The currency exchange sector of Nigeria’s financial services market plays a pivotal role in the nation’s nation’s economic development. Commonly called Bureau De Change (BDC), the sector ensures exchange stability and offers Nigerians employment opportunities.
The Central Bank of Nigeria (CBN) refers to BDC as a “retail exchange dealer carrying on the business of Personal Travel Allowance (PTA), Business Travel Allowance (BTA), Medical and School fees, and carrying on inward and outward transfer.”
BDC’s have remained the most potent tool of exchange rate stability management by the CBN whenever the local currency suffersAlhaji Aminu Gwadabe
The BDC window became increasingly necessary in Nigeria as the central bank’s official foreign exchange rate failed to reflect the real-time supply and demand dynamics. So people who need forex can’t get it at the set rate. Some are often willing to source it even at an even higher percentage from a legal and recognized outlet. This is where the BDC comes in.
Over the years, BDC’s have “remained the most potent tool of exchange rate stability management by the CBN whenever the local currency suffers as witnessed in 2006, 2009, 2016 and 2020.” The central bank currently lists 5000 of such centres presently licensed to operate. They employ about 15,000 Nigerians.
However, many of these exchange companies are now battling with the low-profit margin on transactions allowed by the CBN, credibility crisis, and automation, among other issues.
Alhaji Aminu Gwadabe, president of the Association of Bureau De Change Operators of Nigeria (ABCON), expressed his displeasure over the low-profit margin
“The N2 margin earned by BDCs from every dollar sold is barely enough to cover their operating costs and keep over 15,000 Nigerians employed by the sector,” he said.
In a petition to the CBN in 2018, ABCON also asked the bank to reduce members’ forex buying rate to 350 naira to the dollar and for the selling rate to be 355 naira to the dollar. It requested the apex bank to fix BDCs’ commission at 3.5 percent of every transaction. Equally, the union canvassed for the same forex selling rate for banks and BDCs and, finally, for access to increased forex sources by purchasing export proceeds.
The sector also battles unwholesome practices by unlicensed operators, often tarnishing their image. The licensed BDCs, according to ABCON, are operating within the specified guidelines of the CBN. Still, there are “over one million unlicensed operators whose activities are usually misconstrued to represent the licensed operators.”
To boost public confidence in the licensed BDCs, ABCON has created a platform for members to render their returns daily, weekly, monthly, and annually. About 4000 BDCs are currently using it.
ABCON also took some other confidence-building steps: It now integrates the BDCs portal with the Nigeria Immigration Services (NIS) platform to verify the international passports of customers, collaborates with the Nigeria Inter-Bank Settlement System (NIBSS) for easy verification of customers BVN numbers, partners with the National Identity Management Commission (NIMC) to verify customers using national identity numbers, and connects with the Economic & Financial Crimes Commission (EFCC) and Nigeria Financial Intelligence Unit (NFIU) to jointly battle corruption and money laundering.
Technology is an essential requirement for BDCs to take their place in the country’s fast-evolving financial services market. However, members have failed to meet with the vigour and commitment it requires. The technologies currently in place in most BDCs and the people offering services do not yet reflect the digital era the industry has found itself world-wide.
The body can further encourage its members to invest more in technology to elevate their services to virtual operations found in other nations. Customers who value convenience and desire to save time will likely patronize online money changers. ABCON’s alliances with several government agencies have already paved the way for all the checks required to attain this next step.
Some BDCs have already gone online, making it possible for people to buy currency domestically and internationally through online transfer. They include TradeNaira, Everdon BDC and AbokiMart. This initiative will positively disrupt the redundant, restrictive and out-dated banking models still pervading the sector.
Nigerians in Diaspora remit an average of $24 billion annually. The best way these people can work with BDC operators in Nigeria is if the BDCs themselves increase their visibility, convenience, and honest, open practices.
ABCON’s request to CBN for permission to establish a Bureau De Change Institute in Nigeria –– where operators can receive proper training and better prepare for the market –– also needs to be acceded to without further delay.