The Central Bank of Nigeria (CBN) has directed all participants in the foreign exchange (FX) market to submit a compliance report detailing their adherence to the Nigeria FX Code by January 31, 2025.
This initiative aims to enhance ethical practices, governance, and transparency within the country’s FX market.
CBN’s Compliance Directive
According to the recently published FX Code, market participants must conduct a self-assessment and submit a report to the CBN outlining their level of compliance. Additionally, institutions are required to present a board-approved compliance implementation plan, including extracts from the board meeting minutes where it was discussed.
Following the initial submission, institutions will be expected to submit quarterly compliance reports to the CBN’s Financial Markets Department (FMD). The first of these reports is due by March 31, 2025, and must be submitted within 14 days after the end of each quarter.
The Nigeria FX Code: Key Principles
The FX Code, which took effect on December 2, 2024, establishes best practices to ensure a stable and transparent market environment. It applies to authorised dealers and financial institutions engaged in wholesale FX transactions under the CBN Act 2007 and the Bank and Other Financial Institutions Act (BOFIA) 2020.
The guidelines focus on six core principles:
- Ethics – Upholding professionalism and integrity.
- Governance – Implementing strong oversight mechanisms.
- Execution – Ensuring fair and transparent transactions.
- Information Sharing – Maintaining confidentiality and accuracy.
- Risk Management and Compliance – Identifying and mitigating potential risks.
- Confirmation and Settlement – Streamlining post-trade processes for efficiency.
Enforcement and Potential Penalties
To ensure compliance, the CBN has put enforcement mechanisms in place, including monetary fines and administrative sanctions as stipulated in existing financial regulations. Market participants that fail to adhere to the FX Code risk penalties, reinforcing the importance of aligning operations with these new standards.
Strengthening Market Integrity
The CBN’s directive underscores its commitment to fostering a resilient and transparent FX market. By enforcing the FX Code, the apex bank aims to build confidence among participants and ensure that currency transactions adhere to global best practices.
With the deadline approaching, FX market participants are urged to review their compliance strategies to meet the CBN’s expectations and avoid possible sanctions.
