ADDIS ABABA, ETHIOPIA — May 25, 2026 — In a significant move to streamline international trade and reduce bureaucratic bottlenecks, the National Bank of Ethiopia (NBE) has announced major amendments to its foreign exchange directives. The new measures, effective immediately, eliminate the need for prior central bank approval for key trade finance instruments and mandate a restructuring of fees related to Letters of Credit (LCs).
These changes mark the latest step in Ethiopia’s ongoing transition to a market-based foreign exchange regime, a framework first introduced in July 2024 to align the country’s financial sector with international best practices.
Easing Approval Bottlenecks for Businesses
To improve the ease of doing business and strengthen the broader foreign exchange market, the NBE has amended FX Directive No. FXD/01/2024. The reforms explicitly target institutions holding foreign currency accounts, including retention account holders, granting them unprecedented autonomy in executing international trade transactions.
Key amendments include:
- Decentralized LC Approvals: Commercial banks are now authorized to approve Letters of Credit on acceptance for eligible foreign currency account holders without requiring prior approval from the NBE.
- Streamlined CAD Processing: Similarly, banks can now approve Cash Against Documents (CAD) on acceptance for these institutions without seeking prior central bank clearance.
- Faster Shipment Initiation: In a major boost for importers, eligible institutions can now order or initiate the shipment of goods under CAD arrangements without prior approval from commercial banks. Payment processing will simply be subject to standard document submission and verification.
Rationalizing Letter of Credit Fees
Addressing concerns over high and inconsistent trade finance costs, the NBE also issued strict new guidelines on how commercial banks charge for foreign exchange-related LC transactions. The central bank noted that existing fee structures were inconsistent with global norms.
To align with international pricing practices, the NBE has instructed all commercial banks to implement the following fee structures for foreign currency and retention account holders:
- Pro-Rata Charges: LC fees and charges must now be determined on an annualized basis and applied pro-rata according to the specific tenor (duration) of the Letter of Credit.
- Rate Caps: The annualized fee rate applied to these LC transactions is strictly prohibited from exceeding the maximum limit previously established by the NBE.
Market Impact
The central bank stated that these measures are intended to reduce transaction costs for both importers and exporters, thereby enhancing the overall competitiveness of Ethiopia’s trade finance environment. By cutting red tape and standardizing fees, the NBE hopes to further strengthen the credibility and operational efficiency of its ongoing macroeconomic reforms.
The NBE confirmed it will continue to monitor the market closely, standing ready to take additional measures as necessary to ensure a stable and efficient foreign exchange ecosystem.
