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The Central Bank of Nigeria (CBN) has directed Deposit Money Banks (DMBs) and all other participants in the foreign exchange market to submit compliance reports on the recently introduced FX Code by December 31, 2024. This initiative is part of the CBN’s ongoing efforts to enhance transparency, integrity, and efficiency within Nigeria’s foreign exchange market, ensuring alignment with international best practices.
The FX Code, which came into effect on October 14, 2024, sets out a comprehensive framework of principles governing the conduct of market participants. It aims to promote ethical behavior and professionalism across Nigeria’s foreign exchange sector.
According to the FX Code document, “The FX Code is issued pursuant to the CBN Act of 2007 and the Bank and Other Financial Institutions Act (BOFIA) of 2020, which empower the Central Bank of Nigeria to prescribe standards that must be adhered to by institutions engaged in foreign exchange business in Nigeria.”
The CBN mandates all market participants to conduct a self-assessment of their adherence to the FX Code and submit a report by the December 31 deadline. Additionally, each participant must present a detailed compliance implementation plan, approved by its board, to the CBN by the same date. Full compliance with the FX Code is expected by the end of 2024.
The directive applies to banks and financial institutions licensed by the CBN under the CBN Act of 2007 and BOFIA 2020, who are engaged in wholesale foreign exchange business in Nigeria. The CBN has emphasized that any failure to comply with the FX Code could result in sanctions, including monetary penalties, under the relevant provisions of the CBN and BOFIA Acts.
The FX Code also introduces enhanced governance and operational frameworks for participants in the FX market. These institutions are required to establish sound governance structures, adhere to ethical standards, and implement robust risk management practices.
“Market participants should strive for the highest professional standards,” the CBN reiterated in its guidance, underscoring the importance of professionalism and accountability.
Beginning December 31, 2024, market participants will also be required to submit quarterly compliance reports to the Financial Markets Department of the CBN. These reports will serve as an ongoing monitoring mechanism to ensure consistent adherence to the FX Code. The first quarterly report is due by December 31, 2024, and subsequent reports must be submitted within 14 days following the end of each calendar quarter.
To enforce compliance, the CBN has put in place strict enforcement mechanisms, including monetary penalties for non-compliance. “The CBN may take appropriate enforcement and other administrative actions, including monetary penalties, as provided for under the CBN Act of 2007 and BOFIA 2020, against any market participant that fails to comply with the FX Code,” the central bank warned.
This directive is part of the CBN’s broader strategy to promote a transparent, fair, and efficient FX market that accurately reflects market dynamics and supports Nigeria’s flexible exchange rate regime. The FX Code, modeled after the internationally recognized FX Global Code, aims to incorporate global best practices into Nigeria’s foreign exchange market, creating a more resilient and transparent infrastructure where participants can confidently engage in FX transactions at competitive rates.
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