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

Black Market Dollar to Naira Exchange Rate Today 17th May 2024

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of May 17th, 2024 stood at 1 USD to ₦1,540.

Published

22 hours ago

May 17, 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 17th, 2024 stood at 1 USD to ₦1,540.

Recent data from Bureau De Change (BDC) reveals that buyers in the Lagos Parallel Market purchased a dollar for ₦1,560 and sold it at ₦1,550 on Thursday, May 16th, 2024.

This indicates a slight improvement in the Naira exchange rate when compared to today’s 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 the black market

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

Buying Rate: ₦1,540
Selling Rate: ₦1,530

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.

Forex

SEC and ABCON Explore Collaboration for ‘Kolectyomoni’ Digital Currency Platform

Published

22 hours ago

May 17, 2024

Samed Olukoya

The Association of Bureaux De Change Operators of Nigeria (ABCON) has initiated talks with the Securities and Exchange Commission (SEC) to explore collaboration on its upcoming digital currency market platform, ‘Kolectyomoni’.

This move was underscored during an official visit by ABCON representatives to the newly appointed Director General of the SEC, Dr. Timi Agama. Aminu Gwadabe, President of ABCON, conveyed the association’s eagerness to engage with SEC to ensure the smooth operation of its digital currency platform.

Gwadabe emphasized that ABCON recognizes the regulatory oversight of SEC in the financial sector and seeks its guidance to navigate the complexities of the digital currency market.

He pointed out that while digital currencies hold immense potential for financial inclusion and innovation, they also present regulatory challenges that require collaborative efforts between industry stakeholders and regulatory bodies.

Highlighting the significance of embracing digital currencies, Gwadabe noted, “The future of BDC’s business is digital currency.”

He stressed the growing adoption of digital currencies among Nigerians, citing statistics that reveal a rising number of participants in the digital currency ecosystem, with a substantial market size of $9 billion annually.

In response, Dr. Timi Agama expressed SEC’s openness to support and facilitate the growth of the digital currency sector in Nigeria.

He acknowledged ABCON’s initiative in launching the ‘Kolectyomoni’ platform and assured of SEC’s cooperation in providing regulatory guidance and oversight.

Agama reaffirmed SEC’s commitment to fostering innovation in the financial sector while ensuring investor protection and market integrity.

He underscored the importance of collaboration between regulators and industry players to develop robust frameworks that foster innovation and safeguard against potential risks.

Furthermore, Agama encouraged ABCON to finalize the development of the ‘Kolectyomoni’ digital currency platform and submit it to the SEC for thorough review and assessment by the technical team.

He emphasized the need for timely regulatory oversight to address emerging trends in the digital currency market and maintain regulatory compliance.

Naira

Black Market Dollar to Naira Exchange Rate Today 16th May 2024

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of May 16th, 2024 stood at 1 USD to ₦1,560.

Published

2 days ago

May 16, 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 16th, 2024 stood at 1 USD to ₦1,560.

Recent data from Bureau De Change (BDC) reveals that buyers in the Lagos Parallel Market purchased a dollar for ₦1,530 and sold it at ₦1,520 on Wednesday, May 15th, 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.