Market expects improved FX liquidity as 82 recapitalised BDCs get $150,000 weekly

Expectations of improved foreign exchange liquidity have strengthened across Nigeria’s financial markets following the decision of the Central Bank of Nigeria (CBN) to grant 82 recapitalised Bureau De Change (BDC) operators access to up to $150,000 weekly from the Nigerian Foreign Exchange Market (NFEM). The move, which industry stakeholders describe as both strategic and timely, […]

Expectations of improved foreign exchange liquidity have strengthened across Nigeria’s financial markets following the decision of the Central Bank of Nigeria (CBN) to grant 82 recapitalised Bureau De Change (BDC) operators access to up to $150,000 weekly from the Nigerian Foreign Exchange Market (NFEM).

The move, which industry stakeholders describe as both strategic and timely, is aimed at easing dollar scarcity in the retail segment of the market, narrowing the gap between official and parallel exchange rates, and reinforcing confidence in the naira.

Daily Trust however learnt that the dollar supply is restricted only to 82 licensed and recapitalised BDC operators.

Our correspondent reports that under revised guidelines issued pursuant to the Banks and Other Financial Institutions Act (BOFIA) 2020, existing BDCs were required to recapitalise and reapply for licences under new categories. Only 82 operators met the new requirements and were granted final approval.

Tier-1 BDCs were mandated to raise a minimum capital base of N2 billion and are permitted to operate nationwide, establish branches across states, and appoint franchisees subject to regulatory approval.

Tier-2 BDCs, with a minimum capital requirement of N500 million, are limited to operating within a single state or the Federal Capital Territory and may establish up to five branches but cannot appoint franchisees.

With recapitalisation completed and governance frameworks strengthened, the CBN has now opened a structured pathway for these operators to access up to $150,000 weekly through authorised dealer banks at prevailing market rates.

For months, analysts had argued that limited access to foreign exchange at the lower end of the market—particularly for small businesses, travelers, students, and import-dependent retail operators—was sustaining demand pressures in the parallel market.

By integrating licensed BDCs into the formal FX supply chain under stricter regulatory conditions, the apex bank appears to be addressing that structural imbalance.

 

Strengthening the retail FX segment

The BDC sub-sector occupies a unique position within Nigeria’s FX ecosystem. Unlike commercial banks that cater largely to corporates and large-ticket transactions, BDCs primarily serve retail customers and small-scale businesses with legitimate forex needs.

These include payments for school fees abroad, medical expenses, business travel allowances, and small-scale imports.

In recent years, however, the sector has undergone significant transformation. Following concerns about weak oversight, speculative activities, and rent-seeking behavior in the past, the CBN introduced sweeping reforms that reshaped licensing, governance, and capital requirements.

 

Liquidity boost and market impact

Market participants say the weekly allocation, while modest relative to overall FX demand, could significantly improve liquidity in the retail segment when aggregated across 82 operators.

If fully utilised, the weekly injections could amount to over $12 million flowing directly into the retail market segment, easing pressure that would otherwise spill into the parallel market. Over a month, this translates into roughly $50 million in potential supply targeted at genuine end users.

Analysts believe this incremental supply may help moderate speculative demand and compress the spread between official and parallel market rates.

In recent weeks, the naira has shown signs of stabilisation, supported by improved reserves and policy clarity. Additional retail liquidity is expected to consolidate those gains.

Managing Director of Financial Derivatives Company Limited, Bismark Rewane, had recently noted that persistent divergence between official and parallel rates often reflects uneven access to FX and residual market frictions. Increasing supply at the retail level, he argues, is critical to restoring alignment and deepening confidence.

“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.

Similarly, the Country Director of the World Bank in Nigeria, Mathew Verghis, has emphasized that the size of the rate gap—rather than the nominal exchange rate itself—is a more meaningful indicator of market efficiency and stability. A narrower spread signals improved transparency, better price discovery, and reduced arbitrage incentives.

