The Central Bank of Nigeria has mandated Deposit Money Banks and all other participants in the foreign exchange market to submit compliance reports regarding the FX Code by December 31, 2024.
This directive comes as part of CBN’s efforts to strengthen the integrity and efficiency of Nigeria’s foreign exchange market, ensuring it aligns with global standards.
The FX Code, issued by CBN and effective from October 14, 2024, outlines a comprehensive set of principles that regulate market participants’ conduct to ensure ethical and professional behaviour in Nigeria’s FX market.
The FX Code document read, “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.”
The apex bank clarified who the market participants are, as it said, “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 apex bank added that failure to comply with this requirement could attract sanctions, including monetary penalties, under the CBN Act of 2007 and the Bank and Other Financial Institutions Act of 2020.
The FX Code introduces new governance structures and operational frameworks for institutions involved in FX activities, such as banks and financial institutions.
These participants are required to have a sound governance framework, uphold ethical standards, and manage risks effectively.
“Market participants should strive for the highest professional standards,” the CBN emphasized.
Starting 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 ongoing compliance.
This quarterly reporting will be a continuous monitoring mechanism to ensure the FX market operates transparently and efficiently.
It added, “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.”
Also, the CBN has put in place enforcement mechanisms, including sanctions, to address cases of non-compliance.
The bank said, “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 move is part of the CBN’s broader strategy to promote a robust, fair, and liquid FX market that reflects market information and supports Nigeria’s flexible exchange rate regime.
The FX Code is modelled after the globally accepted FX Global Code and aims to integrate best practices in Nigeria’s foreign exchange market.
By aligning with international standards, the CBN hopes to create a more transparent and resilient market infrastructure where participants can confidently engage in FX transactions at competitive prices.