CBN Introduces FX Code as Naira Appreciates Against Dollar

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The Central Bank of Nigeria (CBN) has unveiled the Nigeria Foreign Exchange (FX) Code, an initiative aimed at fostering integrity and efficiency in the country’s foreign exchange market. The announcement, made in a statement by the apex bank on Monday, coincided with the appreciation of the Naira against the dollar in the black market, gaining N10.

The CBN explained that the FX Code was introduced to address risks and enhance the market’s functionality in light of the positive transformations that Nigeria’s financial landscape has undergone in recent years. Drawing from the principles of the Global FX Code and best practices from leading jurisdictions, the Nigerian FX Code aims to ensure that the country’s FX market operates at the highest international standards.

According to the CBN, the FX Code sets out standards to strengthen the integrity and effectiveness of Nigeria’s wholesale foreign exchange market. “Over the years, the Nigerian financial landscape has experienced significant and positive transformation. Nonetheless, some risks are evident,” the bank stated. “The FX Code was developed in response to these developments to establish guidelines that holistically promote the integrity and effective functioning of the FX market.”

The apex bank highlighted that the FX Code is designed to promote a market environment that is robust, fair, liquid, open, and transparent. It aims to create conditions in which a diverse group of market participants, supported by resilient infrastructure, can confidently transact at competitive prices that reflect available market information. The Code aligns with acceptable global behavioral standards and best practices, further reinforcing Nigeria’s flexible exchange rate regime.

The CBN outlined that the FX Code applies to all market participants, including authorized dealers licensed under the CBN Act 2007, the Bank and Other Financial Institutions Act (BOFIA) 2020, and other participants engaged in wholesale FX business as part of their licensed operations. The Code is structured around six core principles: ethics, governance, execution, information sharing, risk management and compliance, and confirmation and settlement processes.

In its statement, the CBN added that certain principles have been tailored to address the unique needs of the Nigerian FX market. These principles require market participants to implement measures to prevent illegal financial transfers and adhere to anti-money laundering policies to safeguard the integrity of both domestic markets and the global financial system.

The term “market participant,” as defined in the Code, encompasses banks, personnel, and other approved institutions engaged in FX activities. While some principles are broad, others are specifically targeted at either institutional or individual behaviors. For example, certain guidelines address organizational policies and procedures, while others focus on the conduct of personnel in their professional roles.

The FX Code’s release had an immediate positive impact, as the Naira appreciated by N10 in the black market on Monday. This development underscores the market’s optimistic response to the new standards and highlights the potential for improved confidence and stability in Nigeria’s foreign exchange market.

With the implementation of the FX Code, the CBN aims to set a new benchmark for ethical and effective market practices, ensuring that Nigeria’s financial system continues to grow in credibility and global relevance.