No More Grey Areas: Strengthening Nigeria’s financial integrity and rebuilding investor trust after FATF delisting
Introduction
More than two (2) years after Nigeria was listed as one of the countries to be placed under increased monitoring (the grey list) by the Financial Action Task Force (FATF), due to weak financial standards, anti-money laundering concerns, etc, Nigeria’s delisting from the grey list signifies a strengthened financial integrity and readiness for increased cross-border trade with fewer investor doubts and transactional frictions. This decision was the product of sustained legal, institutional, and operational reforms.
This development carries deep economic and diplomatic implications. It signals that Nigeria has restored credibility in its financial ecosystem, aligning its Anti-Money-Laundering (AML), Counter-Terrorist-Financing (CFT), and Counter-Proliferation-Financing (CPF) measures with global standards. Most importantly, it provides a foundation for stronger investor confidence, renewed cross-border partnerships, and accelerated economic growth.
This article examines Nigeria’s response to addressing the FATF’s identified deficiencies and the impact of its delisting from the grey list.
Understanding the Grey List and Its Implications
When Nigeria was placed on the FATF grey list in February 2023, the implications were immediate and severe. The designation, which identifies countries with deficiencies in their AML/CTF frameworks, cast a long shadow over Nigeria’s economic prospects and deterred foreign investors from coming into the country.
For Nigeria, this translated into tangible economic pain. International banks subjected Nigerian transactions to heightened scrutiny, correspondent banking relationships weakened, and foreign investors approached opportunities with increased caution. Cross-border payments became more expensive and time-consuming, while Nigerian businesses faced additional compliance hurdles that dampened competitiveness. The ripple effects impacted everything, from diaspora remittances, a critical source of foreign exchange, to trade finance and foreign direct investment flows.
The Reform Journey: Building a Framework for Change
Nigeria’s path to delisting was neither quick nor simple. It required a coordinated effort across multiple government agencies, legislative reforms, and a fundamental restructuring of the country’s financial intelligence architecture. The transformation was led by key institutions, including the Nigerian Financial Intelligence Unit (NFIU), the Economic and Financial Crimes Commission (EFCC), the Central Bank of Nigeria (CBN), and other relevant agencies. The reforms were broad, systematic, and sustained across major pillars. They include the following:
1. Robust Legislative Overhaul: The AML and Terrorism Laws
Nigeria replaced and updated its legal framework to meet global standards. Central to this effort was the Money Laundering (Prevention and Prohibition) Act, 2022 (MLA 2022), which modernised the country’s AML regime, broadened offences, and strengthened institutional powers to investigate and prosecute financial crime. The MLA 2022 supplanted the 2011 Money Laundering (Prohibition) Act and equipped enforcement agencies with sharper tools for detection and enforcement.
Complementing the MLA 2022, the Terrorism (Prevention and Prohibition) Act, 2022, improved Nigeria’s CTF framework by clarifying offences, expanding investigative powers, and reinforcing mechanisms to freeze and seize terrorist assets; actions FATF specifically looks for in assessing a jurisdiction’s CFT regime.
2. Strengthened sectoral regulation and supervisory guidance
Regulators moved quickly to translate high-level legal reform into operational standards. The Central Bank of Nigeria (CBN) and other supervisors issued updated AML/CFT/CPF regulations and guidance, setting out risk-based customer due diligence, beneficial ownership expectations, targeted financial sanctions, and enhanced reporting obligations for banks and other financial institutions. These instruments raised supervisory scrutiny and clarified expectations for compliance across the financial sector.
3. Operationalisation of the Beneficial Ownership Register
Transparency over company ownership was a major gap cited in Nigeria’s mutual evaluation. The Corporate Affairs Commission (CAC) and partner agencies accelerated the roll-out of a beneficial ownership (PSC) register and public commitments to validate and publish ownership data. Making beneficial owner information accessible to competent authorities and, in some cases, the public, helped reduce anonymity that can shelter illicit financial flows.
