On 28 January 2025, the Central Bank of Nigeria (CBN) launched the Foreign Exchange Code (FX Code). The CBN Foreign Exchange Code guides the banking industry and promotes ethical conduct in the Nigerian Foreign Exchange Market (FX Market).
The FX Code takes effect retrospectively from 2 December 2024. It applies to all Market Participants, including Authorized Dealers, Banks and Other Financial Institutions licensed by the CBN under the Banks and Other Financial Institutions Act 2020 (BOFIA).
Six guiding principles of the CBN Foreign Exchange Code
The Code rests on six principles: ethics, governance, execution, information sharing, risk management and compliance, and confirmation and settlement. Alongside 52 sub-principles, they follow international standards while addressing challenges specific to Nigeria.
The aim is a more transparent, stable and predictable market. The Code is also meant to become the benchmark for conduct across all participating institutions and to fix past inefficiencies.
Ethics
Market Participants must act honestly, fairly and consistently with clients and other participants. They must also identify and remove conflicts of interest, such as personal relationships, personal dealing, gifts or entertainment that could compromise judgment. Where a conflict cannot be avoided, participants should manage it, for example through information barriers, changed duties or declarations, and disclose it to affected parties.
Governance
Participants need governance frameworks that give clear responsibility for, and oversight of, their FX activity. That framework should include:
- transparent lines of responsibility and effective oversight based on sound management information;
- a culture where staff can challenge senior management;
- remuneration and promotion structures consistent with good conduct; and
- independent control functions to detect and respond to improper practices.
Execution
Participants must tell clients clearly whether they act as agent or principal. They must handle orders fairly and transparently, based on each client’s needs and prevailing market conditions.
Strategies that create artificial price movements are prohibited. In addition, participants must publish disclosures about their FX business and make clear that prices include any mark-up.
Risk management and compliance
Participants need a risk management function, an independent compliance function and processes to review both. They must also manage FX risk exposures, plan for market disruption, keep accurate records and run know-your-customer checks to prevent money laundering and terrorist financing.
What it means for the market
The FX Code sets higher expectations for every bank and authorised dealer in the market. Our newsletter covers all six principles, including information sharing and confirmation and settlement, and assesses the Code’s likely impact.
The Code forms part of wider banking reform. Our Banking and Capital Markets 2025 Wrap-Up and 2026 Outlook covers its early effect on FX inflows, and our note on the CBN baseline standards for automated AML solutions covers a related compliance area.
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