Forex traders struggle to survive as CBN cuts BDCs off from dollar supply

The Bureau De Change (BDC) operators have lamented that they are close to going out of operations as most of its members are struggling to stay afloat and meet up with overhead expenses.

These licensed currency traders have attributed this mainly to the suspension of dollar allocation by the Central Bank of Nigeria (CBN) to the BDCs, as they struggle to have access to foreign exchange from the official window.

The operators lamented that with the huge drop in income level, paying staff salaries, office rent, licenses and other compliance expenses has become a major challenge.

This is further compounded by the uncertainty in the retail sub-sector of the forex market, with many of the BDC operators still battling to meet up with the recapitalization and license processes.

The BDC operators had always advocated for increased participation and involvement in the foreign exchange market to help sustain the success of the various policies being implemented by the CBN and help provide more liquidity.

This push by the BDCs followed the June 2023 unification of all segments of Nigeria’s foreign exchange market, consolidating all windows into one. This action by the apex bank was part of a series of immediate changes aimed at improving liquidity and stability in the Nigerian Foreign Exchange (FX) Market.

The currency traders had advised the CBN to always leverage the BDCs and allow them access to banks’ autonomous window and agencies of international money transfer operators.

The CBN had in July 2021 stopped the sale of forex to BDC operators across the country, accusing them of becoming conduit for illegal financial flows, working with corrupt people to conduct money laundering in Nigeria.

In February 2024, the apex bank announced the resumption of forex sales to the BDCs following the revocation of operational licenses of over 4,173 of these licensed currency traders over their failure to comply with some regulatory guidelines. This was to help enhance liquidity in the retail segment of the forex market.

However, the CBN has since stopped the sales of forex to the licensed currency traders with little or no intervention till date. The BDC operators, who said that the CBN could not sustain the exercise, however, noted that they are `engaged in positive discussion with the apex bank for the return of their active participation in the BDCs in the retail end of the forex market.

Customers now prefer to use IMTOs 

In an exclusive chat with Nairametrics, a BDC operator, Abubakar Ardo, said that most of them are barely managing to stay in business, as the non-sale of forex directly to the BDCs has affected their operations badly.

Apart from the challenge of getting forex from the official window, Ardo explained that the demand for forex has dropped sharply as most customers now prefer to do transfers or use online platforms or International Money Transfer Operator (IMTOs) instead of physical cash exchanges.

He said, ‘’Honestly, things have been extremely tough for us lately. Most operators are just managing to stay afloat. Since the CBN stopped selling forex directly to us, our operations have been badly affected. We used to depend largely on the official window to get foreign exchange at regulated rates, but that avenue has been shut for a long time. 

‘’Right now, survival depends mostly on what we can get from walk-in customers — people coming in to sell small amounts of dollars, pounds, or euros. But that’s not structured or steady. Sometimes, you can go days without a single serious transaction. The market is very dislocated, and demand has dropped sharply because most people now prefer to do transfers or use online platforms or IMTOs instead of physical cash exchanges. 

‘’This may be good for the Naira, but sincerely, many of us are suffering. That’s why we’re proposing we get fully integrated.

‘’Meeting up with overhead costs has become a major challenge. Office rent, staff salaries, licenses, and other compliance expenses are still there, but the income isn’t coming in as before. As I talk with you, many operators have either closed shop temporarily or reduced their workforce just to cut costs.’’ 

He insisted that they are basically operating in survival mode — trying to keep their licenses active and hoping that the CBN will eventually re-integrate BDCs into the official market.

Going extinct 

Making his own contribution, the President of the Association of Bureau Dec Change Operators of Nigeria (ABCON), Aminu Gwadebe, pointed out that the majority of its members are struggling to meet up with their overhead expenses, with their operations almost going extinct.

He said, ‘’The market is stable. As patriotic citizens, we align with policies that strengthen our sovereignty, which is the naira and commend both the regulatory and fiscal authorities on the naira stability and elimination of the exchange rate spikes. 

‘’Our operations are currently near extinction, with the majority of our members struggling to meet up with overhead expenses. There is an ongoing positive collaboration between the CBN and the operators on the return of active participation of the BDCs in the retail end of the FX market. 

‘’The BDCs, over time, remained the most potent tool of the CBN’s foreign exchange policy transmission mechanism. The majority of us are comatose as survival is largely dependent on the official foreign exchange market, which is not accessible to the BDCs, with only very few grappling with dislocated and unstructured walk-in customers.’’ 

Gwadebe noted that the CBN discontinued the sales of forex to BDCs a long time ago, with little or no intervention to date.

What you should know 

The forex traders had over 2 years ago called on the CBN to allow them to provide liquidity in the retail end of the foreign exchange market, stating that the apex bank needs them for the success of the forex policies.

They advised the CBN to immediately leverage the BDCs and allow them access to banks’ autonomous window and agency of international money transfer operators.

They also urged the CBN to reinstate its 2015 policy guidelines, which allow the BDCs to effectively provide liquidity in the retail end of the market through the forex windows.

The 2015 policy guidelines allow the BDC operators to access foreign exchange from the autonomous window of the commercial banks, as well as act as agents for diaspora remittances. (Nairametrics)