BDC Ban: Can bank apps take the place of bureau de change operators in Nigeria?


Nigeria’s Central Bank (CBN) has instructed commercial banks to develop mobile applications and other processes needed to take over the operations of bureau de change (BDC) operators in the country.

This comes after the apex bank banned licensing and sale of forex to Bureau de Change operators because of price manipulation and corruption.

Why has CBN banned BDC operators?

The CBN explained that the money changers have misused their licenses by becoming wholesale dealers, illegally trading FX to the tune of millions of dollars per transaction.

“They have turned themselves away from their objectives. They are now agents that facilitate graft and corruption in the country. We cannot continue with the bad practices that are happening at the BDC market.”

Godwin Emefiele, Governor Central Bannk of Nigeria

The governor of the CBN, Godwin Emefiele, also accused them of rent-seeking behaviour and involvement in money laundering activities.

Going forward, the weekly supply of FX for BDC’s from the CBN will be awarded to commercial banks to meet legitimate FX demands of retail end-users (people who need $5,000 dollars or less). This basically means banks are taking over the role of BDC operators.

Bureau de change is a business which, in competition with other similar businesses, makes its profit by buying foreign currency and then selling the same currency at a higher exchange rate. It may also charge a commission or a fee on the purchase or sale.

CBN has banned money changing operations in Nigeria

To achieve this, the CBN has asked banks to make necessary arrangements to sell FX to customers in cash, or electronically like bank apps.

“Further to the Monetary Policy Committees, Deposit Money Banks (DMBs are hereby reminded to set up teller points at designated branches across the country to fulfil legitimate FX requests for Personal Travel Allowance (PTA Business Travel Allowance (BTA), tuition fees, Medical payments, SMEs transactions, amongst others,” the CBN said.

Can bank apps replace money changers?

Following the ban on the sale of forex to money changers, the naira has continued to fall with the exchange rate going as high as N525 to a dollar on the black market on Wednesday.

The steep drop raises questions about whether banks can effectively replace BDC operators disbursing foreign currency to retail users.

This is not the first time that the central bank is banning Bureau De Change operators though. In January 2016, Nigeria’s apex financial regulator banned the BDCs on the similar claim that the operators have gone from retail to wholesale dealers of Forex.

“Instead of catering for retail users who needed about $5,000, they now transact in millions of dollars suggesting that the BDC source money from unscrupulous places,” CBN says.

Similar to now, the banks were, at the time, ordered to take over the sale of FX to retailers. However, things didn’t go as planned. Within one year of the ban, the dollar had gained a whopping 85% against the naira, raising the devaluation effectively by 46%.

On the 11th of January 2016, when the CBN banned BDCs, the exchange rate was N268/$1 by December of the dame year, the exchange rate had depreciated to N495/$1.

The crash was attributed to several factors but the biggest was that dollar scarcity remained at the retail and wholesale end of the forex market.

Some reports pointed that the banks that were supposed to increase the flow of FX were clandestinely told to limit their bid/offers rates and volumes. Prices were also said to have been approved by the CBN before being sold in the market by third party sellers.

Dangers ahead?

Due to the low inflow of U.S. dollars into the Nigerian economy, banks struggle to give foreign currency to their customers on demand. 

Although the situation should improve with the CBN channelling its weekly allocation for BDC’s to banks, replacing money changers who are serving the huge demand for forex in Nigeria’s import-dependent economy is a major problem.

When the CBN banned BDCs on Tuesday, the exchange rate was N500/$1. Now, the rate is about N520/$1. This is according to data recorded on, a website that collates the parallel market rates.

If it depreciates by 46% as it did in 2016, then we could be looking at an outrageous exchange rate of N925/$1 by the end of the year.

Despite the current fall, the rates may eventually stabilise because the CBN has made some directives to address the possible scarcity of dollar that may result from the ban.

First, it has directed banks to ensure that no customer is turned back or refused forex provided that documentation and all other requirements are satisfied equally.

It has also told them to avoid undue delays rationing and/or diversion of FX and has created toll free lines to keep them to account. CBN says any breach will be severely sanctioned.

Electronic applications and alert systems are also to be created to update customers on the status of their FX requests.

With FX readily available, the black market price will be pushed down as people going there to get forex will be reduced.

Those who were able to get forex from the official market will also be discouraged from selling their hoard at the black market.

Advantages and disadvantages

Banning the BDCs for nefarious activities might be a move in the right direction. However, banks don’t have the processes money changers have that allow them to service businesses FX demands quickly.

Currently, bank processes involve forms including several levels of approval that often make buying of FX for use take days as opposed to the minutes it takes using BDC operators.

Cutting the red tape and reducing the timing is something the CBN has to consider if its new policy is to be successful.

Branch app grants speedy access to investments at 20% returns, free unlimited money transfers and low-interest loans
The future of FX will change if people can purchase foreign exchange directly from their devices

That’s where the use of technology comes into play. If FX can be bought from the comfort of offices and homes, the future of the FX will change.

A visible example of how buying foreign currency on apps works is the current process used by Flutterwave’s Barter which allows you to convert Naira to dollar at any time using its app.

Another major block is the high fees that are often charged by banks. The availability of more FX for banks is good news for freelancers, remote workers, and remittance recipients through banks but the high fees banks charge on remittances could see people running back to the black market.

In Summary

Banks have the resources to take over the processes of BDC operators. However, the effectiveness in disbursing foreign currency to retail users through the banks over the long term will show if it completely makes money changers unneeded.

It will also dictate how the exchange rate at the parallel market will vary from the official rate of ₦410/$1.

However, as commercial banks adjust to the CBN directive, the ban is likely to put more pressure on the naira in the parallel/black market – where forex is traded unofficially.

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