By Michael Nwadike

THE decision of the Central Bank of Nigeria (CBN) to permit participation of licensed Bureau De Change (BDC) operators in the Nigerian Foreign Exchange Market has triggered massive gain for the naira and narrowing of gaps between official and parallel market rates. By allowing each BDC to purchase up to $150,000 weekly, the apex bank has taken major step to boost FX liquidity and strengthen the naira amidst rising FX reserves. For many stakeholders, the CBN move aligns with its long-term strategy to make FX available to retail-end users and businesses with genuine need for forex. The Bureaux De Change (BDC) segment of the forex market is central in making dollars available to retail end users and businesses requiring the greenback for imports and other transactions. For years, the Central Bank of Nigeria (CBN) has undertaken critical reforms to unify Nigeria’s exchange rate, eliminating distortions and restoring transparency. This unification has enabled the apex bank to clear the outstanding foreign exchange obligations, giving businesses—ranging from manufacturers to airlines—the confidence to plan and invest in the future.

The apex bank further instituted critical reforms to shape the BDC segment of the market through recapitalisation and subsequent approval of 82 BDC operators under its revised guidelines. The Tier-1 operators recapitalized to the tune of N2 billion whole Tier-2 sourced N500 million. The CBN exercised its powers conferred under the Bank and Other Financial Institutions Act (BOFIA) 2020, and the Regulatory and Supervisory Guidelines for Bureaux De Change Operations in Nigeria 2024 (the Guidelines), has granted Final Licenses to 82 Bureaux De Change (BDCs) to operate”. The 82 recapitalised BDCs will now access $150,000 weekly injection from the CBN. However, the CBN says it will continue to update the list of BDCs with valid operating licences for public verification. In a circular signed by the Director of the Trade and Exchange Department, Dr Musa Nakorji, and addressed to authorised dealer banks and the general public, the apex bank said the FX injection would improve foreign exchange liquidity in the retail segment of the market and meet the legitimate needs of end users.

“To ensure the availability of adequate foreign exchange liquidity in the retail segment of the foreign exchange market to meet the legitimate needs of end users, this is to inform market participants that all BDCs that are duly licensed by the CBN are allowed to access foreign exchange from the NFEM through any Authorised Dealer of their choice, at the prevailing exchange rate,” the bank stated. The apex bank added that authorised dealer banks must carry out full Know-Your-Customer and due diligence checks on BDC clients before selling foreign exchange to them. “Authorised dealers are required to complete the necessary KYC and due diligence for their BDC clients in line with applicable regulations and the internal risk management framework,” the circular read. It explained that upon completion of these requirements, foreign exchange could be sold to BDCs strictly in line with existing operational rules, but subject to a weekly limit. “Upon completion of these requirements, foreign exchange may be sold to BDCs for utilisation in line with the existing BDC Guidelines, subject to a maximum of $150,000 per week for each BDC,” the CBN said.

The bank also imposed strict reporting and transparency requirements, directing that “all licensed BDCs shall ensure the timely and accurate submission of returns to the Central Bank electronically, and in accordance with extant regulations.” To prevent hoarding and speculative positions, the CBN warned that BDCs must not retain unutilised foreign exchange purchased from the market. “Any unutilised balances are expected to be sold back to the market within 24 hours,” the circular stated, adding that “BDCs are not permitted to keep funds purchased from NFEM in their positions.” The apex bank further tightened settlement rules, mandating that all foreign exchange transactions by BDCs be routed through settlement accounts with licensed financial institutions. “Settlement of foreign exchange transactions by BDCs with Authorised Dealers and/or with end user customers shall be conducted exclusively through settlement accounts held with licensed financial institutions,” it said. It also barred third-party transactions and limited cash settlement, noting that “third-party transactions are prohibited, and settlement of foreign exchange sales in cash is limited to a maximum of 25 per cent of each transaction amount.” The CBN stressed that existing BDC guidelines would continue to apply to all transactions, signalling a blend of wider market access and strict regulatory oversight as it seeks to stabilise and deepen the foreign exchange market.

The new CBN guidelines for the sector requires all Tier-1 BDCs to operate nationally, while the Tier-2 BDCs can only operate in one state within the Federation. The capital raising was part of reforms to re-position the BDC sub-sector to play its envisioned role in the foreign exchange market in Nigeria. The guideline was issued after the conclusion of stakeholder consultations and in exercise of the powers conferred on the CBN by Section 56 of the Banks and Other Financial Institutions Act (BOFIA) 2020. The guidelines, amongst others, introduces new licensing requirements and categories of BDCs as well as revises the permissible activities, financial requirements, corporate governance requirements and AML/CFT/CPF provisions for BDCs. It requires that all existing BDCs re-apply for a new license according to any of the Tiers or license category of their choice. According to the new guideline, “Tier-1 BDC may operate in any state of the Federation and the Federal Capital Territory (FCT), may establish branches and appoint franchisees in any State and FCT, subject to the written approval of the CBN and shall maintain a minimum distance of one kilometre between its branches, its branch and a franchisee, and between its franchisees”. It is permitted to exercise oversight on its franchisees, with all franchisees allowed to adopt their franchisor’s name, logo, branding, technology platform and regulatory rendition requirements.

