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The Central Bank of Nigeria (CBN) has issued a directive requiring participants in the foreign exchange (FX) market to submit compliance reports on adherence to the Nigeria FX Code by January 31, 2025.
This directive is part of the apex bank’s efforts to promote ethical practices, governance, and transparency in the Nigerian FX market.
The Nigeria FX Code, which came into effect on December 2, 2024, outlines principles of good practice to ensure a robust, fair, and transparent foreign exchange market. The code applies to authorized dealers licensed under the CBN Act of 2007, the Banks and Other Financial Institutions Act (BOFIA) of 2020, and other entities engaged in wholesale FX transactions in Nigeria.
To ensure compliance, the CBN has mandated market participants to conduct a self-assessment and submit detailed reports on their adherence to the FX Code. The institution’s board of directors must endorse these reports and include an implementation plan for addressing any gaps identified. Additionally, extracts from board meeting minutes must accompany the submission to demonstrate oversight and accountability.
The Nigeria FX Code document states:
“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 January 31, 2025. All Market Participants will thereafter be required to submit to CBN a detailed compliance implementation plan that is approved and signed by its Board along with the extracts of the Board meeting.”
After the initial deadline, market participants are required to file quarterly compliance reports with the CBN’s Financial Markets Department. These reports must be submitted within 14 days after the end of each calendar quarter, with the first set due by March 31, 2025.
To enforce adherence, the CBN has outlined penalties for non-compliance, as stipulated under the CBN Act of 2007 and the BOFIA Act of 2020. These enforcement measures aim to uphold integrity and transparency in the foreign exchange market.
The Nigeria FX Code is modeled after the Global FX Code, incorporating international best practices while addressing the unique dynamics of Nigeria’s FX market. It provides comprehensive guidelines covering ethics, governance, execution, information sharing, risk management, and settlement processes.
The CBN expects FX market participants to uphold high ethical standards, establish strong governance structures, handle transactions fairly, protect confidential information, and implement effective risk management frameworks.
This initiative underscores the CBN’s commitment to fostering a transparent and well-regulated foreign exchange market, reinforcing confidence among stakeholders and promoting economic stability.
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