The Central Bank of Nigeria (CBN) on Monday introduced the Nigeria Foreign Exchange (FX) Code, coinciding with the Naira’s appreciation against the dollar on the black market.
The apex bank explained that the FX Code was implemented to address risks arising from positive changes in the country’s financial environment. The Code, which aligns with global FX standards and best practices, was designed to strengthen the country’s financial system.
CBN said: “Over the years, the Nigerian financial landscape has undergone considerable and positive transformation. Nonetheless, some risks are apparent.
“The FX Code was in response to these developments to set out standards to holistically strengthen and promote the integrity and effective functioning of the wholesale foreign exchange (FX) market in Nigeria.
“It will facilitate better functioning of the market, further reinforcing Nigeria’s flexible exchange rate regime.
“The FX Code is expected to promote a robust, fair, liquid, open, and appropriately transparent market in which a diverse set of market participants, supported by resilient infrastructure, can confidently and effectively transact at competitive prices that reflect available market information in a manner that conforms to acceptable global behavioural standards and best practices.
“The FX Code applies to market participants. These are authorised dealers licenced by the CBN under the CBN Act 2007 and the Bank and Other Financial Institutions Act (BOFIA) 2020 and other participants that engage in the wholesale foreign exchange business in Nigeria as part of their licenced business.”
The Central Bank of Nigeria (CBN) outlined that the FX Code is built on six key principles: ethics, governance, execution, information sharing, risk management and compliance, and confirmation and settlement processes. These principles aim to strengthen the country’s foreign exchange market by ensuring transparency, fairness, and stability.
CBN added: “In addition, some principles were incorporated in the Nigerian FX Code to promote efficiency in the Nigerian FX market.
“The FX Code requires market participants to ensure that illegal financial transfers are avoided and appropriate money laundering policies are put in place to protect the integrity of the domestic markets and the global financial framework as a whole. In the context of the FX Code, the term
“Market participant is generally used to refer to banks, personnel, and other approved institutions.
“In some cases, it will be clear that a principle is by its nature more relevant to only one or the other. For example, certain principles deal primarily with business or bank-level policies and procedures rather than individual behaviours.
“The terms ‘banks’ and ‘personnel’ are occasionally used where principles focus on good practice by banks with regard to personnel in their capacity as such, and vice versa.”
The immediate response to the release of the FX Code was a N10 appreciation of the Naira against the dollar on the black market on Monday.
