The Central Bank of Nigeria has taken a significant stride toward enhancing the Bureau De Change (BDC) segment of the foreign exchange market by introducing an operational mechanism that brings foreign currency trading rates in line with those observed on the Investor & Exporter (I&E) forex window.
Issuing the directive via Circular Number TED/FEM/PUB/FBC/001/007 dated August 17, 2023, and aptly titled ‘Operational Mechanism for Bureau De Change Operations in Nigeria,’ the apex bank announced its commitment to improving the efficiency of the Nigerian foreign exchange market.
This strategic move by the Central Bank of Nigeria underscores the commitment to fostering a harmonized and transparent forex trading environment within the nation.
In accordance with the circular, the spread between the buying and selling rates of BDC operators should remain within the allowable limits of -2.5% to +2.5% of the Nigerian exchange market window’s weighted average rate of the previous day. Moreover, BDC operators are mandated to provide periodic reports on their financial institution forex rendition system.
This system has been upgraded to align with the requirements of the operators and demands reports on a daily, weekly, monthly, quarterly, and yearly basis.
The circular further emphasizes that the non-rendition of returns will attract sanctions, including the potential withdrawal of operating licenses. In cases where BDC operators have not conducted any transactions during a given period, they are expected to submit nil returns.
However, despite the directive, there have been observations that some BDCs are not complying, particularly those with access to limited forex resources. Notably, the naira began trading on the I&E window at 761.82/$ and closed at 739.52/$ on Friday, according to figures from the FMDQ.
According to some BDC operators who chose to remain anonymous due to their non-compliance, the naira was being sold at 865/$ on Friday. These operators cited challenges in sourcing forex at the official rate, rendering it difficult for them to abide by the new directive.
The President of the Association of Bureau De Change Operators of Nigeria, Aminu Gwadabe, praised the new directive as a crucial step in financial reform for the industry.
Gwadabe said, “It is an anchor rate for them, if a customer comes, then you look at what is the closing rate for the I&E window and you buy at the -2.5 per cent to +2.5 per cent; the same thing if a customer comes to you, you use the same I&E window.”