The Association of Bureau De Change Operators of Nigeria (ABCON) has revealed that the majority of the licensed currency traders are faced with uncertainty, as only less than 5% of its members have so far been able to meet the new capital requirement set by the Central Bank of Nigeria (CBN).
There has been a lot of anxiety in the sector recently as the fate of most of these licensed Bureau De Change (BDC) operators hangs in the air, unless the June 3, 2025, recapitalization deadline is further extended.
Recall that in May 2024, the CBN had increased the minimum share capital of Bureau De Change Operators to N2 billion for Tier 1 license and N500 million for Tier 2 license as against the previous threshold of N35 million for a general license.
These directives were contained in the CBN’s revised Regulatory and Supervisory Guidelines for BDC operations in Nigeria. The guidelines were designed to enhance the regulatory framework amidst ongoing reforms in the foreign exchange market.
Tier-1 BDCs are permitted to operate nationally, while Tier-2 BDCs will only be allowed to operate within one state of the Federation.
The capital raising initiative is part of the CBN’s reforms to reposition the BDC sector better to fulfill its role in Nigeria’s foreign exchange market.
The new guidelines were issued after consultations with stakeholders and in line with the powers vested in the CBN by Section 56 of the Banks and Other Financial Institutions Act (BOFIA) 2020.
Meanwhile, the BDC operators had kicked against this increase in capital requirements from N35 million to N2 billion for Tier-1 BDCs, stating that it is against international best practices.
They called on the CBN to review the N2 billion capital requirement for BDCs to fit into international standards and noted that the licensed currency traders were open to collaboration with the apex banks on some of these policies.
In a bid to allow more time for its implementation, the CBN had in November 2024 extended the deadline for BDC operators to recapitalise by six months, with the new date set for June 3, 2025.
The CBN decided to extend the deadline by six months due to the low level of compliance with the new capital requirements by the licensed currency traders.
Over 95% of BDCs yet to meet capital requirement
However, there seems to be palpable fear and anxiety in the sector, with most of the BDC operators yet to meet the share capital limit as the deadline approaches.
In an exclusive chat with Nairametrics, the President of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadebe, revealed that only less than 5% of its members have so far been able to meet the new CBN recapitalization requirements for BDC operators.
He hinted that over 95% of the BDC operators are at risk of shutting down, as their fate hangs in the balance except if the recapitalization deadline is further extended.
Gwadebe said, ‘’The BDCs will continue to remain the third level of the forex market and ensure the closing of the gap between the official and parallel market rate. However, as the deadline for the recapitalization is closing nearer, the entire sector is heightened with anxiety and with hope to still remain in the market, as not up to 5% have so far met the new financial requirements.’’
On what will happen to the remaining 95% and whether ABCON is trying to make a case for the BDCs with the government, he said, ‘’Their fate hangs in the air except if the deadline is further extended. However, we are hopeful of the CBN Management’s humane considerations.
‘’We are pushing for a lot of initiatives to ease the compliance of our members to the new financial capitalization requirements of N500 million and N2 billion, respectively.’’
On suggestions for its members to consider a merger, the ABCON President said, ‘’Yeah, we are strategically advocating for our members nationwide for mergers as we await an approved framework work, especially on consideration of existing capital by the CBN on the mergers initiative.’’
Monopolies should not be created
On his part, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, cautioned the CBN to be careful so as not to end up creating monopolies in the parallel market as a result of the new capital requirement.
He said, “CBN needs to be careful not to create a monopoly situation in the parallel market due to the new capital requirements. They [BDCs] are just like microfinance banks in the financial market’’
Another BDC operator, Mallam Adamu in Wuse Zone 4, acknowledged the efforts of the CBN with its recapitalization policy. He, however, admitted that some of the BDCs will be out of business as many of them are still struggling to meet the deadline.
Adamu said, “Many operators are still struggling. There have been talks about mergers, which is one thing. Many of us will try to meet up, but that also means some of us will be out of business, which is why we are appealing to CBN [to reconsider].”
What you should know
- ABCON had always advocated against a high share capital limit for its members, arguing that the BDC business is not capital-intensive, as they do not take deposits or lend funds to customers.
- They said that what the BDCs need is consolidation through mergers of operators and not necessarily recapitalization of the industry, noting that doing that might edge out professionals and highly experienced operators.
- They had earlier called on the CBN to review the minimum capital base for tier-1 operators to N500 million and tier-2 operators to N100 million.
(Nairametrics)