By the new rule, Tier 2 BDC Licence is permitted to operate only in one State of the Federation or the FCT; allowed to establish five branches in a State of operation, subject to the written approval of the CBN and required to maintain a minimum distance of one kilometre between its branches but is not allowed to appoint franchisees.

The new rule further stops commercial, merchant, non-interest and payment service banks., financial holding companies, other Financial Institutions (OFIs), including International Money Transfer Operators and payment service providers, serving staff of financial services regulatory and supervisory agencies and serving staff of regulated financial services providers, among others from owning BDC license.

On the FX sales front, BDCs are capped at a 1% spread above their acquisition rate, a margin designed to reward efficiency without inflating end-user costs. The apex bank has restated that the continuity signals no retreat from its zero-tolerance stance on FX distortions.

CBN Governor, Olayemi Cardoso’s team has repeatedly emphasised, the post-2023 reforms—unifying exchange rates and dismantling naira arbitrage—have stabilized reserves and curbed capital flight. The BDC circular reinforces this trajectory, embedding retail access within a compliant scaffold rather than reverting to the opaque “old regime” of the 2010s, where BDCs were accused of siphoning billions in subsidized dollars.

A cornerstone of the guidelines—and perhaps its most innovative guardrail—is the stipulation that no more than 25 per cent of any BDC transaction may be settled in physical cash. The remaining 75 per cent must channel through debit or prepaid cards issued by licensed financial institutions, transforming what could have been a cash-flooding policy into a digital bulwark for transparency.

The hybrid model not only mitigates the risks of informal dollar proliferation—often linked to smuggling or money laundering—but also funnels activity through the banking system, where every naira and dollar leaves an electronic footprint.

The naira has recently shown a modest but noteworthy recovery, appreciating to N1,350/$ in the official market and N1,440/$ in the parallel market at the weekend.

Managing Director/CEO Financial Derivatives Company Limited, Bismark Rewane, explained that even amid this improvement, the gap between the official and parallel rates reflects underlying market frictions.

“This divergence stems from lingering supply-demand imbalances, heightened speculative activity, and uneven access to foreign exchange, especially for smaller end users who frequently turn to the parallel market,” he said in emailed note to investors.

Country Director, World Bank in Nigeria, Mr. Mathew Verghis, said the critical issue in exchange rate is not necessarily the rate at which the naira is exchanged against the dollar or other global currencies, but the gap between official and parallel market rates.

Speaking at the Agusto & Co., 2026 Economic Roundtable, themed “Nigeria’s Banking Recapitalisation: What Does It Mean for the Nigerian Economy?”, in Lagos, he said reduced gap between the official and parallel markets represents positive feedback for the market.

The Central Bank of Nigeria (CBN) has, however, taken key steps to bridge the gaps.

Rewane explained that by directly increasing dollar availability to retail FX intermediaries, the move aims to ease pressures for legitimate end users. The intention is clear: as supply rises and speculative demand moderates, the gap between official and parallel rates could narrow.

Rewane had earlier estimated the fair value of the naira at about N1,257 to the US dollar.

He posits that the local currency is undervalued by approximately 11 per cent when assessed using the purchasing power parity (PPP) model.

He noted that currencies typically converge towards their PPP-implied values over a five-year horizon.

According to him, the appropriate exchange rate based on current PPP estimates stands at N1,256.79 to the dollar, reinforcing the view that the naira remains below its fair valuation level.

President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said the naira has remained stable across market for several months, ending years of volatility in the market.

He said injection of more liquidity through BDCs will support FX liquidity and create sustainable pathway for naira stability.

The CBN under Cardoso is cultivating multiple FX sources to increase dollar inflows, boost dollar access to manufacturers and retail end users.

From moves to improve diaspora remittances through new product development, the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and enabling timely access to naira liquidity for IMTOs, the apex bank has simplified dollar-inflow channels for authorized dealers and other players in the value chain.

The move has led to substantial accretion to the gross FX reserves and supported the stability of the naira.

Given that FX inflows to the economy are strategic in achieving monetary and fiscal policy stability, the CBN under Cardoso puts in a lot of efforts in attracting more inflows into the economy.

Diaspora remittances to Nigeria, estimated at $23 billion annually, remain a reliable source of forex to the domestic economy. There are also other sources and policies that are being explored by the apex bank to keep dollar inflows coming.

The CBN’s initiatives have supported continued growth in these inflows, aligning with the institution’s objective of doubling formal remittance receipts within a year.

•Nwadike, an economist, lives in Abuja

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