By Chinwendu Obienyi
The Central Bank of Nigeria (CBN)’s continued restriction of Bureau De Change (BDC) operators from full participation in the official foreign exchange (FX) market is raising fresh concerns about liquidity gaps and rising volatility in the country’s parallel market.
According to BDC operators, the apex bank’s tight control of FX distribution, largely channelled through commercial banks, may be counterproductive, as it leaves a critical segment of retail demand underserved.
While the CBN has defended its bank-led approach as necessary for improving oversight and reducing leakages, currency traders argue that the policy is inadvertently sustaining pressure on the informal market.
“The reality is that banks are not structured to efficiently meet small-scale, retail FX demand. When that demand is unmet, it naturally shifts to the parallel market”, Abdul Jago, a FX trader told Daily Sun.
He added that BDC operators, who traditionally serve retail customers such as travellers, small businesses, and individuals needing foreign currency for personal transactions, still have limited access to official FX constrains liquidity at the grassroots level of the market.
“This creates a persistent imbalance, where demand exists but cannot be met through formal channels, thereby widening the gap between official and parallel market rates”, he said.
Industry stakeholders note that the CBN’s cautious stance is rooted in longstanding concerns about compliance and market abuse. The regulator had, in July 2021, halted FX sales to BDCs, citing their alleged involvement in illicit financial flows, money laundering, and practices such as round-tripping.
Although the apex bank briefly reintroduced limited access in recent years, including a capped weekly allocation window, operators say the volumes remain insufficient and access inconsistent.
A senior member of the Association of Bureau De Change Operators of Nigeria (ABCON) said the sector continues to be viewed as high-risk, particularly in terms of Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) compliance.
This perception, the official noted, has driven the regulator’s preference for fewer, more centralised FX distribution channels.
However, BDCs insist they have made significant reforms to address these concerns, including the adoption of digital reporting systems, stricter compliance frameworks, and enhanced internal monitoring.
They argue that excluding them from the official market not only limits liquidity but also undermines broader efforts to stabilise the naira.
“The parallel market thrives when there are inefficiencies in the formal system. If licensed operators are allowed to function effectively, it reduces the space for unregulated players”, they said.
Financial experts say the tension reflects a broader policy dilemma for the CBN, which is balancing the need for tighter regulatory control with the practical realities of FX demand distribution in a large, import-dependent economy.
Nigeria’s FX market has faced persistent volatility following the unification of multiple exchange windows in 2023, a reform aimed at improving transparency and attracting foreign investment.
However, structural challenges, including limited FX supply, speculative demand, and weak confidence in the naira, continue to weigh on stability.
For now, the CBN appears committed to its cautious approach.
But as pressure builds in the parallel market, stakeholders warn that a more inclusive framework, one that integrates BDCs under stricter supervision, may be necessary to improve liquidity, narrow rate disparities, and achieve lasting exchange rate stability.
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