The Central Bank of Nigeria (CBN) has directed Deposit Money Banks and all other participants in the foreign exchange market to submit compliance reports on the FX Code by December 31, 2024.
This mandate is part of CBN’s efforts to enhance the integrity and efficiency of Nigeria’s foreign exchange market, ensuring that it meets global standards.
The FX Code, which came into effect on October 14, 2024, outlines a set of principles that regulate the conduct of market participants, promoting ethical and professional behavior in Nigeria’s FX market.
According to the FX Code document, “The FX Code is issued pursuant to the CBN Act 2007 and the Bank and Other Financial Institutions Act (BOFIA) 2020, which empower the Central Bank of Nigeria to set standards for institutions engaged in foreign exchange business in Nigeria.”
Market participants are required to conduct a self-assessment and submit a compliance report to the CBN by December 31, 2024. In addition, they must provide a detailed compliance implementation plan, approved by their board, by the same deadline. The full implementation and compliance with the FX Code must also be achieved by this date.
The CBN clarified that the FX Code applies to all market participants, including banks licensed by the CBN under the CBN Act 2007 and BOFIA 2020, which engage in wholesale foreign exchange business.
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Failure to comply with the FX Code could result in sanctions, including monetary penalties, as provided under the CBN Act 2007 and BOFIA 2020.
The FX Code introduces new governance structures and operational frameworks for institutions involved in FX activities, requiring them to maintain sound governance, uphold ethical standards, and manage risks effectively.
From December 31, 2024, market participants must also submit quarterly reports to the CBN’s Financial Markets Department, detailing their compliance with the FX Code. These reports are to be submitted within 14 days after the end of each calendar quarter, with the first report due by the end of 2024.
The CBN has put enforcement mechanisms in place, including sanctions, to address cases of non-compliance. The central bank may take administrative actions or impose monetary penalties as outlined in the CBN Act 2007 and BOFIA 2020.
This initiative is part of the CBN’s broader strategy to promote a transparent, fair, and efficient FX market in support of Nigeria’s flexible exchange rate regime. Modeled after the globally recognized FX Global Code, the CBN’s FX Code aims to integrate best practices in Nigeria’s foreign exchange market, fostering greater transparency and confidence in FX transactions.
