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•To sanction violators, settle FX backlog
From Adanna Nnamani, Abuja
The Central Bank of Nigeria (CBN) has introduced a new Foreign Exchange (FX) Code aimed at restoring transparency, accountability and trust in the FX market, while addressing systemic abuses and unethical practices that have hindered the sector’s efficiency.
Speaking during the launch in Abuja on Tuesday, the CBN Governor, Mr. Olayemi Cardoso, explained that the FX Code sets clear and enforceable standards to address past malpractices and prevent a recurrence of systemic abuses that have undermined Nigeria’s financial ecosystem.
Cardoso named several challenges that had plagued the foreign exchange market in the past, including the era of multiple exchange rates and unethical practices that led to a $7 billion FX backlog and assured stakeholders that the forensic verification process of these backlogs is nearing completion, with final settlements to follow.
He said that the FX Code is structured around six core principles, namely: Ethics, Governance, Execution, Information Sharing, Risk Management and Compliance, and Confirmation and Settlement Process, which align with global standards while addressing Nigeria’s unique challenges.
The CBN boss further warned that violations of the FX Code would not be tolerated, while urging market participants, including bank board chairs, managing directors, and compliance officers, to adopt the principles of the FX Code within their organisations.
“The era of multiple exchange rates, which created privileges for a select few at the expense of most Nigerians, severely undermined market integrity. As an example, the $7bn of FX backlogs that has taken over 12 months to verify has led to the discovery of multiple unethical and even illegal practices that we should not be proud of as a nation. The forensic verification process is now near complete, and final settlements will be processed accordingly.
“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.
“Let us be clear: the system itself played a key role in the challenges of the past. Unethical behaviours and systemic abuses – whether by those with privileged access or by complicit participants – eroded public trust and harmed our economy. We will not tolerate any attempts to revert to those practices. Any individual or institution that violates the FX Code will face swift and decisive sanctions.
“Our journey towards market reform is already yielding results. The year 2024 was marked by structural reforms which sought to return the naira to a freely determined market price and ease volatility as several distortions were removed from the market.
“Reforms including the discontinuation of quasi-fiscal interventions, unifying the exchange rate windows, clearing a backlog of foreign exchange commitments, and recalibrating monetary policy tools were all necessary to redirect the course of our economy, restore order and credibility to our FX market, and refocus the CBN on its core mandates.
“Notably, the introduction of the Electronic Foreign Exchange Matching System (EFEMS) in December 2024 has improved market transparency and efficiency. Since its launch, the naira has appreciated significantly—from ₦1,663.90 on December 2, 2024, to ₦1,536.72 as of yesterday.
“Exchange rate stability is a cornerstone of macroeconomic health for an economy like Nigeria’s. Beyond daily market rates, the exchange rate influences critical indicators such as the balance of payments, external reserves, international trade, inflation, economic growth, and foreign investment. These factors collectively shape the economic welfare of our nation and people. Inflation in particular remains a critical challenge as rising prices erode purchasing power and increase the cost of living—but by fostering exchange rate stability, we are tackling this issue head-on.
“Furthermore, our external reserves have grown by 12.74%, reaching US$40.68 billion at the end of 2024. This achievement reflects the effectiveness of reforms aimed at paying off legacy FX obligations and growing reserves organically. All these indicators of progress are the direct result of our commitment to reform and the collective efforts of all stakeholders.
Meanwhile, the apex bank has said that participants in the foreign exchange market are required to submit compliance reports regarding their adherence to the Nigeria FX Code by January 31, 2025.
This directive aims to enhance ethical practices, governance and transparency within the market.
“Market Participants will be required to conduct a self-assessment and submit to the CBN a report on the institution’s level of compliance with the FX Code by January 31, 2025.
“All Market Participants will thereafter be required to submit to CBN a detailed compliance implementation plan that is approved and signed by its Board along with the extracts of the Board meeting.”
“Following the initial deadline of January 31, market participants will be required to file quarterly compliance reports with the Financial Markets Department of the Central Bank.
“These reports are expected to be submitted within 14 days after the end of each calendar quarter, with the first set due by March 31, 2025”, the apex bank said.
