Bureau De Change (BDC) operators in Nigeria have attributed the recent depreciation of the Naira in the parallel market to a significant scarcity of foreign exchange (forex) resulting from diminished sources of liquidity.
Aminu Gwadabe, Chairman of the Association of Bureau De Change Operators of Nigeria (ABCON), disclosed this recently, adding that the recent policies implemented by the Central Bank of Nigeria (CBN) have severely affected forex availability for BDCs.
Gwadabe highlighted that BDC operators are experiencing a decline in forex inflows from traditional sources, including exports and external remittances, forcing them to rely primarily on irregular interventions from the CBN.
He pointed out that the International Money Transfer Operators (IMTOs) are primarily responsible for the current challenges faced by BDCs, as they have increasingly captured a significant share of international remittance payments.
“The liberalization of the market has hindered supply inflows, which are being drastically reduced, making it difficult for our operators,” he stated.
He elaborated, “Most remittance payments now flow toward the IMTOs, ambushing the international remittance payment landscape.”
Gwadabe indicated that non-oil exports, another vital source of forex, have also dwindled. While BDCs previously accessed up to $40,000 weekly from the CBN, this figure has now dropped to around $20,000.
Gwadabe warned that the Naira is likely to continue its depreciation in the parallel market unless there are consistent interventions from the CBN.
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He explained that BDCs act as intermediaries in the retail end of the forex market, meaning any sentiment of scarcity—among buyers and sellers—will directly influence the Naira’s value. By the end of September, the Naira had fallen to its lowest point in seven months in the parallel market at N1,700 to $1, although it recovered slightly at the start of trading on October 2.
In the first quarter of 2024, international remittance inflows totaled $1.07 billion, reflecting a 39% increase from the $770.23 million recorded during the same period in 2023.
When compared to the last quarter of 2023, which had inflows of $965.82 million, this represents an 11% increase. CBN data shows a consistent monthly rise in international remittance inflows, climbing from $383 million to $585 million by August 2024.
It appears that the CBN’s regulatory efforts concerning IMTOs are beginning to yield positive results, as evidenced by the increase in remittance inflows.
However, the ongoing challenges faced by BDCs, particularly with dwindling forex supplies, highlight the need for sustained intervention from the apex bank.
The recent CBN guidelines mandating a more than 5000% increase in the minimum capital requirement for tier-1 BDCs—from N35 million to N2 billion—further complicate the situation for these operators. How BDCs navigate these challenges remains to be seen as the forex landscape continues to evolve.