.As part of his big reforms to build a financial ecosystem that embodies resilience, global competitiveness, and economic prosperity, Cardoso launches a new Foreign Exchange Code
Exactly on the 28th ,January,2025, at its head quarters, Abuja, the Central Bank of Nigeria, CBN, hit another milestone in the history of the regulatory authorities as it launched the Nigerian Foreign Exchange Code (FX Code), a blueprint for the future, grounded in past lessons .The occasion, graced by board chairmen, managing directors, and chief compliance officers from various organizations, is,indeed ,another landmark.
The event was not merely a speech day for the Governor of CBN, Olayemi Cardoso, but an idea sharing forum; participants from various fields were allowed to come up with their views and ideas using their diverse strategic lenses . Confirming this view , Cardoso declared : “Before sharing my thoughts, I want to acknowledge the insightful discussions we have had here today. As Nelson Mandela reminded us, as leaders there is great value in listening to everyone first – to understand perspectives, concerns, and recommendations – before speaking “. He said the ideas shared in this room reaffirmed a “collective commitment to shaping a more resilient and transparent FX market.”
Foreign Exchange Code (FX Code) : A Decisive Step Forward
After listening to various views from the participants, the Governor noted that 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. It is also a blueprint for the future, grounded in the hard lessons of the past.”
Rationales Behind FX Code .
Going down the memory lane , Cardoso revisited the rationales behind his current initiatives which are by the need to reinvent a new foreign exchange system and discard the less transparent one he met on ground. “We must not forget where we are coming from. The era of multiple exchange rates, which created privileges for a select few at the expense of most Nigerians, severely undermined market integrity.”
For example, he drew the attention of the participants to a situation of $7bn of FX backlogs that took over 12 months to be verified but led to the discovery of multiple unethical and even illegal practices that the nation could not proud of . “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”, he added.
However,he said , the forensic verification process is now near complete, while final settlements, according to him ,would be processed accordingly.
Justifying the current FX Code, Cardoso further explained that initiative “is a firm rejection of such distortions and an equally firm commitment to a future defined by fairness, trust and market-driven principles” .
Cardoso Blames the System Too .
He traced the mess in the Foreign Exchange Market he met on ground to the system. “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.”
Stern Warning Against Any Abuse
He used the occasion to issue a stern warning to anyone that fails to abide by the new order “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.”
Results from the Current Market Reforms
Under his leadership.,several reforms which include the discontinuation of quasi-fiscal interventions, unifying the exchange rate windows, clearing a backlog of foreign exchange commitments, and recalibrating monetary policy tools were initiated.
According to Cardoso, the above reforms which “were all necessary to redirect the course of the economy, restore order and credibility to Nigeria’s market, and refocus the CBN on its core mandates have continued to yield good results.
He highlighted some critical benefits from the ongoing reforms to the participants. “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.” , he added .
“Notably, the introduction of the Electronic Foreign Exchange Matching System (EFEMS) in December 2024 has improved market transparency and efficiency”, he declared . “Since its launch, the naira has appreciated significantly—from ₦1,663.90 on December 2, 2024, to ₦1,536.72 as of yesterday.”
Another benefit from the reforms is the prevailing Exchange rate stability that has continued to put the nation’s inflation in check. “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” . The above factors he said have collectively shaped ” the economic welfare of our nation and people.”
Moreover, though “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.”
Further gain from the the reforms under Cardoso leadership is “our external reserves have grown by 12.74%, reaching US$40.68 billion at the end of 2024.” This achievement, he said reflected the effectiveness of reforms aimed at paying off legacy FX obligations and growing reserves organically.
All these indicators of progress listed above Cardoso said were the direct result of the commitment to reform by CBN and the collective efforts of all stakeholders.
FX Code And compliance and accountability
Meanwhile , the CBN Governor explained the FX Code marked a new era of compliance and accountability. “It is not just a set of recommendations; this is an enforceable framework. ”
However, he said violations of the CBN Act 2007 and BOFIA Act 2020, would be be met with penalties and administrative actions. “Market participants must recognize that adherence to these principles is not merely about compliance but about restoring public trust in our financial system.”
Foreign Exchange Code and Financial Services Industry.
“Beyond the foreign exchange markets, the FX Code forms part of our renewed focus on compliance across the financial services industry and I am particularly pleased that we have the leadership of the industry in this room to reinforce a collective commitment to the journey ahead.”
Cardoso also emphasised the imperative of self regulation. “Self-regulation and conduct are at the core of the changes in culture we expect to see at play in the industry, and I expect the principles of the FX Code to be applied across other business areas.”
The Six Core Principles of FX Code
He also listed the six core principles upon which the FX Code is built —Ethics, Governance, Execution, Information Sharing, Risk Management and Compliance, and Confirmation and Settlement Processes. These principles he said , aligned , with international standards while addressing Nigeria’s unique challenges. “Together, they provide the foundation for a resilient and transparent market that inspires confidence among both domestic and international participants” .
. “Today, as we formally launch the FX Code, I call on all market participants to embrace its principles wholeheartedly. The six guiding principles and 52 sub-principles must become the standard for conduct across all participating institutions. Leaders in this room – Board Chairs, Managing Directors, and Chief Compliance Officers – must lead from the front. Embedding these standards within your organizations is not optional”.
He equally sternly warned against any move to undermine the principles. “Let me reiterate: the era of opaque practices is over. We will not hesitate to act against any institution or individual that undermines the integrity of our financial markets.The FX Code is a binding commitment to accountability and transparency—and we must all play our part”.
Cardoso Give Kudos Financial Markets Dealers Association (FMDA)
“I extend my appreciation to the Financial Markets Dealers Association (FMDA) for your efforts in training members on the FX Code and EFEMS. Your dedication to capacity building is critical to the success of these initiatives. To the Global Foreign Exchange Committee (GFXC) and all stakeholders, thank you for your invaluable support in bringing this milestone to fruition . Distinguished guests, as we now proceed to sign the FX Code, let this moment serve as a collective pledge to transparency, ethical conduct, and fairness in our market. Together, we can build a financial ecosystem that embodies resilience, global competitiveness, and economic prosperity.”
