Central Bank of Nigeria Introduces New Guidelines for Bureau de Change (BDC) Operators
The Central Bank of Nigeria (CBN) has issued a fresh set of guidelines aimed at regulating the operations of Bureau de Change (BDC) operators within the country's foreign exchange market. This development comes shortly after Aminu Gwadabe, President of the Association of Bureau de Change Operators of Nigeria (ABCON), advocated for BDCs to have access to the official forex market. While the official forex market has witnessed significant appreciation of the naira, challenges persist in the parallel market.
Key Changes in the Guidelines
In response to these dynamics, the Central Bank of Nigeria has imposed restrictions on BDCs by fixing their buying and selling rates against the official window. The directive, conveyed through a circular issued by Dr. O.S Nnaji, Director of the Trade and Exchange Department, mandates BDC operators to maintain a spread within -2.5 percent and +2.5 percent of the previous day's Nigerian Foreign Exchange market window weighted average rate.
Implementing the Directive
Effectively, if the weighted average rate of the official window concludes at N700 to a dollar, BDCs will only be permitted to sell above N718 per dollar on the following day. Moreover, the CBN has emphasized the obligation for BDC operators to submit periodic reports on the Financial Institution Forex Rendition System (FIFX), with the warning that non-compliance may lead to sanctions, including potential withdrawal of operating licenses.
CBN's Rationale and Impact
The Central Bank of Nigeria has taken these measures as part of its strategy to enhance the efficiency of the forex market, with immediate effect. The bank anticipates that these measures will contribute to the reduction and alignment of the diverse exchange rates prevalent in the country.
Exchange Rate Snapshot
Current data indicates that the spread between the black market and the official window has widened to N120.48 as of the close of business on August 18, 2023. While the naira appreciated to N739.52/$ in the official market, it traded at N860/$ in the parallel market and N858.5/$ in the Peer-to-Peer market, commonly utilized by crypto traders.
Implications for CBN-BDC Relationship
The CBN's decision to regulate the extent to which BDCs can engage in buying and selling forex marks a significant change in the landscape. This move could signify a potential shift towards reintegrating over 5,000 BDC operators into the forex market. Aminu Gwadabe, in a prior interview, suggested that this step could align with the CBN's aims of monetary policy effectiveness and forex market stability.
BDC Landscape in Nigeria
Presently, there are 5,691 CBN-approved BDC operators in Nigeria. Notably, the top ten states with the highest number of BDC operators are Lagos (2,958), FCT (1,179), Kano (981), Anambra (259), Kaduna (55), Abia (50), Oyo (32), Enugu (25), and Rivers (24).
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