The decision by the Central Bank of Nigeria (CBN) to reintegrate Bureau De Change (BDC) operators into the Nigerian Foreign Exchange Market (NFEM) is already reshaping currency dynamics, triggering a notable narrowing of the gap between the official and parallel market rates.
Last week, the apex bank issued a circular to all Authorised Dealer Banks and the general public on the participation of licensed BDCs in the Nigerian Foreign Exchange Market. The move is aimed at improving dollar liquidity in the retail segment of the market and curbing sustained pressure in the parallel market.
Since the issuance of the circular, the previously widening foreign exchange gap between the official and parallel markets has narrowed significantly, even before BDCs have fully accessed dollar supply. The exchange rate spread, which widened to N92 as of Wednesday last week, closed to N33 by Monday. The earlier divergence, which exceeded N90, marked the widest spread since President Bola Tinubu liberalised the currency in 2023.
The naira on Monday climbed to a two-year high of N1,347.78 per dollar in the official foreign exchange (FX) market, further narrowing the spread with the black market, as Bureau De Change operators await trading guidelines from the Central Bank of Nigeria this week.
Data published by the apex bank showed that the naira appreciated by N7.64, with the dollar quoted at N1,347.78, representing a gain of 0.57 percent compared to N1,355.42 recorded on Friday at the Nigerian Foreign Exchange Market.
In the parallel market, also known as the black market, the local currency strengthened sharply on Monday to close at N1,380 per dollar after opening at N1,390 per dollar earlier in the day. The appreciation further narrowed the gap between the parallel market and the official FX window by 2.4 percent. The naira gained N40 per dollar to close at N1,380, reflecting a 2.89 percent improvement from N1,420 recorded on Friday in the black market.
The rally across segments of the FX market has reduced the exchange rate spread to N33 from N92 recorded on Wednesday last week, signalling sustained convergence between the official and informal markets.
The widening had been largely driven by renewed demand for physical dollars in the informal market, with political actors reportedly stockpiling cash ahead of the 2027 general elections. According to a market report by Coronation Merchant Bank’s research department, the spread between the parallel market rate and the official exchange rate widened to N93.80 last week.
“This widening premium reflects persistent demand for foreign currency, especially in cash in the informal market, driven largely by early positioning ahead of the 2027 election cycle, rather than near-term pressures within the official FX market,” the report stated.
However, the CBN’s clarification that licensed BDCs can access the NFEM through authorised dealer banks appears to have shifted sentiment. Market participants say the expectation of improved retail dollar supply has begun to temper speculative demand and cool pressures in the informal segment.
Olayemi Cardoso, governor of the CBN, had stated in November 2025 that the naira was trading within a narrow range, with the premium between the official and parallel markets shrinking to below 2 percent from more than 60 percent previously. The renewed volatility seen recently had threatened to reverse that progress.
The International Monetary Fund (IMF) noted in 2023 that several countries, including Burundi, Ethiopia, and Nigeria, experienced large exchange rate spreads in parallel markets at various times, reaching as high as 90 percent in 2022. In Nigeria, the spread between the official and parallel markets remained elevated at N273 per dollar in 2023, underscoring structural distortions in the FX market.
Under the latest circular signed by Musa Narkoji, CBN’s director of the Trade and Exchange Department, licensed BDCs are permitted to purchase foreign exchange from the NFEM through any Authorised Dealer of their choice at prevailing market rates. The directive is designed to ensure adequate liquidity in the retail segment and meet the legitimate needs of end users.
Authorised dealer banks are required to complete all necessary Know-Your-Customer procedures and due diligence for BDC clients in line with regulatory standards and internal risk frameworks. Upon satisfactory completion, banks may sell foreign exchange strictly in accordance with existing BDC guidelines, subject to a maximum of 150,000 dollars per week per BDC.
All licensed BDCs must submit timely and accurate electronic returns to the Central Bank. Any unutilised foreign exchange purchased from the NFEM must be resold into the market within 24 hours, as BDCs are prohibited from holding such funds in position.
Settlement of transactions between BDCs, authorised dealers, and end users must be conducted exclusively through accounts maintained with licensed financial institutions. Third-party transactions are strictly prohibited. Furthermore, cash settlement of foreign exchange sales must not exceed 25 percent of the total transaction amount, reinforcing efforts to limit cash-based dealings and improve transparency.
Aminu Gwadabe, president of the Association of Bureaux De Change Operators of Nigeria (ABCON), described the circular as a significant and commendable step toward strengthening financial inclusion and enhancing liquidity at the critical retail end of the market.
According to him, the directive will help reduce the wide margin between the NFEM and the unregulated market, boost positive market sentiment, and restore investor confidence in the sub-sector and the broader financial industry. He also urged members to adhere strictly to prudential standards and anti-money laundering and counter-financing of terrorism obligations.
“On behalf of our members, we thank the CBN management for its clarity, support, inclusiveness, and consistent guidance. The new circular will no doubt have a positive impact on the stability of our local currency. It will also address the stubborn and persistent wide margin between the NFEM rate and the unregulated market.,” Gwadabe said.
Market analysts have also weighed in. Ayokunle Olubunmi, head of Financial Institutions Ratings at Agusto & Co., said the measure is one of the steps adopted by the CBN to address the widening gap between official and parallel market rates. “We expect it to address the widening gap, albeit to an extent,” he noted.
Charlie Robertson, author of The Time Travelling Economist, said the measure should help ease distortions in the currency market by integrating more participants into the formal system.
Last year, the CBN confirmed that 82 BDC operators had been fully licensed to commence operations from November 27, 2025, in line with the Bank’s renewed regulatory framework for Nigeria’s foreign exchange market.
In a statement signed by Hakama Sidi Ali, acting director of the Corporate Communications Department, the apex bank explained that the approvals were granted under its powers pursuant to the Banks and Other Financial Institutions Act (BOFIA) 2020 and the 2024 Regulatory and Supervisory Guidelines for Bureaux De Change Operations in Nigeria. Only BDCs listed on the CBN’s website are authorised to operate, the Bank stressed, warning the public against dealing with unlicensed operators.
Operating a BDC without a valid licence constitutes a punishable offence under Section 57(1) of BOFIA 2020, the CBN reiterated, adding that it will continue to update the list of duly licensed operators to ensure transparency and public verification.
As part of the revised framework introduced in February 2024, BDCs are required to meet new minimum capital requirements of N2 billion for Tier-1 operators and N500 million for Tier-2 operators. In July 2025, the apex bank confirmed that the recapitalisation deadline for BDC operators expired on June 3, 2025.
With expectations of improved dollar supply, stricter compliance oversight, and broader formal market participation, analysts say the inclusion of BDCs in the official FX window represents a strategic shift aimed at deepening liquidity, strengthening price discovery, reducing speculative distortions, and sustaining convergence between Nigeria’s previously fragmented exchange rate markets.