…As naira records marginal loss amid liquidity decline
Fringe operators within the Bureau De Change (BDC) sub-sector are poised to be edged out by next month as the deadline for the recapitalisation of retail bureaux steadily approaches on June 3, 2025.
The Central Bank of Nigeria (CBN) had earlier extended this deadline from the initial date of December 3, 2024, to allow operators more time to comply, pushing it forward by six months to June 3, 2025.
In February 2024, the CBN introduced a sweeping tiered framework that categorises BDC operators into two groups, Tier-1 and Tier-2, which set different capital thresholds for each category.
Specifically, Tier-1 BDCs are mandated to raise a minimum capital of N2 billion in order to continue operations, while Tier-2 BDCs are required to secure at least N500 million in capital. Under this new regulatory regime, Tier-1 BDCs will be authorised to operate nationwide, giving them broader reach and flexibility, whereas Tier-2 operators will be confined to operations within a single state of the federation.
Read also: BDCs begin merger talks to meet CBN’s recapitalisation deadline
The hike in capital requirements is widely expected to squeeze out smaller BDCs that lack the financial muscle to meet these rigorous new thresholds, compelling many of them to either exit the market, pursue mergers with other operators or attract external investors to stay in business.
The wave of consolidation is anticipated to leave behind a leaner field dominated by larger, more financially robust BDCs, which could, in turn, enhance professionalism and compliance within the industry.
Tilewa Adebajo, chief executive officer of CFG Advisory, echoed this sentiment, remarking, “Some will make it, most will not, and we will have stronger and more serious players. That industry needs to become structured and professional.”
Ayokunle Olubunmi, head of financial institution ratings at Agusto & Co., also highlighted the coming transformation, stating, “I think we should expect a significant reduction in the number of registered BDCs and an uptick in the regulatory control. However, some unregistered BDCs would turn to agents, buying the foreign exchange (FX) from the licensed ones, given that only the licensed ones are allowed to access FX from the CBN sources directly.” His comment underscores the likelihood that although the formal sector will shrink numerically, informal activities might adapt by aligning with compliant operators.
A further analysis from Ayodele Akinwunmi, senior relationship manager at FSDH Merchant Bank, reinforced expectations of consolidation. He explained, “I believe some of the BDCs will not be able to meet the new recapitalisation level. Tier-1 BDCs are required to have a minimum capital base of N2 billion while Tier-2 BDCs are required to have N500 million. As at my last count, there are 1,517 BDCs in Nigeria. I expect the BDCs to engage in mergers and acquisitions so that bigger and stronger BDCs that will serve the retail FX market will emerge.”
His perspective indicates that mergers and acquisitions are likely pathways for operators determined to survive in the new landscape.
Read also: CBN to extend BDCs recapitalisation deadline to June 2025 on low compliance
BDCs are worried
Aminu Gwadabe, president of the Association of Bureaux De Change Operators of Nigeria (ABCON), captured the anxiety and concerns of industry players regarding the policy shift, saying, “The capitalisation requirements are indeed a hurricane that is delineating our members’ survival. We have made several recommendations but the regulator is sine qua non and sacrosanct. It is all about fit and proper checks. We are scared that the policy might not be a hijack of potentialities. I hope it might also reduce the defection from regulated to an unregulated space which regulators are currently battling to contend with.”
Gwadabe went further to argue that globally, the financial requirements for BDC licensing are designed to be simple, humane, and friendly, cautioning against measures that could inhibit participation.
Meanwhile, a BDC operator who spoke to BusinessDay under condition of anonymity revealed that he intends to comply with the CBN’s directive before the month runs out by shoring up his capital base, a move that reflects the seriousness with which many operators are now approaching the looming deadline.
Read also: BDCs risk licences over recapitalisation 3 months to deadline
Naira loses
Meanwhile, the naira depreciated slightly against the dollar in the official foreign (FX) market on Monday, following a decline in liquidity.
The Nigerian Foreign Exchange Market (NFEM) recorded an inflow of $668mn last week, marking a nine percent decline compared to $735mn in the previous week, according to data from the research department of Coronation Merchant Bank Limited.
After trading on Monday, the naira weakened by 0.2 percent as the dollar was quoted at N1,605.62 compared to N1,602.18 seen on Friday last week at the NFEM, data from the Central Bank of Nigeria (CBN) indicated.
The naira appreciated to N1,600 on Monday, gaining N5 from N1,605 traded on Friday in the parallel market, also known as the black market.
