The Central Bank of Nigeria’s (CBN) decision to approve 82 new Bureau De Change (BDC) licences has stirred notable concern across Abuja’s foreign exchange ecosystem, with operators and analysts warning that the move, though potentially beneficial in the long term, may heighten instability in a market still recovering from past regulatory shocks.
The approvals form part of the apex bank’s ongoing effort to reform and liberalise the FX market following years of fluctuating directives and extensive sanctions against operators.
However, while the CBN frames the new licences as a step toward increased competition and transparency, many within the industry argue that the timing and scale of the rollout could impose additional strain on the FX retail segment, particularly given the limited supply of foreign currency and the rising cost of compliance.
Operators fear market saturation
In Abuja’s major FX trading hubs, from Wuse Zone 4 to Garki, the immediate reaction to the new licensing wave has been cautious at best.
Although some operators acknowledge that new entrants may promote innovation and broaden access points for legitimate FX dealings, many fear that introducing 82 fresh BDCs at once risks flooding the market without a corresponding boost in FX supply.
One Abuja-based operator who requested anonymity said the increased number of players may worsen the pressure on an already stretched retail FX environment.
According to him, many existing BDCs continue to struggle with declining transaction volumes, lower margins, and tighter controls introduced under the latest regulatory framework.
“Most of us are still adjusting to higher reporting obligations and increased capital requirements. Bringing 82 more BDCs into the market when the dollar supply is this thin only increases the competition for the same scarce resources,” he said.
- Others worry that more licences could lead to aggressive undercutting among operators.
- Without adequate supply from formal channels, they emphasise, a surge in participants could inadvertently revive the arbitrage-driven practices that previous reforms sought to curb.
FX analyst Chude Marvelous noted that Nigeria’s FX space remains fragile, and the sudden onboarding of dozens of new operators could replicate past mistakes.
- He referenced previous eras when rapid and poorly monitored licensing created opportunities for speculative behaviour and contributed to rate volatility.
“Licensing 82 BDCs in one sweep is significant. If supervision is not airtight, we could see unhealthy competition, excessive rate fragmentation, and behaviours that undermine pricing integrity in the retail FX market,” he warned.
Policy analyst Dr. Nathan Udo echoed similar sentiments, stressing that the CBN should have adopted a more gradual approach.
In his view, the FX market is still too vulnerable for rapid expansion of BDC participation without first bolstering inflows.
“The FX market is recovering from multiple shocks. Approvals of this scale should be sequenced, allowing the regulator to monitor liquidity conditions and operator behaviour before adding more players. Otherwise, the distortions may outweigh the intended benefits,” he said.
He added that reforms will only be effective if supported by stronger FX supply sources, particularly export proceeds, remittances, and foreign investment inflows.
Compliance obligations and capital requirements add pressure
Under the new reforms introduced by the CBN earlier this year, BDCs are expected to meet higher capitalisation thresholds, adhere to stricter anti–money laundering requirements, and file real-time transaction data. Operators say while these reforms are necessary, many fear that compliance costs may put undue pressure on newcomers and small players.
A BDC owner in Abuja remarked, “The new conditions are tough. Not everyone can meet them. The question is: how many of the 82 newly licensed BDCs can operate sustainably in this environment without cutting corners?”
Nairametrics reached out to the President of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadebe, for comment, but he did not respond as of the time of filing this report.
Experts Call for a Gradual Approach
Market experts insist that the CBN should adopt a phased implementation strategy to monitor how the new BDCs influence liquidity and pricing before issuing more licences. They argue that a controlled expansion of the sector is essential to avoid replicating past experiences of oversaturation, regulatory breaches, and speculative attacks on the naira.
Financial expert and policy analyst Dr. Nathan Udo argued that the approval of additional licences should have been “sequenced more cautiously.”
He noted, “The CBN should carefully sequence these approvals. The FX market is still recovering from previous shocks. A rapid influx of players without adequate monitoring could create distortions that outweigh the intended benefits.”
“Regulatory tightening is good, but the FX market is still fragile. Approving 82 new BDCs at once risks creating excess retail capacity without boosting supply. The likely outcome is aggressive competition, price undercutting, and possible re-emergence of parallel market distortions,” he noted.
He added that the CBN must prioritise expanding FX sources—such as diaspora remittances, export proceeds, and investment inflows—to ensure that BDC reforms produce the intended stabilising effects.
- Some industry watchers also questioned whether the new licensing wave signals a broader shift in the CBN’s FX management strategy.
- After initially delisting and restricting BDCs during previous reforms, the apex bank now appears to be repositioning them as regulated partners in improving market transparency.
- In 2023, the CBN revoked the licences of 4,173 BDC operators over serial regulatory breaches, which reduced the number of active BDCs to around 1,517.
Another Abuja-based economist, Fatima Danladi, welcomed the reforms but urged the CBN to adopt a measured approach.
“Reforms are good, but the pace must match Nigeria’s delicate FX realities. BDCs play an important role in retail FX access. However, licensing too many operators without improving dollar supply may not solve the underlying issues,” she said.
Meanwhile, several operators are calling on the CBN to accompany the licensing approvals with clear guidelines on access to official FX windows, arguing that without consistent supply, many of the newly approved BDCs could become inactive or resort to unhealthy market practices.
What you should know
In May 2024, the CBN released the approved guidelines for operations of Bureau De Change (BDCs) across the country while asking BDCs to reapply for licensing online with the new regulatory requirements in the next six months.
According to the new regulatory requirements, Tier-1 BDCs are mandated to have a minimum capital base of N2 billion, while that of Tier-1 was set at N500 million.
Furthermore, the bank set the application fee for a Tier-1 license at N1 million and that of Tier-2 at N250,000. The licensing fees for Tier-1 and Tier-2 BDCs were set at N5 million and N2 million, respectively.
The bank also asked BDCS to meet the requirements of the Tier of license they are applying for within the next six months.
The new guidelines approved for Tier-1 BDCs allowed them to operate across the 36 states of the country and the FCT and open franchises all over the country, subject to the approval of the CBN.
