The Central Bank of Nigeria (CBN) has approved the release of the Nigerian Foreign Exchange (FX) Code as a guideline to the banking industry to promote the ethical conduct of authorised dealers in the Nigerian Foreign Exchange Market.
According to the statement on its website, the Bank will launch the code next Tuesday, January 28.
In October 2024, the CBN introduced the Nigeria Foreign Exchange Code (FX Code). This development comes as part of the CBN’s ongoing efforts to enhance the integrity and functioning of Nigeria’s wholesale foreign exchange (FX) market.
The FX Code issued under the CBN Act 2007 and BOFIA Act 2020, empowers the Central Bank of Nigeria (CBN) to issue directions regarding the standards to be adhered to by an institution conducting foreign exchange business in Nigeria. It is a set of principles that guide how financial institutions and banks in Nigeria conduct foreign exchange business.
According to the Apex Bank, The FX Code was developed to address weaknesses and risks challenges, setting standards that aim to strengthen the overall performance of the FX market. The introduction of the FX Code is expected to facilitate better market operations, reinforcing Nigeria’s commitment to maintaining a flexible exchange rate regime.
The FX Code is intended to promote an efficient, robust, competitive, fair, liquid, open, and appropriately transparent Market in which establishes clear expectations for diverse set of Market Participants to operate professionally and can confidently and effectively transact at competitive prices that reflect available market information in a manner that conforms to accepted global standards of behaviour and best practices.
The Nigerian FX Code covers six(6) core principles;
Ethics: Market Participants are expected to behave ethically and professionally to promote the fairness and integrity of the FX Market.
Governance: Market Participants are expected to have a sound and effective governance framework that provides clear responsibility for and comprehensive oversight of their FX Market activity and promotes responsible engagement.
Execution: Market Participants are expected to exercise care when negotiating and executing transactions to promote a robust, fair, open, liquid, and appropriately transparent FX Market.
Information Sharing: Market Participants are expected to be clear and accurate in their communications and to protect Confidential Information to promote effective communication that supports a robust, fair, open, liquid, and appropriately transparent FX Market.
Risk Management and Compliance: Market Participants are expected to promote and maintain a robust control and compliance environment to effectively identify, manage, and report on the risks associated with their engagement in the FX Market.
Confirmation and Settlement Processes: Market Participants are expected to put in place robust, efficient, transparent, and risk-mitigating post-trade processes to promote the predictable, smooth, and timely settlement of transactions in the FX Market.
