The Bureau De Change (BDC) operators in Nigeria have attributed the recent depreciation of the Naira in the parallel market to a significant decline in foreign exchange (FX) availability. This reduction in supply, they claim, stems largely from changes in Central Bank of Nigeria (CBN) policies and the dominance of International Money Transfer Operators (IMTOs) in the remittance space.
Aminu Gwadabe, Chairman of the Association of Bureau De Change Operators of Nigeria (ABCON), explained that traditional sources of forex, such as exports and external remittances, have dwindled, forcing BDCs to rely on sporadic interventions from the CBN. According to Gwadabe, IMTOs have now taken control of international remittance payments, diverting a significant portion of funds away from BDCs. This situation has further worsened as non-oil export proceeds—another key source of FX—have also declined.
Gwadabe stated, “The liberalisation of the market has hindered supply inflows, drastically reducing available funds. IMTOs have ambushed the international remittance space, leaving us with reduced access to critical funds.”
He added that, historically, BDC operators received weekly disbursements of up to $40,000 from the CBN, but that figure has now dropped to around $20,000, further exacerbating the situation.
Calls for CBN Intervention
To address the forex shortage, Gwadabe called for more consistent intervention from the CBN, warning that the Naira’s depreciation in the parallel market would likely continue unless additional liquidity is provided. The Naira had hit a seven-month low in the parallel market, trading at N1,700/$ by the end of September 2024, although it rebounded slightly at the start of October.
The CBN has previously taken steps to regulate IMTOs and channel more foreign exchange through official avenues. In 2023, Nigeria received about $19.5 billion in remittances—approximately 35% of Africa’s total—yet only 10% of these funds entered the official forex market.
CBN’s Regulatory Measures
In response to these challenges, the CBN introduced a series of regulatory reforms aimed at liberalizing the foreign exchange market. These include the removal of a +2.5% and –2.5% cap on the exchange rate for remittance transactions and raising the application fee for IMTO licenses from N500,000 to N10 million. Additionally, the CBN imposed a minimum operating capital requirement of $1 million for both foreign and local IMTOs.
As a result, international remittance inflows have surged. By August 2024, remittances through IMTOs reached $585 million, a 130% increase compared to the same period in 2023. Data from the CBN shows that remittance inflows rose by 39% in the first quarter of 2024, totaling $1.07 billion, up from $770.23 million during the same period in 2023.
BDCs Face an Uncertain Future
Despite these gains, BDC operators remain concerned about their shrinking role in the forex market. Recent CBN guidelines also raised the minimum capital requirement for tier-1 BDCs from N35 million to N2 billion, a significant increase that will further challenge smaller operators.
As the CBN continues to bolster international remittances through IMTOs, BDCs may face ongoing difficulties in securing adequate forex, leaving their future role in the market uncertain.
