CBN Restricts BDCs to One Dealer Bank Weekly for $25,000 FX Purchases

By Anastasia John E.

The Central Bank of Nigeria (CBN) has announced new regulations allowing Bureau de Change (BDC) operators to purchase up to $25,000 weekly from Authorised Dealer Banks (ADBs) to fulfill retail market demand for eligible invisible transactions.

The directive, outlined in a circular from the Trade and Exchange Department dated February 5, 2025, aims to enhance transparency and prevent potential misuse of foreign exchange (FX) resources. The circular was signed by Dr. W. J. Kanya, the Acting Director of the Trade & Exchange Department at the CBN.

Key Provisions of the New Guidelines

Limitations on Dealer BanksUnder the new rules, BDCs are restricted to sourcing their allocated forex from a single authorised dealer bank each week. This measure is intended to curb speculative activities and improve oversight. Any BDC found in violation of this regulation will face sanctions from the CBN.

Pricing ConsistencyAuthorised dealers are required to sell FX to BDCs at the prevailing rates in the Nigerian Foreign Exchange Market (NFEM) window, ensuring consistency in pricing across the market.

Capping of MarginsThe CBN has introduced a 1% cap on the margin BDCs can charge end-users above their purchase price. This initiative is designed to protect consumers from excessive fees and foster a fairer forex market. This margin cap applies to all forex sold by BDCs, regardless of the source.

Mandatory Reporting Requirements

To bolster market transparency, the CBN has established mandatory reporting protocols for both Authorised Dealer Banks and BDCs:

•   Authorised dealers must submit weekly reports of their forex sales to BDCs in a specified Excel format to the CBN Trade and Exchange Department via [email protected].
•   BDCs are required to provide daily returns on forex purchases and sales through the Financial Institutions Forex Reporting System (FIFX).

These measures will assist the CBN in monitoring forex flows and mitigating illicit activities within the currency market.

Transaction Limits and Compliance Measures

The circular specifies that BDCs can only disburse purchased FX for designated transactions, capped at a maximum of $5,000 per transaction, quarterly. Eligible transactions include:

•   Business Travel Allowance (BTA) / Personal Travel Allowance (PTA)
•   Overseas school fees
•   Overseas medical fees

Additionally, the CBN has mandated that BDCs maintain comprehensive records of all transactions, including:

•   Bank Verification Number (BVN) of end-users
•   Documentation of the amount disbursed in the beneficiary’s international passport

The CBN reiterated the importance of compliance with Anti-Money Laundering (AML) laws and Know Your Customer (KYC) requirements to prevent fraud and illicit financial activities.

Consequences for Non-Compliance

The apex bank has warned that any Authorised Dealer Bank or BDC that breaches these guidelines, including forex diversion, will face severe penalties, which may include the suspension of their dealership license.

The CBN’s initiative to grant BDCs access to forex purchases from authorised dealers is part of broader efforts to enhance liquidity in the forex market and ensure that legitimate retail demand is adequately met. The central bank continues to implement measures aimed at stabilizing the naira and curbing speculative activities in the currency market.