Last updated on August 5th, 2023 at 09:39 pm
Have you ever wondered where Bureau De Change operators in Nigeria get the large volume of foreign currencies they handle and sell to their customers everyday? We’ll tell you how they will survive the CBN’s new policy.
On inception, their major source of foreign currencies was the Central Bank of Nigeria because the CBN wanted them to take care of the retail need of FX market.
But they’ve expanded their tentacles. Today, they have more than 10 sources from where they source forex, their strategic moves has made them stronger.
That’s why President of Association of Bureaux De Change Operators of Nigeria Alhaji Aminu Gwadabe after CBN’s new policy said that they are still in business in one of our posts which is available at: https://infomediang.com/cbn-has-not-banned-bdcs-from-trading-forex-bdc-operators-president
The price – selling and buying – of the BDC operators are higher than the official rate of the commercial banks, which is one of the reasons sellers prefer to patronise them (this also has some implications on the FX market).
Apart from that, the usual bureaucratic process in banks and documentation do not exist in BDCs offices and on the streets.
In major Nigeria’s cities like Allen in Lagos, Bodija in Ibadan (Oyo State), CMS in Lagos, and Abuja, you can easily find them and their agents on the streets enticing prospective sellers and buyers with the available currencies.
One of the roles they play is by ensuring that forex is available to the critical retail sector of the fx market in terms of supply and to bridge the gap between the official and the parallel market exchange rate
Who are the BDC Operators?
BDC means Bureau De Change. It was established by Nigeria’s apex bank a few years back to serve the retail needs of foreign exchange.
A BDC operator is a buyer and seller of foreign currencies who carries on inward and outward transfers to serve the needs of Personal Travel Allowance (PTA), Business Travel Allowance (BTA), medicals and school fees, among others.
Are BDC operations legal in Nigeria?
It’s a legal business. Operators of BDC must be licenced by the CBN and abide by the rules and must be ready to commit funds.
Where and how did the operators get the foreign currencies they sell?
On July 27, 2021, the Godwin Emefiele-led CBN stopped the weekly sales of forex to BDCs operators, accusing them of illicit transactions and dealings.
He immediately diverted the weekly allocation of $20,000USD to each of the over 5,000 BDC firms to Deposit Money Banks (DMBs). He directed the banks to sell forex directly to customers with a legitimate demand for foreign exchange.
While analysts feared that many of the workers of the operators might lose their jobs, they’ve even shown more capacity in the FX market.
Below are the some of the several ways BDC firms in Nigeria source foreign currencies:
- Excess estacodes
- Allocation from the Central Bank of Nigeria
- Purchase form customers
- Google publishers
- From remittances
- Buy from travelers
- international oil companies
- From international professionals
- Nigerians who earn salary in USD
- Domiciliary account holders
Nigerian politicians and senior civil servants collect estacodes to cover travel expenses. And most times, the foreign currencies are in excess that they come back to sell the excess to BDC operators.
For instance, a typical Nigerian politician would apply for $50, 000 USD as estacodes for travel expenses that shouldn’t be more than $20,000.
The excess of the $30,000 serves the parallel market. The BDC buy from them and they prefer to sell to the street operators because they buy at higher value than the commercial banks.
Allocation from the Central Bank of Nigeria
Before the CBN terminated the supplies of forex to Bureau De Change in Nigeria, the apex bank was one of the major sources of funds to BDCs. It was selling $20,000 each to over 5000 BDCs per week.
Financially, that amount translates to about $110,000,000 in five days and about $5.72 billion within a year.
To have access to the CBN supplies, your company must satisfy the statutory laws and be ready to abide by the rules.
Not only that, you have to make certain deposits to the apex bank’s operation bank account. It seems that the source has been blocked, but the association of BDCs says they will be engaging the apex bank.
At the time of publication, operators remained unperturbed as they continue to source for forex from new and existing customers.
Purchase From Customers
From the CBN’s action, operators already have a flourishing source of supply which come in from their existing customers. The operators have a way of making a customer come back or refer new customers to them.
One of the agents said, “We get dollars from customers more than what CBN give to us,” The Nation quoted him as saying in a report.
A Nigerian blogger could earn as much as $5,000 USD per month or more, depending on the popularity and authority of his blog in a niche.
Bloggers who use Adsense, a programme which was created by Google through which blogs and website owners in the Google Network of content sites serve text, images, video, or interactive media advertisements to a targeted audience.
This set of bloggers is called Google publishers. They earn in USD or Pounds 23 every month, if they meet the payment threshold. These people prefer to sell their foreign currencies to BDC operators.
Interestingly, most of them already have a permanent buyer they sell to when their earnings drop in their domiciliary account.
The CBN had severally ‘promulgated’ policies to effectively use foreign remittances to put in check scarcity that might hit the FX market. One of such policies is Naira4Dollar scheme.
How it works: the CBN offers as a reward to anyone who remits dollars via banks N5 for every $1 remitted.
It was one of the ways to remove the middlemen who buy at CBN rate and sell at black market rate.
But foreign remittance still remains one of the sources of forex for the BDC operators. It’s a huge channel for them till date.
Buy From Travelers
Despite the cashless policy of the apex bank, Nigerians come into the country with large foreign cash since they know that depositing huge amount into their account might raise suspicion from banks and the anti-graft agency.
Not just that, bank exchange rates aren’t always favourable, so they prefer to patronise the BDC operators.
In fact, most of them communicate their buyer in Nigeria before departure from their destination.
So, cash from travellers coming into Nigeria is another source. Have you been to the Murtala Muhammed International Airport or Nnamdi Azikwer International Airport before? You can only know how foreign currencies flow in through this channel.
International Oil Companies
Recently, a BDC operator in Lagos, Nigeria’s commercial city, revealed that international oil companies patronise them to get good exchange than what the banks give them.
One can’t ultimately blame the operators, CBN made the market open to indirectly provide jobs for some people but failed to put ineffective mechanisms to monitor excesses.
Nigerians Who Earn Salary In USD
Nigerian App developers earn huge sums in foreign currencies from across the World. These people patronise parallel market operators than the official channels.
One of them told The Nation recently that:
“We always have many walk-in-customers bringing dollars. There are many Nigerians that earn dollars, especially professionals who carry out services for foreign companies.
“We also have Nigerians working for foreign companies whose salaries are in dollars. They always approach us to change their dollars into naira.”
Domiciliary Account Holders
Just like the Google publishers prefer to sell their earnings to BDC operators, some Nigerians who also earn in USD prefer to do the same.
“There are also many people with domiciliary accounts who also come to us to change money when they need for naira.”
From International Professionals
Many Nigerians who offer services on international markets are paid in foreign currency. In fact there are blogging gigs on LinkedIn that would pay Nigerian content writers in dollars. These people are assets to the BDC operators.
Bureau De Change operators are now a force in Nigeria’s foreign exchange market
Stoppage of sales of forex to them isn’t a ban, in fact CBN allows them to privately source foreign exchange.
Majority of Nigerians prefer to change their dollars at BDC shops than the banks because of the disparity in the official and the parallel market.