Ethiopia Unlocks Investment Gateway with Streamlined Dividend Repatriation Rules

Ethiopia’s central bank has announced sweeping reforms to its foreign exchange regulations, removing a critical barrier that has long constrained foreign direct investment in Africa’s second-most populous nation. The National Bank of Ethiopia (NBE) confirmed on Wednesday that investors can now repatriate dividends abroad without prior approval, marking the latest milestone in the government’s ambitious economic transformation agenda.

The breakthrough announcement comes eighteen months after Ethiopia floated its currency in July 2024, a bold move that saw the birr plunge by 30 percent against the US dollar in a single day as the central bank abandoned decades of tight currency controls. That dramatic shift fulfilled a key condition to secure financial support from the International Monetary Fund and unlock progress on the country’s protracted debt restructuring process.

Build the future you deserve. Get started with our top-tier Online courses: ACCA, HESI A2, ATI TEAS 7, HESI EXIT, NCLEX-RN, NCLEX-PN, and Financial Literacy. Let Serrari Ed guide your path to success. Enroll today.

Historic Forex Liberalization

“Investors who want to repatriate their dividends are entitled to remit net profit/dividend abroad on condition that the necessary documents in the directive are submitted,” the National Bank of Ethiopia stated in its latest guidance. The directive specifies that the amount remitted must not exceed the total profit and dividend earned during the period, and banks are required to report such transactions on a monthly basis.

Speaking at a recent parliamentary session, NBE Governor Eyob Tekalegn emphasized that the repatriation challenge – historically linked to foreign exchange shortages and restrictive rules – has been effectively resolved following wide-ranging economic reforms. “Foreign investors have often expressed concerns about Ethiopia’s foreign currency policy,” the governor noted. “Despite the country’s significant investment potential, the existing environment was not conducive to their operational needs.”

The governor revealed that during a recent engagement with the American Chamber of Commerce in Ethiopia, he asked whether any investor was still facing repatriation difficulties, and none reported current obstacles. He emphasized that both the NBE and commercial banks no longer view repatriation as a barrier, highlighting that “the new foreign exchange regime has strengthened confidence in the system.”

The reforms come as part of Ethiopia’s broader economic transformation agenda, supported by the International Monetary Fund, to open up the previously tightly-controlled economy to private sector investment. The measures represent a comprehensive overhaul of Ethiopia’s foreign exchange system, introducing a competitive and market-based exchange rate mechanism that allows banks and foreign exchange dealers to freely buy and sell foreign currencies at negotiated market rates.

Addressing the Backlog

According to the International Monetary Fund, the NBE has provided banks with guidance on settling dividends that accumulated prior to the foreign exchange reform, to be resolved over an 18-month period starting at the end of September 2024. NBE officials report that most of these historical issues have already been addressed, clearing the path for normalized capital flows going forward.

The comprehensive Foreign Exchange Directive FXD/01/2024 establishes clear and streamlined procedures for the repatriation of capital and earnings, explicitly recognizing the rights of foreign investors to transfer funds abroad in convertible currency. Under this directive, foreign investors can repatriate profits and dividends earned from their investments, proceeds from the sale or liquidation of an enterprise, funds obtained from the transfer of shares or ownership in a business, and reclaim their initial investment if unable to commence operations.

The directive explicitly states that the NBE shall not deny any request for repatriation of profits and dividends, provided the documentary requirements are met. This represents a fundamental shift from the previous system, where foreign exchange allocation was based on a priority listing system that often left investors waiting months or years to access foreign currency for legitimate repatriation purposes.

Impact on Major Investors

The move is likely to have significant implications for major foreign investors operating in Ethiopia, particularly in the telecommunications sector. Kenya’s Safaricom, South Africa’s Vodacom, and Britain’s Vodafone, which collectively own stakes in telecommunications company Safaricom Ethiopia, stand to benefit substantially from the streamlined repatriation procedures.

Safaricom Ethiopia represents one of the largest foreign investments in the country’s telecommunications sector following the government’s decision to end Ethio Telecom’s decades-long monopoly. In March 2023, the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, issued a $1 billion guarantee to Safaricom Plc (Kenya), Vodacom International Holdings Pty Ltd (South Africa), Vodafone International Operations Limited (United Kingdom), and British International Investment Plc to cover their equity investment in Safaricom Ethiopia.

