In other to strengthen the efficiency of Nigeria’s foreign exchange market, the Central Bank of Nigeria has ordered Banks and every other key player in the foreign exchange market to submit compliance reports regarding the FX Code by December 31, 2024.
The FX Code, commissioned by CBN and effective from October 14, 2024, provides principles that regulate market participants’ conduct to ensure ethical and professional standards in Nigeria’s Foreign Exchange market.
According to the statement, the foreign exchange code reads thus : “The FX Code is issued pursuant to CBN Act 2007 and BOFIA Act 2020 which empowers the Central Bank of Nigeria to issue directions for the standards to be adhered to by an institution in the conduct of foreign exchange business in Nigeria"
“Market participants will be required to conduct a self-assessment and submit to the CBN a report on the institution’s level of compliance with the FX Code by December 31, 2024.
“All market participants will thereafter be required to submit to the CBN a detailed compliance implementation plan that is approved by its board by December 31, 2024. The FX Code should be fully implemented, and each market participant be in full compliance by December 31, 2024.”
Central Bank explained that, the FX code is applicable to all market participants such as banks recognized by them and other financial institutions.
“The FX Code applies to market participants. These are banks licensed by the Central Bank of Nigeria under the CBN Act 2007 and Bank and Other Financial Institutions Act 2020 and engage in the wholesale foreign exchange business in Nigeria as part of their licensed business” the statement read.
The apex bank warned that failure to comply with these requirements would attract sanctions, including monetary penalties, under the CBN Act of 2007 and the Bank and Other Financial Institutions Act of 2020.
This policy introduces new governance structures and operational frameworks for institutions involved in foreign exchange activities.
“Market participants should strive for the highest professional standards,” the CBN clearly highlhted.
From December 31, 2024, market participants are also required to submit quarterly reports to the Financial Markets Department of the CBN on their adherence to the FX Code to ensure compliance to all directives.
This quarterly reporting will be a continuous monitoring mechanism to ensure the FX market operates transparently and efficiently.
It stated that: "Market participants will be required to submit a quarterly report to the Financial Markets Department, on the level of compliance to the FX Code within 14 days after the end of every calendar quarter, with the first report due by December 31, 2024.”
“CBN may take appropriate enforcement and other administrative action including monetary penalties as provided for under the CBN Act 2007 and BOFIA Act 2020 against any market participant for failure to comply with the FX Code.”
This new policy is also part of CBN’s strategy to promote a robust, fair, and sailing FX market that reflects market information and supports Nigeria’s flexible exchange rate regime.
The FX Code is modelled after the globally acceptable FX Global Code and aims to integrate best practices in Nigeria’s foreign exchange market with transparency and integrity.
Through this initiative , the CBN hopes to create a more transparent and resilient market infrastructure where participants can confidently engage in FX transactions at competitive prices.
