The Central Bank of Nigeria (CBN) has approved the release of the Nigerian Foreign Exchange (FX) Code for the banking industry in furtherance of its sustained initiatives to ensure ethical conduct of authorised dealers in the Nigerian Foreign Exchange (FX) market.
A statement posted on the apex bank’s website indicated that the unveiling of the FX Code would be performed by the management next Tuesday, January 28.
In October 2024, the CBN introduced the Nigeria Foreign Exchange Code (FX Code) as part of its 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 apex bank to issue directions regarding the standards to be adhered to by an institution conducting foreign exchange business in the country
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The FX Code is a set of principles that guide how financial institutions and banks in Nigeria conduct foreign exchange business.
Specifically, the CBN stated that the FX Code was developed to address weaknesses and risks challenges, setting standards that aim to strengthen the overall performance of the FX market.
It expressed optimism that the introduction of the FX Code will facilitate better market operations, reinforcing Nigeria’s commitment to maintaining a flexible exchange rate regime.
In broader terms, the FX Code aims 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 core principles, namely 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.
Others are, 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; and 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.
In addition, other core principles of the FX Code comprised 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;
and 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.
