By Divine Ihechimerem
The Central Bank of Nigeria (CBN) has officially introduced the Nigeria Foreign Exchange (FX) Code, aimed at addressing potential risks and enhancing stability in the country’s evolving financial landscape.
The CBN announced the release today, highlighting that the Code incorporates global best practices and principles from the Global FX Code, drawing from leading financial jurisdictions worldwide.
In its statement, the CBN explained, “Nigeria’s financial environment has experienced significant and positive changes over the years. However, certain risks persist.”
The FX Code was developed to address these changes, setting forth standards designed to strengthen and promote the integrity of the wholesale foreign exchange (FX) market in Nigeria.
“This initiative will improve market efficiency and further reinforce Nigeria’s flexible exchange rate system,” the CBN said.
The FX Code aims to foster a robust, fair, and transparent market, providing a secure environment where diverse market participants, supported by resilient infrastructure, can confidently engage in transactions at competitive prices. It is designed to ensure that these transactions reflect available market information, while adhering to global standards and best practices.
The FX Code applies to market participants, including Authorized Dealers licensed by the CBN under the CBN Act of 2007, the Bank and Other Financial Institutions Act (BOFIA) of 2020, and other entities engaged in wholesale foreign exchange activities in Nigeria.
The Code is structured around six core principles: ethics, governance, execution, information sharing, risk management and compliance, and confirmation and settlement processes.
Additionally, the CBN emphasized that the FX Code includes specific provisions to enhance market efficiency in Nigeria’s FX sector. It also requires market participants to prevent illegal financial transfers and implement anti-money laundering measures, safeguarding both domestic and global financial systems.
The term “Market Participant” typically refers to banks, though certain principles may apply more directly to banks’ internal policies and procedures, rather than individual actions. The CBN clarified that where needed, specific references to “banks” and “personnel” will be used, focusing on best practices at both organizational and individual levels.