Sopuruchi Onwuka

At this time of prevailing foreign exchange crunch and resilient inflationary trends, Nigeria’s removal from the Financial Action Task Force (FATF) “grey list” could become a crucial catalyst for stabilizing the economy, lowering inflation, and reopening access to long-term financing for infrastructure and private investment.

But the positive signals emerging from the FATF hold strong prospect for recovery but offer no immediate relief for the economy which continues to contend with inflationary pull, acute foreign exchange squeeze and low investment inflow.

The FATF, a Paris-based global watchdog that combats money laundering and terrorist financing, announced on Friday that it has taken Nigeria, South Africa, Mozambique, and Burkina Faso off its list of countries under increased monitoring. The decision followed “successful on-site visits” that confirmed each country had made “positive progress” in closing gaps in their anti–money laundering frameworks.

When Nigeria was grey-listed in February 2023, it sent a signal of risk to international financial markets. Foreign banks began tightening compliance checks, international transfers slowed, and correspondent banking relationships which are vital for cross-border trade came under strain.

The disruptions accompanying the grey listing deepened exiting liquidity squeeze triggered by withdrawal of fuel subsidy and floating of the Naira on the foreign exchange market. The signal of international indignance at the country’s financial systems significantly worsened inflation, which has remained stubbornly above 25 percent.

With the FATF endorsement, expectations are that Nigeria’s financial system is set to regain credibility in the eyes of global investors and lenders, easing the prevailing pressure on the economy and potentially restoring smoother flows of capital.

Oracle Intelligence reports that when a country is grey-listed, international investors and correspondent banks often avoid dealing directly with its financial institutions to minimize compliance risk. That limits dollar liquidity, pushing the local currency down and driving up prices.

Nigeria’s removal from the list changes the scenario, with global banks likely to reopen channels for foreign exchange and trade finance, import costs likely to stabilize and ease inflationary pressure on food, fuel, and manufactured goods.

“We expect improved FX liquidity to help the Naira find a more stable equilibrium,” our source said, explaining that falling cost of foreign exchange holds strong potential to cool inflation in the medium to long term.

“His projection of positive impact on the local economy in the medium to long term suggests that it would take time for the full benefits of the delisting to filter down the domestic economy, inferring strongly that the value could also be lost of the prevailing fiscal disciple is not sustained.”

The delisting also has major implications for infrastructure and industrial financing as grey-listed countries face higher borrowing costs because international lenders attach compliance risk premiums to loans. For Nigeria, that has meant limited access to affordable credit for energy, transport, and manufacturing projects.

Now, with improved FATF status, Nigeria could see renewed appetite from development partners like the World Bank, African Development Bank (AfDB), International Finance Corporation (IFC) and private investors seeking entry into Africa’s largest economy. Domestic banks, freed from enhanced due diligence constraints, are also expected to benefit from easier access to offshore credit lines and partnerships.

Investment banker, Mr Hyacinth Okafor who discussed the development with our correspondent described the delisting as credibility upgrade which, according to him, could unlock concessional loans and commercial funding that were previously sidelined.

“It gives Nigeria a fighting chance to finance key projects without over-relying on short-term or high-interest debt.”

Still, officials caution that the FATF decision is not an endpoint.

Local analysts continue to caution that removing the designation of grey listing is not a finish line but a milestone, stressing that continued vigilance is required to sustain the country’s improved standing.

Nigerian Financial Intelligence Unit (NFIU) has however assured that the nation’s compliance reforms, including a 19-point action plan, are designed to strengthen long-term transparency, not just to secure delisting.

Maintaining that discipline will be essential to preserve investor trust and avoid slipping back into risk territory, the agency stated.

Oracle Intelligence reports that the real test now lies in converting that reputational gain into measurable economic outcomes in terms of stabilizing the Naira, easing inflation, and financing development projects at sustainable costs.

If the government continues to push structural reforms and ensure transparency in financial governance, Nigeria’s exit from the grey list could become one of the most economically consequential milestones of the Tinubu administration: a signal that global confidence in Africa’s largest economy is beginning to return.

While the FATF decision alone won’t fix Nigeria’s structural challenges, it restores confidence in the country’s financial governance and could unlock capital flows essential for rebuilding infrastructure, expanding production, and taming inflation.

It is in the foreground of this expectation that the signals of backslide into mindless external borrowing and irresponsible fiscal planning that creates funding gaps become very unsettling.

For sustainable economic recovery, the Tinubu administration must resist the pull to indulge in fiscal irresponsibility ahead of the 2027 general elections. The slow paltry recovery that we celebrate is very fragile; and the economy is still not far from the precipice.