CBN Reinstates Bureau De Change Operations, Unveils New Rules to Boost Forex Market Efficiency

The Central Bank of Nigeria (CBN) has announced a series of operational changes for the Bureau De Change (BDC) segment, aimed at enhancing the efficiency of the Nigerian Foreign Exchange Market.

The changes, which were unveiled on August 17, 2023, include a new spread range, a new reporting system, and a new sanction regime for BDC operators.

According to a circular issued by the CBN, the spread on buying and selling by BDC operators is now set to fall within a permissible range of -2.5% to +2.5% of the Nigerian Foreign Exchange market window’s weighted average rate from the previous day.

 This means that BDC operators can only buy or sell foreign currency at a maximum of 2.5% above or below the official market rate. This move is expected to provide more stability and transparency to exchange rate fluctuations, ultimately benefiting both BDC operators and the general public.

Another significant change is the mandatory submission of periodic financial reports by BDC operators. These reports, including daily, weekly, monthly, quarterly, and yearly renditions, are to be submitted through the upgraded Financial Institution Forex Rendition System (FIFX), tailored to meet the specific requirements of each operator. This change aims to enhance oversight and ensure that the BDC sector operates with greater accountability.

The circular further emphasizes that failure to submit accurate returns within the specified timeframe will result in sanctions, potentially leading to the withdrawal of operating licenses. Even in cases where BDC operators have had no transactions during a given period, they are required to submit nil returns, thereby fostering a culture of compliance and thorough record-keeping.

All BDC operators and the public are urged to familiarize themselves with these new guidelines and adhere to them meticulously.

By implementing these measures, the Central Bank of Nigeria anticipates a more robust and well-regulated BDC segment that aligns with broader efforts to enhance Nigeria’s foreign exchange market efficiency.

What this means

This move marks a significant shift in the CBN’s policy towards the BDC segment, as it marks the re-entry of BDCs into the country’s foreign exchange market. Previously, under the tenure of former CBN Governor Godwin Emefiele, BDC operators were temporarily excluded from participating in the market due to alleged malpractices and speculation.

The new policy signifies a concerted effort by the CBN to reengage BDC operators and reintegrate them into the foreign exchange landscape. The CBN hopes that by providing a clear and consistent framework for BDC operations, it will curb illegal activities, improve liquidity, and foster confidence in the market.

The new policy also demonstrates the CBN’s responsiveness to the economic challenges faced by Nigerians due to the volatility of the naira exchange rate. By allowing BDC operators to offer competitive rates within a reasonable range, the CBN aims to make foreign exchange more accessible and affordable for Nigerians who need it for various purposes.

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