CBN to Clear Pending Forex Backlogs, Introduces FX Code

By Adedapo Adesanya

The Governor of the Central Bank of Nigeria (CBN), Mr Yemi Cardoso has announced that forensic verification to clear all pending foreign exchange backlogs is now completed and payments will commence soon.

Speaking during the launch of the foreign exchange code, Mr Cardoso lamented how it took the bank over 12 months to clear the $7 billion foreign exchange backlog in 2024.

In March last year, the CBN announced clearance of the backlog, effectively eliminating a legacy burden.

The apex bank boss said the era of multiple exchange rates which accorded privileges to a select few was gone, adding that all deposit money banks that flout the ethics of the FX code will face sanctions.

Mr Cardoso also criticised what he described as the era of unprecedented ways and means of financing which impacted negatively on the economy, leading to a high inflation rate and currency depreciation.

The FX Code is a guideline for the banking industry to promote ethical conduct among dealers in the Nigerian foreign exchange market.

On the Electronic foreign exchange matching system launched in December 2024, the central bank governor assured that the intervention has led to improved market transparency and efficiency.

He reiterated the bank’s commitment to exchange rate stability, saying the nation’s external reserve grew to $40.7 billion as of December 2024.

The CBN noted that the new FX Code was in response to developments in the financial landscape in recent years, adding that it will set out standards to holistically strengthen and promote the integrity and effective functioning of the wholesale foreign exchange (FX) market in Nigeria.

“It will facilitate better functioning of the market, further reinforcing Nigeria’s flexible exchange rate regime.

“The FX Code is expected to promote a robust, fair, liquid, open, and appropriately transparent market in which a diverse set of market participants, supported by resilient infrastructure, can confidently and effectively transact at competitive prices that reflect available market information in a manner that conforms to acceptable global behavioural standards and best practices.

“The FX Code applies to Market Participants. “These are Authorised Dealers licensed by the CBN under the CBN Act 2007, and the Bank and Other Financial Institutions Act (BOFIA) 2020 and other participants that engage in the wholesale foreign exchange business in Nigeria as part of their licensed business.”

According to the apex bank, the FX Code is structured around six leading principles, namely ethics, governance, execution, information sharing, risk management and compliance, and confirmation and settlement processes.