Understanding New Guidelines for BDCs

As the naira continues to strengthen, the Central Bank of Nigeria has reopened a structured window for licenced Bureau De Change operators at the official market. Nume Ekeghe examines the new policy, its safeguards, and what it means for retail FX liquidity and exchange rate stability

When the Central Bank of Nigeria (CBN) issued its circular titled “Participation of Licensed BDCs in the Nigerian Foreign Exchange Market,” the immediate headline was straightforward: licenced Bureau De Change (BDC) operators can now access up to $150,000 weekly from the Nigerian Foreign Exchange Market (NFEM).

But beneath that headline lies a carefully calibrated attempt to boost retail dollar liquidity without reopening the distortions of the past.

Signed by Dr. Musa Narkoji, Director of the Trade and Exchange Department, the circular states that “all BDCs that are duly licensed by the CBN are allowed to access foreign exchange from the NFEM through any Authorised Dealer of their choice, at the prevailing exchange rate.”

The objective, the CBN notes, is, “to ensure the availability of adequate foreign exchange liquidity in the retail segment of the foreign exchange market to meet the legitimate needs of end users.”

In simple terms, the central bank is reopening a structured window for retail dollar supply but under tighter guardrails.

Why This Matters Now

Retail FX demand in Nigeria has never disappeared. Travel allowances, tuition payments, medical expenses, and other invisible transactions continue regardless of where official supply stands. When formal liquidity tightens, demand does not evaporate; it migrates.

By allowing licenced BDCs to access FX directly from the NFEM through Authorised Dealers, the apex bank is attempting to channel retail demand back into the formal system.

But it is doing so with safeguards that reflect lessons from earlier cycles when expanded BDC access contributed to arbitrage, round-tripping, and pressure on reserves. This time, the architecture is different.

Access Has Expanded

The $150,000 weekly cap per BDC is the most visible change. It adjusts the access limit to reflect what the CBN describes as evolving retail demand. Yet, the pricing structure remains firmly market-based.

Foreign exchange will be sold strictly at the prevailing exchange rate. There is no preferential pricing, no administrative allocation, and no hidden subsidy. BDCs are permitted to apply only a one per cent spread above their buying rate, in line with existing regulations.

That point is critical. In Nigeria’s FX history, expanded access has often been interpreted as discounted access. The circular makes it clear that this is not the case. The rate is the rate. The message is subtle but important: liquidity support does not equal subsidy.

The Real Game-Changer

The circular states: “Settlement of foreign exchange transactions by BDCs with Authorised Dealers and/or with end-user customers shall be conducted exclusively through settlement accounts held with licensed financial institutions. Third-party transactions are prohibited, and settlement of foreign exchange sales in cash is limited to a maximum of 25 per cent of each transaction amount.”

This single provision fundamentally reshapes how retail FX will move. Only a quarter of any transaction can be settled in physical cash. At least 75 per cent must pass through cards issued by licensed financial institutions.

That means the bulk of transactions are traceable. In a segment historically driven by cash exchanges, this restriction tightens oversight without eliminating the BDC channel altogether.

No Room to Hoard

Perhaps even more significant is the position limit. “BDCs are not permitted to keep funds purchased from NFEM in their positions,” the circular states. Any unutilised balances must be returned to the market within 24 hours.

This is a direct strike against hoarding. In past episodes, speculative holding of dollars amplified scarcity signals and widened spreads between official and parallel markets. By mandating immediate utilisation or prompt return, the CBN is attempting to prevent that cycle from repeating.

In essence, BDCs are being repositioned as flow-through intermediaries, not storage points. They can access FX. They cannot warehouse it.

Policy Recalibration

It is tempting to view the circular as a return to an older regime where BDCs played a larger role in official FX distribution. But structurally, this framework is tighter. Know Your Customer requirements remain mandatory. Authorised Dealers must complete due diligence in line with internal risk management frameworks. Transactions must be tied strictly to eligible purposes. Electronic returns are compulsory. Third-party settlements are prohibited.

And critically, pricing remains market-driven. “The existing BDC Guidelines apply to all transactions,” the circular reiterates a line that underscores continuity rather than reversal. What has changed is access volume. What has not changed is discipline.

Economic Objective

Improving retail FX liquidity could help narrow spreads between official and parallel markets. When legitimate demand is met efficiently through formal channels, the incentive to source dollars informally diminishes.

Price convergence is not achieved by decree; it is achieved by liquidity and credibility and by expanding supply into the retail segment while maintaining market pricing, the CBN is working toward convergence rather than control. Dollars accessed under this framework are sold at prevailing rates, not at administratively determined discounts. That matters for reserves management and for signalling consistency.

With seventy-five per cent of transactions required to move through licensed financial institutions, FX flows become embedded within formal financial channels rather than circulating primarily in cash.

That strengthens transparency and improves regulatory visibility both essential for exchange rate stability.

What It Means Going Forward

For BDC operators, the circular removes a layer of uncertainty. The rules are now clearer: there is a weekly cap, pricing is tied strictly to the prevailing market rate, and settlement must follow a defined process. In a market that has often shifted abruptly, predictability itself becomes valuable.

For consumers, the signal is equally important. Access to foreign exchange for legitimate needs, travel, medical payments, tuition and other invisible transactions is being strengthened, but within a system that is documented and traceable. Dollars may be more accessible, but they will not move in the shadows.

For the economy, the implications are more structural. The framework could ease distortions in the retail FX segment, draw more activity into the formal banking system, and improve transparency around how retail demand is met. By ensuring that most transactions pass through licensed financial institutions, the CBN is quietly reinforcing intermediation and data visibility in a segment that has historically been cash-heavy.

As the market continues to adjust, this circular represents a deliberate effort to anchor retail demand within formal, transparent, and market-driven channels. If that balance holds, it could help strengthen exchange rate stability and gradually rebuild confidence in the system and outcomes that matter far more than the weekly cap itself.