CBN mandates banks to submit FX compliance reports

The Central Bank of Nigeria (CBN) has directed Deposit Money Banks and other foreign exchange market participants to submit compliance reports regarding the FX Code by December 31, 2024.

The CBN issued this directive to strengthen the integrity and efficiency of Nigeria’s foreign exchange market and ensure alignment with global standards.

The FX Code, effective from October 14, 2024, outlines principles for market participants to ensure ethical and professional behaviour in Nigeria’s FX market.

The FX Code document stated, “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 FX Code applies to banks licensed by the CBN and engaged in wholesale foreign exchange business in Nigeria. 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 involved in FX activities, such as banks and financial institutions. These participants are required to have a sound governance framework, uphold ethical standards, and manage risks effectively.

“Market participants should strive for the highest professional standards,” the CBN stressed.

The bank said, “CBN may take appropriate enforcement and other administrative action including monetary penalties as provided for under the CBN Act 2007 and BOFIA Act 2020 against any market participant for failure to comply with the FX Code.”

This initiative is part of the CBN’s broader strategy to promote a robust, fair, and liquid FX market that reflects market information and supports Nigeria’s flexible exchange rate regime.

The FX Code is modelled after the globally accepted FX Global Code and aims to integrate best practices in Nigeria’s foreign exchange market. By aligning with international standards, the CBN hopes to create a more transparent and resilient market infrastructure where participants can confidently engage in FX transactions at competitive prices.