By Bassey Udo
Banks and other operators in the foreign exchange market risks stiff penalties and sanctions for violations, as the Central Bank of Nigeria (CBN)on Tuesday officially unveiled the Nigeria Foreign Exchange Code (FX Code).
Performing the unveiling in Abuja during which all the deposit money banks committed to strict compliance, the CBN governor, Olayemi Cardoso, said the code was to guide the ethical conduct, transparency and professional behaviours of all financial institutions in the foreign exchange market.
“The FX Code represents a decisive step forward, setting clear and enforceable standards for ethical conduct, transparency, and good governance in our foreign exchange market. It is a firm signal that business-as-usual will no longer suffice.
“Similarly, the period of unprecedented ways-and-means-financing inflicted significant damage on our economy, contributing to inflation, currency depreciation, and eroded public confidence.
“These practices must never return. The FX Code is a firm rejection of such distortions and an equally firm commitment to a future defined by fairness, trust and market driven principles.
“The FX Code marks a new era of compliance and accountability. It is not just a set of recommendations; this is an enforceable framework. Under CBN Act 2007 and BOFIA Act 2020, violations will be met with penalties and administrative actions,” the CBN governor warned.
Reviewing some of the activities by operators, which severely undermined the integrity of the foreign exchange market., Cardoso said the over $7bn FX backlogs has taken over 12 months to verify, leading to the discovery of multiple unethical and even illegal practices the country should not be proud of.
Disclosing that as the forensic verification process was nearing completion, he said final settlements would be processed accordingly.
Warning against the return of these malpractices, which he said eroded public trust and harmed the country’s economy, he said the apex bank would not tolerate any attempts to revert to those practices. “Any individual or institution that violates the FX Code will face swift and decisive sanctions,” he declared.
The FX Code rests on six core principles bordering on ethical conduct, good governance, transparent execution, open Information Sharing, Risk Management and Compliance, and Confirmation and Settlement Processes.
These principles and standards, the CBN governor said, are not optional, but embedded in the financial institutions operational systems and are aligned with global standards, while addressing Nigeria’s unique challenges.
The Group Managing Director of United Bank for Africa (UBA), Oliver Alawuba, who led other bank leaders in signing the charter to affirm their commitment to compliance with the new operational codes, said the code was a pivotal initiative for stabilizing Nigeria’s foreign exchange market.
“This initiative not only complements other notable reforms of the CBN, but also sets a new benchmark for accountability and integrity in the FX market,” Alawuba said.
“By embedding global best practices and fostering a culture of trust and equity, the Code will enhance market efficiency, attract greater participation, and elevate Nigeria’s standing in the global financial landscape,” he added.
He urged financial institutions to embrace the Code as a unified platform for reinforcing fairness, professionalism, and ethical behavior in Nigeria’s financial markets.
Director of the Financial Market Department at the CBN, Dr. Omolara Duke, described the FX Code as a transformative step forward, as it sets the principles for good foreign exchange market practices developed to promote the integrity and robust functioning of the wholesale foreign exchange market.
She said the Nigerian FX Code, which is an extension of the Global FX Code, was as a result of the lack of trust, which impaired the efficient functioning of the foreign exchange market globally.
The FX Code, she pointed out, adopts lessons from the Global FX Code launched in May 2017, following global misconduct in foreign exchange markets.
By aligning with international standards, she said Nigeria now joins a community of 54 central banks already listed on the Bank of International Settlements’ Central Bank Register.