The Central Bank of Nigeria (CBN) has issued a directive requiring market participants in the wholesale foreign exchange (FX) market to submit a self-assessment report on compliance with the newly introduced Nigerian FX code by 31 January.
This directive, aimed at strengthening the integrity and functionality of Nigeria’s FX market, was outlined in the bank’s ‘Nigeria FX Code,’ published on Monday.
The FX code, which became effective on 2 December 2024, is issued under the CBN Act 2007 and the Bank and Other Financial Institutions Act (BOFIA) 2020.
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According to the publication, it aims to establish global best practices in FX market operations, ensuring a fair, liquid, and transparent market for diverse participants, while promoting a flexible exchange rate regime.
Market participants, including authorised dealers licensed by the CBN and other institutions engaged in wholesale FX transactions, must submit a compliance implementation plan by the same deadline.
This plan, approved by the board of each institution, must include extracts from board meetings to affirm oversight and commitment to the Code’s principles.
“The FX code is issued as an FX market guideline pursuant to CBN Act 2007 and BOFIA Act 2020 which empowers the CBN to issue directions with respect to 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 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,” it said.
The CBN on Wednesday announced its approval of the Nigeria FX Code, with the formal launch set to take place at its headquarters in Abuja on 28 January.
The FX Code is built on six core principles designed to enhance ethical conduct, governance, execution, information sharing, risk management, and settlement processes.
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These principles seek to uphold professionalism, ensure sound governance frameworks, encourage transparency in transactions, and mitigate risks associated with FX trading.
As part of the compliance framework, institutions are required to submit quarterly reports to the CBN’s Financial Markets Department, with the first report due by 31 March.
The reports, due 14 days after the end of each calendar quarter, will detail the level of adherence to the code’s provisions.
The CBN also outlined enforcement mechanisms to ensure compliance. Non-adherence to the FX code could attract monetary penalties and other administrative sanctions, in line with the powers vested in the apex bank by the CBN Act and BOFIA Act.
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