The Central Bank of Nigeria (CBN) has announced the introduction of the Nigerian Foreign Exchange (FX) Code, a strategic initiative aimed at improving transparency, fostering ethical practices, and enhancing professionalism in Nigeria’s foreign exchange market. The official launch is scheduled for January 28, 2025, in Abuja.
The FX Code serves as a comprehensive guideline for all participants in the foreign exchange market, including authorised dealers, banks, and corporate entities. It is designed to align Nigeria’s FX market operations with international best practices while addressing unique domestic challenges. The Code outlines standards for governance, ethical conduct, risk management, and compliance, aiming to build trust and promote a stable financial system.
Complementing the FX Code, the CBN recently introduced the Electronic Foreign Exchange Matching System (EFEMS) in October 2024. The EFEMS, which went live on December 1, 2024, after a pilot phase in November, is a pivotal tool for improving market transparency. It facilitates real-time pricing, enhances oversight, and supports a market-driven exchange rate.
Under the new system, all interbank FX transactions must be conducted through EFEMS, which is approved by the CBN. The platform allows transactions to be immediately recorded and reduces speculative activities while ensuring a fair and transparent trading environment. The CBN will also publish real-time data on buy and sell orders, providing the public with greater access to market information.
The introduction of the FX Code is part of the CBN’s broader vision to strengthen Nigeria’s financial market infrastructure and foster economic growth. By adhering to these guidelines, market participants can help create a more efficient and transparent FX market, which will encourage foreign investment and bolster confidence in the economy.
The apex bank has emphasised the importance of compliance with the Code and EFEMS as key steps toward building a resilient financial market that can thrive in a globally interconnected economy. The guidelines are also expected to reduce market distortions and speculative trading, ensuring fair access to foreign exchange for all participants.
The CBN is collaborating with the Financial Markets Dealers Association (FMDA) to implement operational rules for EFEMS and ensure the seamless rollout of the FX Code. Authorised dealers are required to complete all necessary training, system integration, and documentation ahead of the January launch.
Expected Impact
The Nigerian FX Code and EFEMS are expected to deliver several key benefits, including:
- Improved governance and transparency in FX transactions.
- A market-driven exchange rate that fosters stability.
- Enhanced trust and confidence among foreign investors.
- Fair access to FX for market participants.
- Reduction in speculative trading and elimination of market inefficiencies.
The CBN’s efforts reflect its commitment to fostering a robust and transparent financial system that supports Nigeria’s broader economic goals.
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Credit: AriseNews (Text Excluding Headline)
