LAGOS, Nigeria (VOICE OF NAIJA)-The Central Bank of Nigeria (CBN) has instructed 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 directive is part of the CBN’s ongoing efforts to enhance the integrity and efficiency of Nigeria’s foreign exchange market, ensuring it meets global standards.
The FX Code, introduced by the CBN and effective from October 14, 2024, establishes a set of principles governing the conduct of market participants, promoting ethical and professional behavior 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.”
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The Central Bank warned that non-compliance with this requirement may result in sanctions, including fines, as stipulated under the CBN Act of 2007 and the Banks and Other Financial Institutions Act of 2020.
The FX Code establishes new governance structures and operational frameworks for entities engaged in foreign exchange activities, including banks and financial institutions.
These institutions are expected to maintain robust governance frameworks, adhere to ethical standards, and manage risks effectively.
“Market participants should strive for the highest professional standards,” the CBN emphasized.
Effective December 31, 2024, market participants will also be required to submit quarterly reports to the CBN’s Financial Markets Department, detailing their compliance with the FX Code to ensure ongoing adherence.
This quarterly reporting will serve as a continuous monitoring system to ensure transparency and efficiency in the foreign exchange market.
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 initiative is part of the CBN’s larger strategy to foster a strong, fair, and liquid foreign exchange market that accurately reflects market dynamics and supports Nigeria’s flexible exchange rate system.
The FX Code is based on the internationally recognized FX Global Code and seeks to incorporate best practices into Nigeria’s foreign exchange market.
By aligning with global standards, the CBN aims to build a more transparent and resilient market infrastructure, enabling participants to engage in FX transactions with confidence and at competitive rates.