 

Guardrails against speculation

While expanding access, the CBN has simultaneously reinforced safeguards designed to prevent abuse and speculative hoarding.

Authorised dealer banks are required to conduct full Know-Your-Customer (KYC) checks and due diligence before selling foreign exchange to BDCs. Weekly purchases are capped at $150,000 per operator, ensuring no single entity dominates allocations.

To prevent hoarding or position-taking, any unutilised foreign exchange must be resold into the market within 24 hours. BDCs are expressly prohibited from retaining purchased FX in open positions.

Settlement rules have also been tightened. All transactions must pass through settlement accounts held with licensed financial institutions. Third-party transactions are barred, and cash settlements are limited to a maximum of 25 per cent of any transaction value. The remaining 75 per cent must be executed through electronic channels such as debit or prepaid cards.

This hybrid settlement model is designed to curb informal dollar circulation, enhance traceability, and strengthen anti-money laundering controls. By routing most transactions through the formal banking system, regulators ensure that both naira and dollar flows leave a clear digital footprint.

In addition, BDCs are capped at a 1 per cent spread above their acquisition rate—a margin intended to reward operational efficiency without imposing excessive costs on end users.

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.

 

Aligning with Broader FX Reforms

The integration of recapitalised BDCs into NFEM forms part of a broader reform agenda pursued by the CBN under Governor Olayemi Cardoso.

Since 2023, the apex bank has prioritised exchange rate unification, dismantled multiple FX windows, and adopted a willing buyer-willing seller framework aimed at improving transparency and price discovery.

 

 

CBN has also cleared substantial outstanding FX obligations, restoring confidence among manufacturers, airlines, and other corporates that depend on reliable access to foreign exchange.

Beyond domestic reforms, the bank has pursued strategies to boost dollar inflows into the economy. These include efforts to formalise diaspora remittances—estimated at roughly $23 billion annually—through new product development and improved collaboration with International Money Transfer Operators (IMTOs). Timely access to naira liquidity for IMTOs has also enhanced remittance flows through official channels.

Together, these measures have supported accretion to gross FX reserves and improved overall market sentiment.

 

BDC operators speak

President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, has welcomed the CBN’s decision, describing it as a pragmatic step toward sustainable naira stability.

According to him, increased liquidity through licensed BDCs will strengthen the retail segment and reduce distortions that previously pushed legitimate demand into informal channels.

He said, “The BDCs over time have proven to be the most potent tool of the Cbn foreign exchange market Transmission mechanism.

“Once again we are happy and delighted with the positive development and congratulate all the successful BDCs nationwide.”

However, a source who is among the licensed operators told our correspondent that the operators would begin to access the weekly allocation to them through the commercial banks.

 

Industry stakeholders argue that the recapitalisation exercise has effectively streamlined the sector, leaving fewer but stronger operators with improved governance structures and technological capacity.

 

By limiting participation to recapitalised and compliant entities, he said the CBN is signalling that expanded access must go hand in hand with accountability.

 

While the $150,000 weekly cap per BDC will not singlehandedly resolve Nigeria’s FX challenges, analysts say the measure represents a calibrated intervention rather than a blanket subsidy regime.

 

By targeting retail demand with disciplined supply, the apex bank is attempting to address structural weaknesses without reigniting arbitrage opportunities that characterised earlier eras.

 

Some economists maintain that sustained stability will ultimately depend on continued reserve accretion, disciplined fiscal management, improved oil production, and diversification of export earnings.

 

However, in the near term, improved liquidity in the retail market could dampen speculative pressures and foster greater convergence between official and parallel rates.

 

The consensus among market observers is that the success of the policy will hinge on strict enforcement of reporting obligations, compliance standards, and anti-speculative guardrails.

 

Experts say if implemented effectively, the integration of 82 recapitalised BDCs into NFEM could mark a turning point in Nigeria’s FX reform journey by balancing broader market access with tighter regulatory discipline.