The Central Bank of Nigeria (CBN) has announced the imminent launch of the Nigerian Foreign Exchange (FX) Code, a significant step towards enhancing the ethical conduct and transparency of the country’s foreign exchange market. The Code, set to be officially launched on January 28th, 2025, will serve as a crucial guideline for all authorized dealers operating within the Nigerian Foreign Exchange Market (NFEM).
This development underscores the apex bank’s commitment to strengthening the governance and transparency of the FX market, following the introduction of revised guidelines for the NFEM in November 2024.
A key feature of these revised guidelines mandates that the boards of all banks, along with their Chief Executive Officers (CEOs) and Chief Compliance Officers, annually attest to their adherence to the Nigeria FX Code of Ethics and Conduct.
“The Bank will formally launch the Code at the CBN Head Office Auditorium, Abuja, on Tuesday, January 28, 2025,” the CBN stated in a notice published on its official website.
This attestation serves as a formal declaration of their commitment to upholding the integrity of the FX market and ensuring strict compliance with all CBN-issued circulars and guidelines.
Consolidation of FX Windows and Enhanced Market Depth
The primary objective of these revised guidelines is to deepen the foreign exchange market following the consolidation of all official FX market windows. This move, spearheaded by the CBN, aims to create a more unified and efficient market for all stakeholders.
The circular, issued by Omolara Omotunde Duke, director of the CBN’s financial markets department, supersedes all previous directives, including the operational changes announced on June 14, 2023, and earlier circulars dating back to 2017. This comprehensive overhaul signifies a renewed focus on streamlining and modernizing the FX market.
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Key Provisions of the Revised Guidelines
Under the new framework, authorized dealers are entrusted with the critical responsibility of facilitating FX transactions for both firms and individuals while ensuring strict adherence to all relevant regulations. These dealers are obligated to conduct thorough due diligence on all transactions, provide transparent pricing, and offer accessible market access through innovative digital solutions.
Furthermore, the guidelines unequivocally state that all legitimate FX transactions must be conducted exclusively through authorized dealers. Dealing with unlicensed intermediaries is strictly prohibited and will be subject to appropriate penalties.
Bureaux de Change and Other Market Participants
The revised guidelines also encompass Bureaux de Change (BDC) operators. Licensed BDCs are granted permission to purchase FX from authorized dealers to meet the legitimate needs of their customers, albeit within specific limits set by the CBN.
The guidelines emphasize that all FX transactions conducted by BDCs, International Money Transfer Operators (IMTOs), and authorized dealers must strictly adhere to the terms of their respective licenses and the provisions of the Nigeria FX Code.
Implications for the Nigerian Economy
The launch of the Nigerian FX Code and the implementation of these revised guidelines are expected to have significant implications for the Nigerian economy. By enhancing market transparency, promoting ethical conduct, and ensuring compliance with regulations, these measures aim to:
Improve market efficiency: Streamlining the FX market will reduce transaction costs and improve the overall efficiency of FX trading.
Enhance market confidence: Increased transparency and accountability will bolster confidence among market participants, both domestic and international.
Strengthen macroeconomic stability: A well-regulated and efficient FX market is crucial for maintaining macroeconomic stability and supporting sustainable economic growth.
Reduce illicit financial flows: By combating illicit financial activities, such as money laundering and terrorism financing, these measures will help to safeguard the integrity of the Nigerian financial system.
If You Ask Me
The CBN’s decision to launch the Nigerian FX Code marks a significant milestone in the ongoing efforts to strengthen and modernize the country’s foreign exchange market. By emphasizing ethical conduct, transparency, and compliance, the Code aims to create a more robust and resilient FX market that can better serve the needs of the Nigerian economy.
The successful implementation of these guidelines will require close collaboration between the CBN, authorized dealers, and other market participants. Continued monitoring, evaluation, and refinement of the regulatory framework will be crucial to ensure the long-term success of these initiatives.
