Forex

Bureau De Change License Fee Reduced by Over 50% to N15 Million as CBN Eliminates Arbitrage

The cost of obtaining a Bureau De Change (BDC) license dropped to N15 million following news of the country’s transition towards a single exchange rate

Published

11 months ago

June 15, 2023

Samed Olukoya

In a major development for Nigeria’s financial landscape, the cost of obtaining a Bureau De Change (BDC) license dropped to N15 million following news of the country’s transition towards a single exchange rate.

On Wednesday, following the Central Bank of Nigeria (CBN) announcement that it has floated the Nigerian Naira, the Naira experienced a significant drop of up to 38% on the Investors and Exporters (I&E) window, marking its largest slide in four years.

However, the shift towards a unified exchange rate is expected to have adverse effects on the profitability of Bureau De Change operators, who have traditionally benefited from arbitrage opportunities and Nigeria’s multiple exchange windows.

Historically, BDCs have thrived by capitalizing on the disparity between exchange rates and leveraging the arbitrage opportunities presented by Nigeria’s complex currency market. However, with the introduction of a unified exchange rate, the market has already begun to react, and interest in BDC licenses has cooled significantly.

Reliable sources have revealed that the registration cost, which previously stood at N35 million, has dropped to N15 million, and it is anticipated to decrease further.

A market expert explained, “Until now, BDCs received a weekly allocation of $20,000 at the official rate, allowing them to sell it on the parallel market at a nearly 100% margin. This substantial arbitrage made their business highly profitable and led to an influx of BDC dealers. However, with the unification of rates, the motivation to hold on to these allocations diminishes.”

BDCs have enjoyed tremendous profitability, with the Central Bank receiving an overwhelming 500 requests for BDC licenses on a weekly basis. However, the recent floatation of the Naira by the CBN has caused the USD exchange rate to reach N700. As a result, the activities of BDCs, which largely operate in the parallel market, are expected to slow down significantly.

Explaining the implications of rate parity, a financial analyst said, “With a floating Naira, BDCs will no longer have a monopoly on readily available foreign exchange. Rate parity means that whatever a BDC offers will be similar, if not the same, as what the banks provide. This will drastically reduce the assurance that BDCs are the exclusive source of accessible FX, as anyone can obtain it from any bank.”

While the move towards a unified exchange rate holds potential for the long-term stability of the market, it presents significant challenges for BDCs that heavily rely on arbitrage. The CBN had previously threatened to halt the issuance of BDC licenses in 2021, but even with a unified exchange rate, the underlying issue of the FX demand backlog in Nigeria remains unresolved.

As Nigeria continues to navigate its path towards a single exchange rate, the future of Bureau De Change operators hangs in the balance. While the potential benefits of rate unification are evident, the profitability of BDCs, once considered “insanely profitable” businesses, now faces uncertainty and disruption. The financial landscape in Nigeria is undergoing a transformation, and the fate of BDCs will depend on their ability to adapt to the changing market dynamics.

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Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Naira

Dollar to Naira Black Market Exchange Rate Today 4th May 2024

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of May 4th, 2024 stood at 1 USD to ₦1,400.

Published

12 hours ago

May 4, 2024

Samed Olukoya

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of May 4th, 2024 stood at 1 USD to ₦1,400.

Recent data from Bureau De Change (BDC) reveals that buyers in the Lagos Parallel Market purchased a dollar for ₦1,380 and sold it at ₦1,370 on Friday, May 3rd, 2024.

This indicates a decline in the Naira exchange rate compared to the current rate.

The black market rate plays a crucial role for investors and participants, offering a real-time reflection of currency dynamics outside official or regulated exchange channels.

Monitoring these rates provides insights into the immediate value of the Naira against the dollar, guiding decision-making processes for individuals and businesses alike.

It’s important to note that while the black market offers valuable insights, the Central Bank of Nigeria (CBN) does not officially recognize its existence.

The CBN advises individuals engaging in forex transactions to utilize official banking channels, emphasizing the importance of compliance with regulatory frameworks.

How much is dollar to naira today in black market

For those navigating the currency exchange landscape, here are the latest figures for the black market exchange rate:

Buying Rate: ₦1,400
Selling Rate: ₦1,390

As economic conditions continue to evolve, staying informed about currency exchange rates empowers individuals to make informed financial decisions. While the black market provides immediate insights, adherence to regulatory guidelines ensures stability and transparency in forex transactions.

Naira

Black Market Dollar Rate Reaches ₦1,380 Today, May 3rd, 2024

US dollar to Nigerian Naira exchange rate as of May 3rd, 2024 at the black market stood at 1 USD to ₦1,380

Published

2 days ago

May 3, 2024

Samed Olukoya

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of May 3rd, 2024 stood at 1 USD to ₦1,380.

Recent data from Bureau De Change (BDC) reveals that buyers in the Lagos Parallel Market purchased a dollar for ₦1,350 and sold it at ₦1,340 on Thursday, May 2nd, 2024.

This indicates a decline in the Naira exchange rate compared to the current rate.

The black market rate plays a crucial role for investors and participants, offering a real-time reflection of currency dynamics outside official or regulated exchange channels.

Monitoring these rates provides insights into the immediate value of the Naira against the dollar, guiding decision-making processes for individuals and businesses alike.

It’s important to note that while the black market offers valuable insights, the Central Bank of Nigeria (CBN) does not officially recognize its existence.

The CBN advises individuals engaging in forex transactions to utilize official banking channels, emphasizing the importance of compliance with regulatory frameworks.

How much is dollar to naira today in black market

For those navigating the currency exchange landscape, here are the latest figures for the black market exchange rate:

Buying Rate: ₦1,380
Selling Rate: ₦1,370

Naira

Dollar to Naira Black Market Today, May 2nd, 2024

As of May 2nd, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,350 NGN in the black market, also referred to as the parallel market or Aboki fx.

Published

2 days ago

May 2, 2024

Samed Olukoya

As of May 2nd, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,350 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,310 and sell it at N1,300 on Monday, April 29th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate declined when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.