A recent surge in the parallel forex market has prompted the National Bank of Ethiopia (NBE) to implement aggressive corrective measures. These actions include an unscheduled auction to sell half a billion dollars and a weekend directive requiring banks to exercise increased caution in their Letters of Credit (LC) issuance. The directive mandates that LCs for non-essential imports, which require significant amounts of foreign currency, align with the valuation benchmarks established by the Ethiopian Customs Commission.
Financial experts indicate that this new ruling, which instructs banks to synchronize their LCs with Customs Commission valuations, primarily targets the illegal exchange market.
This market experienced a significant spike the previous week, with rates reaching as high as 190 birr per dollar, compared to the official bank rate of under 160 birr.
The surge was fueled by a sudden increase in foreign currency demand from importers, prompting the NBE to act swiftly. On Tuesday, January 27, 2026, the central bank injected $500 million through a special auction to help banks meet this heightened demand.
Major investors who spoke with Capital attribute this timing to the Chinese New Year (CNY). This period, typically from late January to mid-February, often sees a significant slowdown in economic activity.
“Production slows, ports become congested, and global freight networks operate less efficiently, not only during the holiday but for several weeks afterward,” they explained. To mitigate these supply chain disruptions, expected to peak around February 17–March 3 in 2026, importers are rushing to secure necessary commodities for as far ahead as April or May.
“As far as I understand, the government recognizes the link between foreign currency demand and CNY. This understanding is a major reason for the substantial sum provided in the extraordinary forex auction and the push for banks to help combat the illegal forex market,” a major exporter told Capital. Experts added, “I expect the black market will gradually diminish due to the NBE’s measures.”
The NBE’s latest directive, effective January 27, 2026, requires all commercial banks to use Ethiopian Customs Commission price data when processing forex for imports. In a statement on Sunday, the NBE noted that this move aims to “strengthen consistency and data integrity,” citing significant discrepancies between values declared on LCs and official customs reference prices.
A key detail that remains unspecified is the exact list of “selected imported items” to which the rule applies. The NBE stated that, “with the objective of harmonizing price references and ensuring consistency in balance of payments data,” banks must now apply customs values “as indicative prices.”
This marks the latest phase in Ethiopia’s forex market reforms, which began with the introduction of a market-clearing exchange rate system in July 2024.
While experts initially believed that the indicative rate would target major forex-consuming commodities like steel, a list reviewed by Capital also includes non-essential items such as vehicles, home and office furniture, electronics, and wires.
The central bank emphasized that this step aligns with its broader reform agenda and that it “will continue to monitor implementation and take appropriate measures.”
However, the lack of specificity regarding covered goods is likely to raise concerns among importers, who will face an imminent shift in how their transaction values are assessed for forex access.
Financial experts note that the directive is part of a broader government effort to curb forex flight and illicit remittance practices, which are seen as critical to the nation’s economic reform program.
This action follows substantial forex injections; in the past two months alone, the government has sold $890 million via auction, including $650 million through extraordinary, unscheduled auctions.
