CBN Issues Strong Warning to Financial Institutions Over FX Code Compliance
By Patience Ikpeme
The Central Bank of Nigeria (CBN) has issued a stern warning to all financial institutions engaged in foreign exchange (FX) transactions, reiterating that any individual or organization found in violation of the newly launched Foreign Exchange Code (FX Code) will face severe penalties.
CBN Governor Olayemi Cardoso pointed out the importance of compliance and accountability at the formal launch of the FX Code in Abuja on Tuesday.
In a clear message to the banking sector, Cardoso stated that the FX Code represents a binding commitment to ethical conduct and transparency within Nigeria’s foreign exchange market. “The FX Code marks a new era of compliance and accountability. This is not merely a set of recommendations; it is an enforceable framework,” he declared. “Violations will be met with prompt and administrative sanctions.”
The CBN Governor personally endorsed the FX Code by signing the commitment charter, with Oliver Alawuba, Managing Director of United Bank for Africa (UBA), leading a host of other banking leaders in doing the same. Cardoso stated that self-regulation is essential, indicating that leaders in the industry must take the initiative to embed these standards within their organizations.
Underlining the challenges Nigeria has faced with foreign exchange practices in the past, he recalled the era of multiple exchange rates that favored a select group while undermining market integrity. “The $7 billion of FX backlogs that took over 12 months to verify revealed multiple unethical and illegal practices that tarnished our reputation as a nation,” Cardoso stated.
The newly established FX Code is built around six foundational principles: Ethics, Governance, Execution, Information Sharing, Risk Management, and Compliance. These principles not only align with international standards but also address Nigeria’s unique challenges in the financial landscape. The full adoption of these principles across the banking industry is essential, with leaders expected to lead by example.
Alawuba echoed the Governor’s sentiments, referring to the FX Code as a “good and visionary step” toward stabilizing the FX market. He noted that the initiative will enhance market integrity, restore investor confidence, and promote a resilient financial system.
Dr. Omolara Duke, Director of the Financial Market Department at the CBN, remarked on the historical lack of trust in the FX market and stated that the FX Code is designed to instill integrity and robust functioning. By embedding global best practices, the CBN aims to elevate Nigeria’s standing among global financial markets.
The launch of the FX Code is seen as a pivotal moment for Nigeria, positioning its foreign exchange market as one defined by fairness and transparency. The CBN has made it clear that reverting to past unethical practices will not be tolerated, and the consequences for non-compliance will be swift.
This reform comes at a crucial time as the FX market shows signs of stabilization, with the naira gaining in value against the dollar since the introduction of the Electronic Foreign Exchange Matching System (EFEMS) in December 2024. Industry leaders are optimistic that adherence to the FX Code will restore not only market integrity but also public confidence in Nigeria’s financial system, paving the way for a more prosperous economic future.
With the FX Code officially adopted, Nigeria joins the ranks of 54 countries, including Brazil, Canada, and South Africa, reinforcing its commitment to ethical financial practices in a global context. “We have the opportunity to create a legacy of integrity within our market,” Cardoso concluded, urging all market participants to embrace the principles of the FX Code as part of their daily operations and decision-making processes.
As Nigeria embarks on this journey toward strengthening its foreign exchange market, the CBN remains firm in its resolve that integrity, accountability, and transparency will shape the future of the nation’s financial landscape.
