers and partners, conducting enhanced due diligence, especially for high-risk clients, politically exposed persons, and vendors, ensuring operations are not conduits for illicit funds and where the industry collaborates to combat systemic threats, sharing information on emerging risks, cooperating with law enforcement, and maintaining open communication with the central bank and regulators.

To further sanitise the system, the apex bank chief said that starting in 2025, financial institutions will be required to refine their compliance and governance frameworks to address evolving risks.

“We are enhancing regulatory effectiveness and accountability, as demonstrated by recent changes to our supervisory and enforcement approach,” he said, recalling that penalties totalling N15 billion were imposed on 29 banks for breaches, including AML/CFT violations. He said that in addition to these penalties, the banks are required to address the root causes of the lapses, which is crucial for improving regulatory effectiveness. “Historically, the industry has struggled with recurring issues, but we are confident that this approach will help change that narrative,” he stated.

The CBN Governor said that a bank that prioritises compliance does more than protect itself—it strengthens the entire financial ecosystem. According to him, such an institution directs financial resources toward growth, innovation, and prosperity rather than crime and corruption, saying “Together, we must exceed standards, demonstrating to the public and the world that we are stewards of integrity and trust.”

Economic Buffers

Reflecting on the achievement of his team, Cardoso said the economic buffers built within a spate of one year are already bearing fruits. He said, “In October 2023, we prioritised reforms to rebuild Nigeria’s economic buffers and strengthen resilience. Inflation, which had surged to 27%, was one of the most pressing challenges, partly driven by excessive money supply growth. While our GDP growth had stagnated at a meagre 1.8% over the previous eight years, the money supply expanded rapidly, averaging about 13% growth annually. This imbalance not only fuelled inflation but also contributed to a significant depreciation of the naira. As we all know, inflation creates uncertainty for households and businesses, acting as a silent tax by eroding purchasing power and driving up living costs.”

He disclosed, however, that under his leadership, the CBN has taken decisive steps to move away from these practices. “We have ended years of fiscal deficits financed through CBN’s Ways and Means advances, reinforcing our commitment to price stability and promoting fiscal discipline,” he said.

Naira Value

Speaking on the true value of the Naira, Cardoso said the local currency is yet to get to its true value, blaming the current high rate of the dollar on the desperation of buyers. He said, “It is vital to address the disinformation circulating about a supposed demand-supply gap in the FX market, which is fuelling unnecessary panic. The current USD exchange rate reflects the price that the most desperate buyers are willing to pay, and this does not represent the true market value of the naira. The introduction of the electronic matching system will correct these distortions by enhancing the price discovery process. Additionally, it will significantly boost the central bank’s oversight and intervention capabilities, ensuring a more stable and transparent foreign exchange market.”

He challenged the CIBN to ensure the highest standards are upheld in the banking industry, saying “The ethics and professionalism of bankers and treasurers are under constant scrutiny, which is why we have introduced the FX Global Code for all authorised dealers and market participants. I urge this institute to take the lead in upholding and demonstrating the highest standards in the industry. At the Central Bank, we have intensified surveillance of market activities to ensure compliance and eliminate bad actors who attempt to undermine the system. Together, we must build a market based on strong governance and transparency. As regulators, we will maintain a zero-tolerance approach to compliance violations.”