History of BDCs in Nigeria

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HISTORY OF BDC IN NIGERIA

The Bureaux De Change also known as BDC for short is a term for licensed businesses that engage in the exchange of foreign currencies, this implies that they make a profit by buying foreign currencies and selling them at a higher exchange rate to parties in need of them. In its document “guidelines for Bureaux De change,” the central bank of Nigeria conceptualized it as “any company that is licensed to carry out small scale foreign exchange services in Nigeria and whose sole object is the carrying on of such businesses on a stand-alone basis.” As a licensed firm dealing with foreign exchange, the Bureaux De change carries on business relative to using foreign currencies on transactions such as Business Travel Allowance (BTA), Personal Travel Allowance (PTA), medical and school fees as well as inward and outward transfer. This group of companies are licensed by the country’s Central bank and are as well regulated by her.

            Primarily, the focal objectives of BDC operators globally involve making forex available to the retail sector of the forex in terms of foreign exchange supply, in essence, bridging the gap between the official and parallel market exchange rate as clarified by the association of Bureaux De Change Operators of Nigeria (ABCON). Exchange rate transaction by BDC operators generally relates to spot prices dealings, indicating a transaction system with no space for credit or future service rendering, taking about two business days from the trading day, which is usually adjusted for profit gaining. The CBN made this outline known in the operation manner for the operators indicating a “cash and carry” basis of trading with no forward transaction system allowed and each BDC operator has the liberty to quote its buying (bid) and selling (ask) prices or rates and this is subjected to a maximum of 3.5% between the buying and selling rates.

            The central bank of Nigeria stated issuing guidelines for the operation of Bureaux De Change in the country as far back as the year 1989, when the need for foreign currencies by the citizens saw a spike in its scale, in effect to that and to primarily broaden the foreign exchange market to improve access of persons to foreign currencies as required, hence the entry of BDCs into the Nigeria financial. The origin of the BDCs into Nigeria financial system could for a fact be traced to the moment when Alhaji Abdulkarim Ahmed was the governor of the central bank of Nigeria, his period of management of the apex financial institution paved the way to the granting of licenses for the creation of the BDC operators to improve the flow of forex in the economy of the country; the legal backing from the CBN of Nigeria made their growth and the need for their service increase drastically.

            The reign of Ahmed a northerner as the CBN governor between 1982 and 1993 which was during the democratic governor of Shehu and the military regimes of generals Muhammadu Buhari and Ibrahim Babaginda all members of the Northern region of the country; this brought about an insinuation that a biased leveraging of privileges to applicants from the northern part of the country was in a relative form, pinpointing to the fact that more northerners were given more opportunities to engage as a BDC operator in the country; this practically juxtaposed the reason for the existence of more BDCs from the north than there is from the southern part of the country. Although, time and event over the years have opened or created an opportunity for new operators from the other regions to key into the business, however, the Northerners still dominate the industry; a figure as of November 2020 however shows that there exist 2991 BDCs of which 1777 were registered in Lagos state and entire southern Nigeria, while the remaining 1214 were registered in northern Nigeria.

            To make robust the platform for the BDC operators, the central bank of Nigeria set up an official body to oversee and monitor the activities of the Bureaux De Change operators, this body was called the Association of Bureaux De Change of Nigeria (ABCON). This body which is an umbrella of the Central bank for all licensed Bureaux De changed by the apex bank works consistently with the CBN to develop policies for the regulation of the foreign exchange market; the CBN is however the principal and major regulator of the business sector. ABCON’s secretariat is located at 4, Oluwaleyimu Street, Allen, Ikeja, Lagos; she operates during the workdays in the week, Mondays to Fridays only from 8 am – 6 pm. The association has the following outlined relevance to play in the economy of Nigeria: 

  • Develop and provide economic data for analysis and policy decisions.
  • Act as a tool to the central bank for the oversight of the foreign exchange market.
  • Provide access to foreign exchange to small-scale entities in the economy.
  • Enhancing economic activities through making forex available to businesses.

Places across the nation have several Bureaux De Change companies, however, the following mentioned locations are spots with the highest number of Bureaux De Change operators, Abuja airport, Kano, Kaduna, Lagos as well as Port Harcourt. The existence of the foreign market operators came into a dire need due to the inability of commercial banks in the country to fulfill the need of foreign currency demand in the country, in essence, they serve as establishments created for the strengthening of the capacity of forex in the country and in that trail, Bureaux De Change is to make easy the distribution of foreign currencies to retail bodies who require these currencies for transaction purpose with the other countries of the world. To play the expected role these institutions are purposed to serve, each operator in the foreign exchange would require to be fully strengthened with enough foreign currencies that would aid their ability to meet with the required demand for the foreign currency in need of by the various private economic units in the country that requires them to transact with the outside world.