The Central Bank of Nigeria has mandated all Deposit Money Banks and foreign exchange market participants to submit compliance reports regarding the FX Code by December 31, 2024.
This initiative aims to enhance the integrity and efficiency of Nigeria’s foreign exchange market, aligning it with global standards, according to The PUNCH.
The FX Code, effective from October 14, 2024, establishes principles to regulate the conduct of market participants, promoting ethical and professional behaviour.
The FX Code document read, “The FX Code is issued pursuant to CBN Act 2007 and BOFIA Act 2020 which empowers the Central Bank of Nigeria to issue directions for the standards to be adhered to by an institution in the conduct of foreign exchange business in Nigeria.
“Market participants will be required to conduct a self-assessment and submit to the CBN a report on the institution’s level of compliance with the FX Code by December 31, 2024.
“All market participants will thereafter be required to submit to the CBN a detailed compliance implementation plan that is approved by its board by December 31, 2024. The FX Code should be fully implemented, and each market participant be in full compliance by December 31, 2024.”
The apex bank clarified who the market participants are, as it said, “The FX Code applies to market participants. These are banks licensed by the Central Bank of Nigeria under the CBN Act 2007 and Bank and Other Financial Institutions Act 2020 and engage in the wholesale foreign exchange business in Nigeria as part of their licensed business.”
The CBN added that failure to comply with this requirement could attract sanctions, including monetary penalties, under the CBN Act of 2007 and the Bank and Other Financial Institutions Act of 2020.
The FX Code introduces new governance structures and operational frameworks for institutions engaged in foreign exchange activities, including banks and financial institutions. Participants must establish robust governance frameworks, maintain high ethical standards, and effectively manage risks to comply with the code’s requirements.
This is aimed at fostering a more transparent and accountable FX market in Nigeria.
“Market participants should strive for the highest professional standards,” the CBN emphasized.
Starting December 31, 2024, market participants must submit quarterly reports to the Financial Markets Department of the CBN detailing their adherence to the FX Code.
This ongoing reporting mechanism aims to ensure continuous compliance and promote transparency and efficiency in Nigeria’s foreign exchange market.
It added, “Market participants will be required to submit a quarterly report to the Financial Markets Department, on the level of compliance to the FX Code within 14 days after the end of every calendar quarter, with the first report due by December 31, 2024.”
The CBN has also established enforcement mechanisms, including sanctions, to address non-compliance with the FX Code.
These measures aim to uphold the integrity of the foreign exchange market and ensure that participants adhere to the required standards.
