Ethiopia’s Central Bank Implements New Policy on Foreign Exchange Spreads and Fees

Ethiopia’s central bank has introduced a new policy requiring banks to clearly separate and display the foreign exchange (FX) trading spread—the difference between buying and selling rates—in their transactions and daily posted rates.

The National Bank of Ethiopia (NBE) emphasized that banks are to adjust their buying and selling rates based on market conditions and through transparent negotiations with individual clients. These adjustments should generally not exceed 2% of the banks’ posted rates, in line with international standards.

In addition to the spread, the new policy mandates that all FX-related fees and commissions be separately disclosed, reported, and charged to clients. Banks are expected to adhere to international best practices when setting these fees and ensure that they remain competitive.

“Furthermore, banks must transparently disclose all fees, commissions, and related charges in their transactions with customers. These fees should also be regularly reported to the NBE as per established practices,” the bank stated.

In July 2024, the NBE overhauled its foreign exchange regulations, allowing authorized private foreign exchange dealers to take a more significant role alongside banks in determining the exchange rate. This initiative aims to foster a more open and competitive foreign exchange market.

As part of this directive, authorized foreign exchange dealers are now able to buy and sell foreign currency, with the final exchange rate determined through negotiations between dealers and their clients. While banks maintain a crucial role, they now operate alongside private dealers as equal participants in the FX market.

On October 2, 2024, the NBE announced the approval of five companies that applied for licenses and met the minimum requirements to operate as Independent Foreign Exchange Bureaus.

The central bank recognizes that these forex bureaus will play a vital role in enhancing and expanding the country’s foreign exchange market. Their activities will be closely monitored and supervised to ensure compliance with the responsibilities outlined in the NBE’s Foreign Exchange Directive.