The Central Bank of Nigeria (CBN) has asked everyone involved in the foreign exchange (FX) market to turn in a compliance report showing how well they’re following the Nigeria FX Code by January 31, 2025. 

This move is part of the central bank's push to boost ethical standards, governance, and transparency in the FX market.

Market participants are required to conduct a self-assessment and submit a compliance report to the Central Bank of Nigeria (CBN) by January 31, 2025, as stated in the FX Code document released on Monday. This report must detail the institution's compliance level with the FX Code and be approved and signed by the Board, accompanied by extracts from the Board meeting.

 “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 January 31, 2025. All Market Participants will thereafter be required to submit to CBN a detailed compliance implementation plan that is approved and signed by its Board along with the extracts of the Board meeting.” 

The Nigeria FX Code, which kicks in on December 2, 2024, lays out best practices to create a fair and transparent FX market. It’s aimed at authorized dealers under the CBN Act 2007, the Bank and Other Financial Institutions Act 2020, and other entities involved in wholesale FX trading.

Compliance directive highlights

The CBN is asking market participants to carry out a self-assessment and submit a report that shows how they’re complying with the code. This report needs to be signed off by the board of directors and should include a plan to fix any compliance issues. They also have to provide minutes from the relevant board meetings to show that there’s proper oversight.

After the initial report, participants will need to file quarterly compliance reports with the CBN’s Financial Markets Department (FMD). These reports are due within 14 days after each quarter ends, with the first one expected by March 31, 2025.

Enforcement and penalties

As for enforcement and penalties, the CBN has set up strict measures, including fines as outlined in the CBN Act 2007 and BOFIA Act 2020. Those who don’t comply could face administrative penalties, highlighting how crucial it is to stick to the FX Code.

The Nigeria FX Code is based on the Global FX Code, blending international best practices with the specific needs of Nigeria’s foreign exchange market. It revolves around six main principles:

  • Ethics: Everyone involved should uphold high ethical standards and professionalism.
  • Governance: Organizations need to set up solid governance structures to oversee FX activities.
  • Execution: Careful handling of transactions is crucial for a fair and transparent market.
  • Information sharing: It's vital to maintain confidentiality and accuracy in all communications.
  • Risk management and compliance: Strong frameworks should be established to identify and manage risks effectively.
  • Confirmation and settlement: Smooth post-trade processes are key to ensuring transactions go off without a hitch.

Strengthening market integrity 

The CBN’s directive shows its dedication to building a more resilient and transparent FX market. The FX Code is designed to boost confidence among market players, making sure that transactions are competitively priced and meet global standards. Market participants are encouraged to align their practices with the FX Code principles to avoid penalties and help maintain the overall stability of Nigeria’s FX market.