The Central Bank of Nigeria (CBN) released a new FX Code on Monday, January 27, 2025, to boost liquidity, and transparency and guide market participants in Nigeria’s foreign exchange market.

The new code contains a set of principles recognised as good practices in the global FX exchange market.

The governor of the Central Bank of Nigeria Olayemi Cardoso-led CBN launches the new FX Code.

Why CBN designed the new FX code

The apex bank designed the code to address risks in Nigeria’s growing financial system while boosting the integrity and functionality of the FX market.

The FX Code’s document disclosed that it was developed in response to Nigeria’s financial transformation over the years. It seeks to establish standards that ensure the efficient functioning of the wholesale FX market, boosting the country’s exchange rate sector.

“The FX Code is intended to facilitate a fair, liquid, and transparent market environment that inspires confidence among participants,” the document states.

CBN designed the code to promote a robust market with fairness, openness, and adequate transparency, allowing participants to engage in competitive rates that reflect accurate market information.

The six pillars of the new code

It lists behavioural standards and best practices that align with global standards.

Market dealers covered by the new code are licensed traders by CBN under the CBN Act 2007 and the Bank of Other Financial Institutions Act (BOFIA) 2020, and other entities in wholesale trading as part of their licenses.

It is anchored around six core pillars: Governance, execution, information sharing, risk management and compliance.

It also addresses the importance of confirmation and settlement processes, encouraging participants to implement post-trade practices that allow for smooth and timely settlements of transactions.

Experts say the code aims to position Nigeria’s FX market as one of the most efficient with global standards.

The Nigerian forex market has been dogged by irregularities and irresponsible trading by market participants, leading to the accumulation of FX claims by investors and foreign airlines.