CBN’s FX Code: A Bold Step Toward Market Integrity, Economic Stability

Last week, the Central Bank of Nigeria under the leadership of the Governor, Olayemi Cardoso took a decisive step toward restoring sanity to the foreign exchange (FX) market with the introduction of its new FX Code. The policy is not just another regulatory framework, it is a much-needed reform to eliminate the distortions, unethical practices, and systemic abuses that have long plagued Nigeria’s foreign exchange ecosystem.

For too long, Nigeria’s foreign exchange market operated in a manner that benefited a privileged few at the expense of the larger economy. The multiple exchange rate regime allowed arbitrage opportunities, where some entities gained unfair access to cheaper dollars, creating artificial scarcity and distorting price discovery.

This led to a huge $7bn foreign exchange backlog—an unacceptable burden that slowed economic growth and weakened the naira.

The $7bn of FX backlogs that have taken over 12 months to verify has led to the discovery of multiple unethical and even illegal practices that Nigeria should not be proud of as a nation.

With the launch of the FX Code, the CBN Governor Olayemi Cardoso has sent a clear message: those days are over.

Cardoso assumed the leadership of the CBN at a time when key economic indicators were pointing southwards. The economy faced a stockpile of debts of more than $108.2bn, maturing obligations, misaligned currency with over N22tn printed bank notes stoking inflation, high interest rates, foreign direct investment draught, and an acute dollar shortage.

Revamping the economy and turning the above negative economic indicators around within his first year in office was by no means a simple task.

Against all odds, Cardoso courageously started a series of bold reforms, many considered long overdue. The reforms were unveiled, and their implementation took off immediately, including exchange rate unification.

The exchange rate reforms directed by President Bola Tinubu saw Cardoso unifying all multiple rates into the Investors’ and Exporters’ Forex Window.

That policy required that all applications for medicals, school fees, business travel allowance/personal travel allowance, and SMEs would continue to be processed through the I&E window. The operational changes to the foreign exchange market also include the re-introduction of the “Willing Buyer, Willing Seller” model at the I&E Window

The newly launched FX Code introduces six core principles—Ethics, Governance, Execution, Information Sharing, Risk Management and Compliance, and Confirmation and Settlement Process—all aligned with global best practices.

These principles will ensure that Nigeria’s foreign exchange market operates transparently, fairly, and in a way that supports sustainable economic growth.

The FX Code is not just about punishing past offenders; it is about building a system that works for everyone. By mandating strict compliance and regular reporting, the CBN is ensuring that all market participants—banks, financial institutions, and businesses—adhere to ethical and transparent practices. This will boost investor confidence, attract foreign direct investment, and strengthen Nigeria’s external reserves, which have already grown by 12.74 per cent to $40.68bn.

Furthermore, the CBN’s recent reforms, including the unification of exchange rate windows and the introduction of the Electronic Foreign Exchange Matching System, have already yielded positive results. The naira’s appreciation from N1,663.90 in early December 2024 to N1,536.72 is proof that these policies are working. Stability in the FX market will further reduce inflationary pressures, enhance price stability, and improve the purchasing power of Nigerians.

One of the biggest game changers of this new FX Code would be its firm stance against unethical and illegal practices. The forensic audit of FX backlogs has exposed multiple irregularities, highlighting the need for strict regulation. The commitment to sanctioning violators ensures that financial institutions and individuals who engage in malpractice will face consequences. This level of accountability is essential for a fair and efficient FX market.

Additionally, experts say the discontinuation of quasi-fiscal interventions—where the CBN previously engaged in off-budget financing—has restored credibility to monetary policy. By focusing on its core mandate, the CBN is now creating a more predictable and market-driven FX environment, which is crucial for long-term economic growth.

But, the success of the FX Code will depend on full compliance from market participants. The requirement for institutions to submit self-assessments, detailed implementation plans, and quarterly reports ensures continuous monitoring and enforcement. This proactive approach will help prevent future distortions and create a more resilient financial system.

While some may argue that regulation alone cannot fix all of Nigeria’s FX challenges, the truth is that without a well-structured and transparent market, sustainable solutions will remain elusive. The FX Code is not just another policy—it is a fundamental reset that paves the way for a more efficient, investor-friendly, and stable economy.

The CBN deserves commendation for this bold initiative. Now, it is up to financial institutions, businesses, and stakeholders to embrace these reforms and work toward a more transparent and robust FX market that benefits all Nigerians.

CBN’s FX Code: A Bold Step Toward Market Integrity, Economic Stability is first published on The Whistler Newspaper