As I scrolled through my laptop, a news alert caught my attention – “Dollar Crashes Against Naira”. After conducting some research, I discovered that the Central Bank of Nigeria’s launch of the FX code has sent shockwaves through the foreign exchange market, causing the dollar to crash sharply against the naira.
But what exactly is the FX code? The FX code, short for Foreign Exchange Code, is a set of guidelines introduced by the Central Bank of Nigeria to promote transparency, ethical conduct, and good governance in the Nigerian foreign exchange market. It’s essentially an adoption of the FX Global Code, tailored to Nigeria’s foreign exchange market.
The FX code is built around six core principles aimed at fostering a fairer and more efficient market. These principles include ethics, governance, execution, information sharing, risk management and compliance, and confirmation and settlement processes.
Here’s an example of how the FX code works: Let’s say a Nigerian business owner, Mrs. Johnson, wants to import goods from China worth $10,000. She needs to exchange her naira for dollars to pay for the goods. The FX code ensures that the bank or financial institution she uses to exchange her naira provides her with fair and transparent exchange rates, and that the transaction is conducted in a secure and efficient manner.
Back to the news, The parallel market, also known as the black market, also saw the naira close at N1,625 on Wednesday, with a gain of 0.55% or N9. The dollar traded for N1,625 as against an average rate of N1,634 quoted on Tuesday in the black market.
featured image by Artyom Kulakov
