Ethiopia Caps Forex Fees at 4% to Boost Transparency and Market Competitiveness

The National Bank of Ethiopia (NBE) has introduced a new regulation capping all foreign exchange (FX) transaction fees charged by commercial banks at a maximum of 4%, starting May 26. This move is part of ongoing efforts to reform Ethiopia’s foreign exchange market, following the country’s shift toward market liberalization that began in July 2024.

Under the updated directive issued on May 20, banks are also barred from adding extra fees for minor services linked to forex transactions. All banks are required to publicly disclose their forex-related charges, with details to be published regularly on the NBE website beginning in June. The central bank emphasized that this measure aims to align Ethiopia’s FX pricing with international standards while promoting transparency and competitiveness.

The cap applies to a range of forex services, including foreign currency purchases for importing goods, making service payments, and cash note transactions. The regulator stated that simplified and transparent pricing is essential to improving consumer access to the forex market.

Additionally, NBE has raised the advance payment limit for importers to $50,000 per transaction, up from the previous cap of $5,000. This change addresses long-standing challenges that restricted importers from providing sufficient upfront payments to overseas suppliers.

Travellers also stand to benefit from the reforms. Personal travellers can now access up to $10,000 in foreign currency, while business travellers are allowed up to $15,000, either in cash or through debit card transactions. Moreover, individuals holding foreign exchange accounts may now use up to 20% of their balances via debit cards, doubling the previous limit of 10%.

The NBE expressed optimism that these changes would help develop a more dynamic and responsive forex market, capable of better serving both individual banking clients and the broader private sector. The regulator has been closely monitoring the market since implementing a flexible exchange rate regime in late July 2024. In a related policy from October 2024, banks were instructed to clearly itemize and report all fees and commissions tied to forex dealings to enhance customer transparency.