Connect with us

Forex

Bureau De Change (BDC) Operators Turn to Mergers to Meet CBN’s Stringent Recapitalization Requirements

Published

on

Bureau De Change Operator

Bureau De Change (BDC) operators in Nigeria are exploring merger options as a strategy to meet the Central Bank of Nigeria’s (CBN) recapitalization requirements.

This development follows challenges faced by many operators in complying with the revised capital thresholds, despite a six-month extension granted by the apex bank in December 2024.

The CBN’s new guidelines issued in May 2024 introduced two tiers of licensing for BDC operators. Tier 1 BDCs are required to maintain a minimum capital base of ₦2 billion, pay ₦1 million as a non-refundable application fee, and ₦5 million as a non-refundable license fee.

Tier 2 operators must maintain a minimum capital base of ₦500 million with corresponding application and licensing fees of ₦250,000 and ₦2 million.

The President of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadebe, acknowledged the difficulties faced by members.

“I think compliance is still very lukewarm. A lot of our members are still saying it is difficult for them to meet up. However, I don’t have a record of who has complied, and it is difficult for me to say the level of compliance, but I know that the majority of our members are still talking about difficulties in meeting the requirements,” Gwadebe said.

To address these challenges, BDC operators are considering mergers as a viable option to meet the CBN’s financial requirements.

“I said members are having strategic sessions to consider various options to make it easier for them to meet up since the CBN has insisted that the financial requirement is not going to be reviewed for that, that it is an industry practice”, Gwadebe stated.

Despite the difficulties, ABCON continues to engage with the CBN in an effort to secure more favorable terms.

However, Gwadebe stressed that operators are actively working on strategies to comply with the guidelines.

“As it is, we have secured an extension to see how we can meet up. It is a difficult one. No doubt, it will affect a majority of our members. However, the strategy we are putting in place is to see how members can come together and meet the financial requirements,” he added.

The recapitalization effort is part of the CBN’s broader initiative to strengthen the financial stability of the BDC sector.

However, the stringent requirements have placed significant pressure on operators, particularly smaller firms to explore consolidation or exit the market entirely.

Beyond recapitalization, Gwadebe highlighted the importance of addressing liquidity challenges to stabilize the naira.

He attributed the ongoing volatility in the foreign exchange market to supply constraints and emphasized the role of the CBN in injecting liquidity.

“The government has a reference of 1500/dollar, and the official rate is about 1540/$. Unfortunately, the gap is still a bit high between the official and the parallel market rate.

It is only a matter of the supply side of the market through the interventions of the central bank because the CBN is the catalytic actor in the foreign exchange market,” Gwadebe said.

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

Comments
Advertisement
Advertisement
Advertisement