How do you lock an exchange rate…

The quote is in dollars, payment lands in four months, and the buyer asks whether the price can be fixed at today's rate. That is not a question about the market. It is a question about who carries four months of movement.

An exchange rate is not a market question but a sharing question. Only three wordings work in a contract: a fixed rate, a band, or a split of whatever falls outside the band. Choosing one assigns the movement. Hedging turns uncertainty into a known cost, and the price of that is missing the move in your favour.

✓Fixed rate, with the hedging cost assigned to one side

Costs are known, quoting and amendments stay simple

✓Reference rate plus observation date plus band plus split

Each side carries the band, the excess is shared

!"At the exchange rate on the payment date" alone

No source, no fixing time, nothing to calculate in a dispute

×A verbal "we will revisit if the rate moves"

No reference, no formula; if talks fail someone absorbs it or defaults

China side: real exposure, not paperwork

For a domestic entity to buy a forward, the bank tests the real foreign-currency exposure, not whether a contract exists. Article 31 of the Implementing Rules for the Administration of Banks' Settlement and Sale of Foreign Exchange requires a genuine underlying exposure that may be settled or sold spot under the rules; Article 32 requires a declaration or confirmation letter stating the reality of the underlying flows, the purpose, and any unsettled exposure in the same direction.

The SAFE policy Q&A is blunter: the need behind a forward may be estimated and uncertain, and having trade documents cannot be treated as the sole or main test.

Two hard differences. Article 33: a forward settles in full at maturity, net settlement is not allowed. Article 34: an option may be closed out, settled in full or net-settled, but the flows on exercise may not exceed the real underlying. Article 38 limits clients to domestic institutions, with individually owned businesses treated the same.

Destination side: three markets, three clocks

Nigeria: importers register Form M when placing the order, valid 180 days for general goods. The customs rate equals the NFEM closing rate on the day Form M is opened and holds until clearance ends. Duty is priced the day Form M is opened, the goods are paid on the remittance date, and the two can be months apart.

Ghana: Article 16 of the Foreign Exchange Act (Act 723) requires central bank permission for outward payment. BoG notice BG/GOV/SEC/2025/27 took effect on 1 September 2025: importers must present an endorsed bureau receipt, an endorsed bank purchase or cash withdrawal voucher, a valid IDF, a commercial invoice and the contract (where applicable). The contract is on that list, so a vague one stops at the bank.

Kenya: exchange control was abolished in 1993 and there are no exchange restrictions. But section 4.1 of the Foreign Exchange Guidelines requires documents to be kept for any transaction above US$10000 equivalent; import payments under 4.2(a) need the IDF, transport documents, original invoice and customs entry. Remittances of US$500000 and above are usually discussed with the central bank first, an industry practice rather than a published rule.

Three ways to write it

Approach	Who carries what	Fits which order	Risk
Fixed rate	One side carries all, whoever quotes first	Small amount, short cycle, simple documents	A sharp depreciation leaves the seller performing at a loss; state who pays for the hedge
Band	Seller carries inside the band, repricing outside	Medium amount, three to six months	Five fields or it becomes an argument: reference, observation date, formula, caps, amendment
Split	The excess over the band is shared, often 50:50	Large, long, repeat business	Reconciliation is heavy; on small orders the admin costs more than it saves

All three run into the same question first: which rate, and on which day. The reference must be a source anyone can check, such as the RMB central parity published by CFETS or the NFEM closing rate published by the CBN; the observation date can only be one of signing, L/C opening or shipment.

Hedging is a cost, not free insurance

A forward consumes credit lines or margin, and the spread is real money; an option costs a premium, and without it there is no right. All of it ends up in the price, and saying so early is cheaper than explaining later.

There is another cost: once locked, a move in your favour is lost. The usual practice is to hedge part of the exposure only.

Four steps

Size the exposure

Lay out amounts and dates against the payment schedule, not the order total

Choose the wording

Fixed rate for small and short, band or split for large and long

Fix the five fields

Reference source, observation date, formula, caps, whether the L/C amount changes

Then hedge with the bank

Bring the contract, invoice and declaration; forwards settle in full only

Five traps

✓Assuming a contract and an invoice are enough for a forward
✓Assuming forwards can be net-settled; they settle in full
✓Nigeria: quoting at the remittance date, ignoring the Form M date
✓Ghana: no contract or IDF, documents bounced by the bank
✓Writing "at the day's rate" with no source and no fixing time

Closing

Other pinch points in the payment chain are covered in the article on five checkpoints against a buyer who walks away; to size the landed cost, use the site's import duty calculator (/en/duty-calculator).

This reflects the position verified on 5 November 2026. Foreign exchange requirements follow the Implementing Rules and current SAFE policy Q&A; payment requirements in Nigeria, Ghana and Kenya follow the central bank's current notices and the written confirmation of the account bank.