The National Bank of Ethiopia (NBE) has today, February 11, 2026, enacted the "Amendment to Foreign Exchange Directive No. FXD/01/2024," issued as Directive No. FXD/04/2026. This new directive, effective February 12, 2026, represents the most significant liberalization of Ethiopia's foreign exchange (forex) framework in recent memory. It moves the country decisively away from a system of strict administrative controls towards a more market-oriented, supervisory model designed to enhance investor confidence, reduce operational friction, and attract foreign currency into the formal economy.

For foreign investors, exporters, and businesses operating in Ethiopia, understanding the nuances of this directive is not just a matter of compliance—it is a strategic imperative. This update from Makkobilli Law Firm provides a comprehensive review and expert analysis of the key changes and their practical implications for your business.

1. Executive Summary: A Paradigm Shift in Forex Management

Directive FXD/04/2026 is not an incremental adjustment. It fundamentally alters the landscape for businesses engaging in cross-border transactions by:

a. Empowering Exporters and Service Providers with unprecedented control over their foreign currency earnings.

b. Decentralizing Authority from the NBE to commercial banks, drastically accelerating key approvals for investment and finance.

c. Introducing Modern Financial Instruments to mitigate foreign exchange risk.

d. Reducing Bureaucracy for a wide range of personal and corporate forex transactions.

Below, we analyze the most critical amendments and what they may mean for your operations.

2. Analysis of Key Changes in Directive No. FXD/04/2026

2.1. For Exporters & Service Providers: 100% Forex Retention Indefinitely

The Change (Article 3.2): The directive amends Article 6.2 of the prior directive, stating: ‘Any service exporter is entitled to hold 100 percent of their export proceeds in an FX retention account for indefinite periods’. This abolishes the previous mandatory conversion requirements and time limits.

Strategic Implication: This is a game-changer. Businesses earning forex, including consultants, tech companies, and other service exporters, are no longer forced to convert their earnings into Birr. This provides complete control over forex holdings, allowing for strategic cash flow management, a natural hedge against currency depreciation, and simplified payment for foreign-denominated expenses (e.g., software, international counsel, raw materials) without seeking forex allocation from a bank.

2.2. For Foreign Investors: Streamlined Profit Repatriation and Account Opening

The Change (Article 3.10 & 3.4): Commercial banks are now directly authorized to approve and remit profits and dividends for registered foreign investments. Furthermore, Foreign Direct Investment (FDI) companies can now open foreign currency accounts directly at a commercial bank with their investment license and TIN, eliminating the need for a prior NBE approval letter.

Strategic Implication: This dramatically reduces delays and administrative hurdles, addressing a long-standing pain point for foreign investors. The ability to repatriate profits efficiently and predictably through commercial banks significantly enhances Ethiopia's attractiveness as an FDI destination. 

2.3. For Corporate Finance: Decentralized Loan Approvals & Forward Contracts

The Change (Article 3.11 & 3.1): Approval for external loans and suppliers' credits is now delegated to commercial banks. Critically, the directive also introduces the legal basis for forward foreign exchange contracts, allowing parties to lock in an exchange rate for future transactions.

Strategic Implication: Decentralized loan approvals will accelerate financing for projects. The introduction of forward contracts is a sophisticated development that allows businesses to mitigate exchange rate risk. 

2.4. For Individuals and Operations: Easing of Restrictions

The Change: The directive introduces several relaxations:

     - The USD 10,000 customs declaration requirement upon entry is cancelled (Article 3.13).

     - Banks can issue internationally recognized payment cards (e.g., Visa/Mastercard) and load them with forex without requiring proof of travel (Article 3.3).

     - The minimum deposit to open a forex account is removed (Article 3.6).

     - Advance payments for overseas medical and education services (up to USD 20,000) are simplified (Article 3.15).

Strategic Implication: These changes improve the ease of doing business for expatriate staff, simplify personal financial management for employees, and reduce petty administrative tasks, allowing businesses to focus on core activities.

Conclusion: Seizing the Opportunity

Directive FXD/04/2026 is a clear and positive signal from the National Bank of Ethiopia. It demonstrates a commitment to creating a more stable, predictable, and efficient foreign exchange market.

For businesses, this is a moment to re-evaluate and optimize financial strategies. The newfound flexibility in holding forex, the ability to hedge against risk, and the accelerated approval timelines for investment and financing unlock opportunities for growth and efficiency. Navigating this new landscape effectively requires expert legal and financial guidance to ensure full compliance while maximizing strategic advantage.

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Disclaimer:

This blog post is provided by Makkobilli Law Firm LLP for general informational purposes only and does not constitute legal advice. The information contained herein is not intended to create, and receipt of it does not constitute, an attorney-client relationship. You should not act or refrain from acting based on this information without seeking professional legal counsel specific to your situation.

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