Central Bank of Nigeria Implements New Compliance Directive for FX Market Participants

The Central Bank of Nigeria (CBN) has issued a directive requiring participants in the foreign exchange (FX) market to submit compliance reports on their adherence to the newly established Nigeria FX Code by January 31, 2025. This directive is part of the central bank’s efforts to promote greater ethical standards, governance, and transparency within the nation’s foreign exchange sector.

The Nigeria FX Code, which came into effect on December 2, 2024, is designed to bolster the country’s FX market by introducing principles of fair and transparent practice. It applies to authorised dealers and other entities involved in wholesale FX business, all of whom are required to adhere to the code’s guidelines.

As part of the compliance process, market participants must conduct self-assessments of their operations and submit detailed reports on their adherence to the code. These reports must be signed off by the institutions’ boards of directors, with an accompanying implementation plan addressing any areas of non-compliance. Additionally, extracts of the relevant board meeting minutes will be required to confirm oversight and accountability.

“The market participants will be required to submit their compliance reports by January 31, 2025. The reports will include an implementation plan for rectifying any identified gaps,” the CBN said in a statement.

Following the initial report submission, market players will be obligated to file quarterly compliance reports with the CBN’s Financial Markets Department. These reports are due within 14 days after the end of each calendar quarter, with the first submission set for March 31, 2025.

In a bid to ensure enforcement of the new rules, the CBN has warned of monetary penalties for any non-compliance, invoking the powers provided by the CBN Act of 2007 and the Bank and Other Financial Institutions Act (BOFIA) of 2020.

The FX Code is modelled on the Global FX Code and takes into account global best practices while adapting them to Nigeria’s unique market dynamics. The code addresses critical areas such as ethics, governance, execution practices, information sharing, risk management, and settlement processes.

With this move, the CBN aims to ensure that FX market operations are conducted with the highest levels of integrity, transparency, and accountability, aligning Nigeria’s practices with global standards and enhancing investor confidence in the market.