The project has been rolling out 2G, 3G, 4G networks across Ethiopia with 5G in selected areas, representing a transformative investment in the country’s digital infrastructure. The development impact is expected to be significant, with projections suggesting the investment could increase GDP per capita by up to 7 percent by 2028 while helping to create more than two million direct and indirect jobs.

Safaricom’s parent company structure underwent significant changes in December 2025, when Vodacom agreed to acquire an additional 20 percent stake in Safaricom from the Government of Kenya and Vodafone, increasing Vodacom’s ownership to 55 percent. This transaction, valued at $2.1 billion, strengthens Vodacom’s control over one of Africa’s most successful telecommunications and financial services businesses, which includes the majority stake in Safaricom Ethiopia.

The Currency Float Catalyst

The foreign exchange reforms announced this week build on the foundational changes initiated in July 2024, when Ethiopia made the dramatic decision to float the birr currency. The move fulfilled a critical condition for securing IMF support worth $3.4 billion over four years under the Extended Credit Facility, with an initial disbursement of $1 billion.

Hours after floating the currency, Ethiopia also secured World Bank approval for $1.5 billion in financing for its first-ever budget support lending to the country. The larger package of international support eventually totaled $16 billion, including debt restructuring, grants, and loans, providing Ethiopia with crucial resources to stabilize its economy and manage its substantial external debt burden.

The Horn of Africa nation had been struggling with soaring inflation and chronic foreign currency shortages for years. In December 2023, Ethiopia became the third economy on the continent in recent years to default on its government debt, missing a $33 million interest payment on its only Eurobond. The country had requested a debt restructuring under the Group of 20’s Common Framework process in early 2021, but progress was significantly delayed by the civil war in the northern Tigray region.

Following the currency float, the birr’s value initially plummeted by 30 percent to 74.73 per dollar from the previous controlled rate of 57.48 birr. The depreciation continued in subsequent days, with the currency eventually losing more than 100 percent of its value within ten days as central bank controls were fully lifted and market forces took over.

Prime Minister Abiy Ahmed defended the currency float amid inflation concerns, emphasizing that the move was necessary to unify the previously fragmented foreign exchange market. “There were two markets. One is 100 and the other is 50. So when the gap between the two became wide, it brought many dangers. So what we said [was that the two] should be unified,” he explained in a televised briefing.

One decision can change your entire career. Take that step with our Online courses in ACCA, HESI A2, ATI TEAS 7, HESI EXIT, NCLEX-RN, NCLEX-PN, and Financial Literacy. Join Serrari Ed and start building your brighter future today.

Comprehensive Exchange Rate Overhaul

The foreign exchange directive introduced a two-tier structure for spot foreign exchange markets. The first tier consists of the wholesale or inter-bank forex market, where authorized banks engage in foreign currency transactions with one another. The second tier is the retail forex market, where authorized banks or foreign exchange dealers conduct transactions with their customers, with banks permitted to negotiate buying and selling rates freely based on market conditions.

One of the most notable changes in the directive was the elimination of the requirement for commercial banks and exporters to surrender export earnings to the NBE. This fundamental shift aimed to give exporters greater flexibility in managing their finances and support the growth of an interbank foreign exchange market. Under the new system, exporters are entitled to hold foreign exchange earnings in retention accounts, though initially they were required to sell retained earnings to their transacting bank within 30 calendar days.

Further amendments introduced in February 2026 removed even these remaining restrictions. The latest directive revisions allow service exporters to retain 100 percent of their export proceeds in forex retention accounts indefinitely, completely lifting restrictions on access and use of foreign exchange. The amendments also eliminated requirements for visa and travel documents to load foreign currency onto internationally recognized debit cards, and removed minimum requirements for opening forex accounts, leaving such decisions to banks’ discretion.

Banks are now authorized to approve investor profits or dividends from recognized and registered foreign investments for remittance abroad without seeking prior central bank approval. This delegation of authority to commercial banks represents a fundamental transformation in Ethiopia’s forex regime, shifting from a centralized, permission-based system to a market-oriented framework based on documentation and compliance rather than discretionary approvals.

Capital Market Development

The foreign exchange reforms coincide with Ethiopia’s ambitious push to develop a modern capital market infrastructure. In January 2025, the country launched the Ethiopian Securities Exchange (ESX), marking the first time in more than half a century that Ethiopia has had a functioning stock market.

