By Christopher Ajewole 
Nigeria’s Bureau De Change (BDC) operators are currently confronted with a significant issue: they are unable to obtain dollars from commercial banks, despite directives from the Central Bank of Nigeria (CBN). This scarcity poses a risk to the stability of the naira, as highlighted by Aminu Gwadabe, the president of the Association of Bureaux De Change Operators of Nigeria (ABCON).
The circumstances are critical, with BDCs facing challenges due to limited foreign exchange availability, unfavorable exchange rates, a decrease in participating banks, reduced profit margins, and uncertainties in business operations. These elements have combined to create a precarious situation, leading to currency substitution and speculative activities that are undermining the naira’s value.
How the Naira is Reacting
The impact of these challenges is already evident in the foreign exchange market. Recent data shows:
The naira dropped to ₦1,580/$ in the parallel market on Thursday and Friday, a ₦55 (3.5%) decline from ₦1,525/$ on Wednesday.
In the official market, the naira depreciated by ₦43/$, falling from ₦1,499/$ on Monday to ₦1,542/$ on Friday.
What Experts Are Saying
Financial analysts warn that the naira’s decline could continue unless urgent measures are taken. Investment expert Ayodeji Ebo cautions that falling treasury bill yields may reduce Foreign Portfolio Investment (FPI) inflows, further limiting the country’s foreign exchange supply.
In response to these challenges, the CBN has implemented initiatives such as the Enhanced Foreign Exchange Market System (EFEMS), designed to streamline operations and enhance price discovery. Nevertheless, additional measures are necessary to stabilize the naira and restore confidence in the foreign exchange market.
More on BDC Operators
Gwadabe has expressed his concerns regarding the challenges faced by BDC operators, which are undermining confidence in the foreign exchange market structure. Gwadabe highlighted that licensed currency traders are not experiencing a convergence of rates between the official market and the parallel market, a primary goal of the Central Bank of Nigeria’s (CBN) reforms in the FX market.
At present, the rate in the parallel market is trading lower than the interbank sales proceeds to BDCs, rendering it unprofitable for these operators to purchase from banks. For example, banks are providing a weighted average rate of N1505/$, while the parallel market rate stands at N1503/$. This scenario is not sustainable and poses a risk to the stability of the naira.
He underscored the importance of ongoing regulatory supervision to promote transparency within the foreign exchange market. In particular, he urged the Central Bank of Nigeria (CBN) to:
· Ensure Transparency: Mandate that banks disclose the maximum margin applied to sales to Bureau de Change (BDC) operators.
· Regulate Sales Volumes: Establish a prudent percentage limit on the volumes of sales related to diaspora remittances and portfolio investment proceeds from banks to BDCs.
· Adjust Intervention Sales: Persist in adjusting intervention sales to BDCs to bolster the strength of the naira.
He praised the fiscal authorities for their efforts in reducing the fiscal deficit, which has had a favorable effect on exchange rate determination. Nevertheless, he called for the declaration of a State of Emergency regarding inflation and encouraged government agencies and state governments to implement significant measures aimed at curbing inflation and alleviating the hardships faced by many Nigerians.
Nigeria’s BDC Operators Struggle as Dollar Scarcity Threatens Naira Stability
Nigeria’s Bureau De Change (BDC) operators are facing a severe dollar shortage, despite directives from the Central Bank of Nigeria (CBN) for commercial banks to supply foreign exchange. This crisis is escalating concerns over the stability of the naira, as highlighted by Aminu Gwadabe, president of the Association of Bureaux De Change Operators of Nigeria (ABCON).
Valentine Alexander
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