National Bank of Ethiopia eases foreign exchange approvals and standardizes letter of credit fees

The National Bank of Ethiopia has amended its foreign exchange directive to remove approval bottlenecks in trade-related foreign exchange transactions as it continues the transition to a market-based foreign exchange regime introduced in July 2024. Banks may now approve Letters of Credit on acceptance and Cash Against Documents on acceptance for institutions holding foreign currency accounts, including retention account holders, without prior National Bank of Ethiopia approval. Those account holders may also order or initiate shipment of goods under Cash Against Documents arrangements without prior bank approval, although payment processing remains subject to submission and verification of the required documents. The update also revises how commercial banks charge for foreign exchange-related Letter of Credit transactions. Fees for institutions holding foreign currency accounts, including retention account holders, must now be set on an annualized basis and applied pro rata to the tenor of the Letter of Credit, while the annualized fee rate must remain within the maximum limit already set by the National Bank of Ethiopia. The central bank framed the change as a move to align pricing with international standards and reduce transaction costs for importers and exporters. The National Bank of Ethiopia said it will continue to monitor developments and take additional measures as needed to support a stable and efficient foreign exchange market.