The Central Bank of Nigeria (CBN) has recently released a list of approved Bureau de Change (BDC) dealers, leaving the Nigerian financial space buzzing with curiosity. In this fresh list, the total number of approved BDC dealers has been significantly reduced to 2,991, leaving many wondering about the reasons behind this drastic change. The document, aptly titled 'Approved BDCs,' was exclusively viewed by Investingport , adding an air of mystery to the unfolding situation. Shockingly, the licenses of a staggering 2,698 BDCs have been abruptly withdrawn, sending shockwaves through the financial sector.
CBN's Previous List and the BDC Phenomenon
Stepping back to 2022, the Central Bank had published a similar list in a document with the reference "REF: FPR/DIR/PUB/CIR/001/037," titled 'List of CBN Licensed Bureaux De Change As at December 31, 2021.' Back then, the CBN had granted approval to a staggering 5,689 black market dealers, a figure that now appears astonishing in light of the recent drastic reduction. BDCs in Nigeria have always been at the forefront of influencing exchange rates, making them an integral part of the nation's economic landscape.
The evolution of BDCs in Nigeria has been nothing short of astounding. Taking a trip down memory lane, we find that prior to the era of Bola Tinubu, the number of BDC operators had seen remarkable growth from a mere 74 in 2005 to an astounding 5,689 in 2021. This meteoric rise, which exceeded 100%, occurred under the leadership of Emefiele. However, the situation took an unexpected turn when the sale of foreign exchange to BDCs was banned, citing concerns over round tripping and involvement in illegal financial flows.
Policy Advisory Council's Recommendations
Under Tinubu's reign, a pivotal document titled 'Policy Advisory Council Report: National Economy Sub-committee' surfaced, advocating for essential reforms to bring stability to the BDC sector. The council urged the implementation of key reforms, including raising the capitalization requirements for BDC operators. Additionally, the council suggested granting Nigerian banks the authority to operate as primary dealers, responsible for supplying the forex market. These proposed changes aimed to foster a more robust and secure foreign exchange landscape.
The Volatile Naira: The I&E Window Dilemma
Following the CBN's decision to float the naira in June, the national currency took a rollercoaster ride, plummeting to N795.28 at the Investors' and Exporters' FX window. The situation worsened in the parallel market, where the naira closed at N820 per dollar, the British pounds closed at N1095, and the Euro at N905. Aminu Gwadebe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), voiced his concern over the naira's volatility and attributed it, in part, to BDCs' exclusion from the Investors' and Exporters' FX window. According to Gwadebe, the I&E window was designed to stand on three legs – the banks, the CBN, and the BDCs – but the absence of the latter has left it incomplete.
As the CBN's list of approved BDCs undergoes significant changes, the Nigerian foreign exchange market finds itself in a state of perplexity. The unpredictability of the naira's value continues to impact Nigeria's economic growth, and the exclusion of BDCs from the I&E window only adds to the mystery. With the winds of change blowing through the BDC landscape, it remains to be seen how this rollercoaster ride will unfold, and whether the proposed reforms will chart a path towards stability or lead to further bursts of uncertainty.