Prime Minister Abiy Ahmed officially opened the exchange on January 10, 2025, ringing the bell to commence trading. Wegagen Bank became the first company listed on the ESX, with exchange officials targeting approximately 90 listings within the first decade of operation. By June 2025, Gadaa Bank had also listed, followed shortly after by state-owned telecom giant Ethio Telecom, which conducted a high-profile initial public offering selling a 10 percent stake that attracted 47,000 investors.

The ESX launch represents more than a financial reform – it marks a strategic leap toward a more inclusive, modern, and robust economy. The exchange is designed to provide Ethiopian firms with an alternative to retained earnings and bank loans, offering transparent price discovery and a broader pool of capital for banks, insurers, industrial companies, and eventually high-growth small and medium enterprises.

Exchange officials have noted that the interbank trading platform, which is part of the ESX infrastructure, has already improved liquidity management across Ethiopia’s banking sector. Since its pilot launch in late October 2024, the platform has facilitated trades exceeding 135 billion birr (approximately $1.1 billion), with all Ethiopian banks signed on to the system.

Documentary Requirements and Compliance

For foreign investors seeking to repatriate dividends, the directive establishes specific documentary requirements that must be submitted to commercial banks. According to legal guidance on the new regulations, investors must provide authenticated minutes of the Board of Directors or equivalent body distributing the profit or declaring dividends, duly signed by the chairman or secretary of the board.

Additional requirements include a copy of closing financial documents duly audited by an independent third-party auditing institution permitted to operate in Ethiopia, capital registration letter issued by the National Bank or Investment Authority, tax receipts evidencing payment of all taxes due to the government (including business and dividend tax receipts), memorandum and articles of association, valid business license, application letter, and any other document of evidence that the NBE may require.

Branch offices of foreign companies operating in Ethiopia seeking to repatriate foreign exchange must fulfill the same requirements, except for the authenticated minutes of board decisions. The directive’s explicit provision that the NBE shall not deny requests when proper documentation is provided represents a fundamental departure from the previous discretionary approval system that often resulted in lengthy delays and uncertainty for investors.

For investors seeking to repatriate proceeds from the sale or liquidation of enterprises, or from the transfer of shares, additional documentation requirements apply. These include updated foreign capital registration certificates, bank credit advice confirming receipt of corresponding value in foreign currency if sold to a foreigner, sales agreements authenticated by proper authorities, and tax clearance from pertinent government organizations.

Expert Analysis and Market Response

Trade and investment analysts have welcomed the reforms as a significant positive development for Ethiopia’s investment climate. The changes address what has long been identified as one of the primary obstacles to foreign direct investment in the country. For decades, foreign investors cited the inability to reliably repatriate earnings as a major deterrent to committing capital to Ethiopian ventures, despite the country’s strategic location, large population, and economic potential.

“If the Governor’s assessment is correct, easing foreign exchange repayment restrictions could lead to a significant increase in FDI,” noted market analysts quoted in local financial media. The reforms introduced eighteen months ago are already credited with boosting the nation’s foreign currency revenue, particularly from exports, as the market-based exchange rate has improved export competitiveness.

However, some observers caution that challenges remain. The governor acknowledged that there are still issues related to repatriation under the “cash against documents” export scheme, which the government is addressing through the Ministry of Foreign Affairs. He stressed that most of the unrepatriated foreign currency issues stem from internal problems within exporting firms themselves rather than from regulatory constraints or foreign exchange availability.

The transformation of Ethiopia’s foreign exchange regime comes amid broader economic liberalization efforts. In mid-2025, Ethiopia opened its banking sector to foreign investors for the first time in decades, a parallel reform seen as pivotal to attracting capital inflows. International lenders can now apply for licenses, a move expected to reshape the country’s financial landscape and bring additional expertise and capital to the sector.

Regional and International Context

Ethiopia’s foreign exchange reforms represent part of a broader trend across Africa, where several countries have moved toward more market-based currency regimes in recent years. Nigeria, Egypt, and Zambia have all implemented significant currency reforms, though with varying degrees of success and often accompanied by short-term economic pain as exchange rates adjust to market realities.

The International Monetary Fund has been a strong advocate for market-based exchange rate systems in developing economies, arguing that such systems improve resource allocation, reduce distortions, and provide clearer price signals for economic decision-making. However, the transition from controlled to market-based systems often proves politically and economically challenging, particularly in countries with limited foreign exchange reserves and significant external debt obligations.