4. Tightened supervision of Designated Non-Financial Businesses and Professions (DNFBPs)
Regulations and agency guidance explicitly required the registration, monitoring, and supervision of DNFBPs, including law firms, real-estate agents, casinos, and dealers in precious metals, with clear AML/CFT obligations. The EFCC and Specialised Control Unit issued regulations and implementation guidance to ensure DNFBPs are integrated into the national AML/CFT framework, closing a critical vulnerability .
5. Enhanced international cooperation and intelligence exchange
Nigeria significantly stepped up cross-border engagement with more proactive mutual legal assistance, improved financial intelligence unit (FIU) information sharing, and cooperation with regional and global partners to trace and recover illicit flows. It is worth noting that the FATF places heavy weight on operational cooperation. Hence, Nigeria’s demonstrable improvements in information exchange and coordinated investigations were decisive.
Strengthening Nigeria’s Financial Integrity and Rebuilding Investor Trust
The FATF’s delisting removes a visible badge of elevated AML/CFT risk. International banks, institutional investors, and insurers use FATF listings as a quick filter for risk appetite; delisting, therefore, lowers the threshold of perceived sovereign and counterparty risk and can reduce transactional frictions such as extra due diligence or outright restrictions that previously hampered finance and trade. It goes without saying that with the enhanced legal certainty and supervisory practice, Nigerian banks are better positioned to negotiate correspondent lines and trade-finance facilities. This would, in turn, reduce bottlenecks in cross-border payments and lower the effective cost of trade finance for importers and exporters.
Additionally, as perceived regulatory risk falls, international investors are likely to reassess exposure to Nigeria. Over time, this can translate to narrower sovereign spreads, greater appetite for corporate debt, and stronger flows into long-term projects.
The Road Ahead: Sustaining Progress
While delisting marks a milestone, sustained compliance is essential. FATF evaluations are cyclical, and countries may be relisted if reforms stall. Moreover, FATF has placed Nigeria under a twelve (12) month post-observation period, requiring proof that reforms translate into sustained enforcement. It must demonstrate that its improvements are not merely cosmetic but represent a fundamental shift in financial governance culture.
The challenges ahead include maintaining inter-agency coordination beyond the immediate pressure of delisting, ensuring consistent enforcement across all sectors and regions, building capacity in rural courts, and continuing to strengthen the beneficial ownership register and risk assessment frameworks. There is also the crucial task of embedding a culture of compliance within the private sector, particularly among smaller financial institutions and non-financial businesses.
Conclusion
Nigeria’s removal from the FATF grey list is more than a regulatory achievement; it’s a statement of intent about the country’s economic future. As the NFIU stated, Nigeria’s commitment goes beyond compliance, as it reflects a national transformation agenda that prioritizes transparency, integrity, and accountability.
The true test lies ahead: Can Nigeria sustain these reforms when external pressure diminishes? Can it transform improved perception into tangible economic growth? Can it leverage this momentum to address broader structural challenges in its economy? The delisting provides Nigeria with an opportunity to rewrite its economic narrative, moving from a perception of high risk to one of an emerging economy. It offers a chance to build deeper integration with global financial systems while strengthening domestic institutions.
Nigeria enters this new chapter, the lesson is clear: credibility is indeed a currency in the global economy. It has earned back a measure of trust, but maintaining and building upon this achievement will require continued vigilance, sustained political will, and a commitment to making integrity the cornerstone of economic policy. The grey areas are gone; what remains is the hard work of building a transparent, robust, and globally competitive financial system that can support Nigeria’s aspirations for sustainable economic growth and development.
Noble Obasi is a Team Lead in the Financial Sector at Stren & Blan Partners, while Michael Afuye, Ebube Okorji, and Ebenezer Ogunwole are Associates in the same sector.
Stren & Blan Partners is a full-service commercial Law Firm that provides legal services to diverse local and international Clientele. The Business Counsel is a weekly column by Stren & Blan Partners that provides thought leadership insight on business and legal matters.
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