CBN releases Nigeria FX code to mitigate financial risks

The Central Bank of Nigeria, CBN, yesterday released the Nigeria Foreign Exchange (FX) Code in a bid to mitigate risks following various positive transformations in the country’s financial landscape.

The CBN disclosed this today, noting that the Code draws on the principles from the Global FX Code and best practices adopted in leading jurisdictions.

CBN said: “Over the years, the Nigeria financial landscape had undergone considerable and positive transformation. Nonetheless, some risks are apparent.

“The FX Code was in response to these developments to set out standards to holistically strengthen and promote the integrity and effective functioning of the wholesale foreign exchange (FX) market in Nigeria.

“It will facilitate better functioning of the market, further reinforcing Nigeria’s flexible exchange rate regime.

“The FX Code is expected to promote a robust, fair, liquid, open, and appropriately transparent market in which a diverse set of market participants, supported by resilient infrastructure, can confidently and effectively transact at competitive prices that reflect available market information in a manner that conforms to acceptable global behavioral standards and best practices.

“The FX Code applies to Market Participants. “These are Authorised Dealers licensed by the CBN under the CBN Act 2007, and the Bank and Other Financial Institutions Act (BOFIA) 2020 and other participants that engage in the wholesale foreign exchange business in Nigeria as part of their licensed business.”

According to the apex bank, the FX Code is structured around six leading principles, namely ethics, governance, execution, information sharing, risk management and compliance, and confirmation and settlement processes.

CBN added: “In addition, some principles were incorporated in the Nigerian FX Code to promote efficiency in the Nigeria FX market.

“The FX Code requires Market Participants to ensure that illegal financial transfers are avoided, and appropriate money laundering policies put in place to protect the integrity of the domestic markets and the global financial framework as a whole.

“In the context of the FX Code, the term “Market Participant” is generally used to refer to banks,

personnel, and other approved institutions.

“In some cases, it will be clear that a principle is by its nature more relevant to only one or the other. For example, certain principles deal primarily with business or banks-level policies and procedures rather than individual behaviors.

“The terms “banks” and “personnel” are occasionally used where principles focus on good practice by banks with regard to personnel in their capacity as such, and vice versa.”