For Ethiopia, the timing of the reforms reflects both necessity and opportunity. The country’s external debt burden, chronic trade deficits, and limited foreign exchange reserves had created an increasingly unsustainable situation under the previous controlled regime. The emergence of a thriving parallel market where the birr traded at more than twice its official rate demonstrated the extent of distortions in the economy and the urgency of reform.

At the same time, the government’s successful negotiation of the peace deal ending the Tigray conflict in November 2022 created political space for bold economic reforms. The resumption of international engagement and the potential for resumed development assistance provided additional momentum for the liberalization agenda.

Looking Forward

The success of Ethiopia’s foreign exchange reforms will ultimately depend on several factors beyond the regulatory framework itself. The country must continue to build foreign exchange reserves through export growth and capital inflows, maintain macroeconomic stability while managing inflation pressures from currency depreciation, develop the institutional capacity of banks and regulatory agencies to effectively implement the new system, and sustain political commitment to market-oriented reforms even in the face of short-term economic dislocations.

For foreign investors, the reforms create a fundamentally different operating environment. The ability to repatriate dividends without prior approval, combined with market-based exchange rates and improved transparency, addresses several of the primary concerns that have historically deterred investment in Ethiopia. However, investors will be closely watching the actual implementation of the new rules and the continued stability of the foreign exchange market.

The Ethiopian government has signaled its commitment to continuing economic reforms, with further liberalization expected in other sectors. State-owned enterprise privatization, telecommunications sector opening beyond the Safaricom Ethiopia license, and continued development of capital market infrastructure all represent areas where additional reforms are anticipated in coming years.

For now, the foreign exchange reforms mark a critical milestone in Ethiopia’s economic transformation. Whether this represents a sustainable turning point or faces implementation challenges ahead remains to be seen, but the direction of travel is clear: toward a more open, market-oriented economy integrated with global financial markets.

The reforms also carry broader symbolic significance for Ethiopia and the wider African continent. As Africa’s second-most populous nation with a strategic location in the Horn of Africa and a history as one of the continent’s few nations never colonized, Ethiopia’s economic trajectory carries weight beyond its borders. Success in implementing these reforms could provide a model for other African nations contemplating similar transitions, while failure could reinforce skepticism about the viability of rapid liberalization in developing economies.

For the millions of Ethiopians whose livelihoods depend on a well-functioning economy, the foreign exchange reforms represent both promise and uncertainty. The potential for increased foreign investment, improved export competitiveness, and greater integration with global markets offers hope for accelerated economic development and job creation. At the same time, the inflationary pressures from currency depreciation and the adjustment costs of economic restructuring pose real challenges for households and businesses.

As Ethiopia enters this new phase of its economic evolution, the National Bank of Ethiopia’s announcement on dividend repatriation represents not just a technical regulatory change, but a signal of the country’s determination to complete its transition to a market-based economy. The real test will come in the months and years ahead as the new system faces the inevitable challenges of implementation, market volatility, and political pressures.

For now, foreign investors in Ethiopia – particularly those like Safaricom, Vodacom, and Vodafone with substantial commitments in the telecommunications sector – can view the reforms as a significant positive development that addresses a longstanding constraint on their operations. The ability to plan for reliable dividend repatriation, combined with the broader improvements in foreign exchange market functioning, should enhance the attractiveness of Ethiopian investment opportunities for international capital.

Whether these reforms will be sufficient to attract the substantial foreign direct investment that Ethiopia needs to finance its development ambitions remains an open question. But by removing one of the primary obstacles that has deterred such investment for decades, the National Bank of Ethiopia has taken a crucial step toward creating the conditions for sustainable economic growth driven by private sector dynamism rather than state control.

Ready to take your career to the next level? Join our Online courses: ACCA, HESI A2, ATI TEAS 7 , HESI EXIT  , NCLEX – RN and NCLEX – PN, Financial Literacy!🌟 Dive into a world of opportunities and empower yourself for success. Explore more at Serrari Ed and start your exciting journey today! ✨

Track GDP, Inflation and Central Bank rates for top African markets with Serrari’s comparator tool.

See today’s Treasury bonds and Money market funds movement across financial service providers in Kenya, using Serrari’s comparator tools.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

12th February, 2026