As the clock ticks towards the June 3, 2025, deadline, Nigeria's Bureau De Change (BDC) operators are grappling with a significant challenge: meeting the Central Bank of Nigeria's (CBN) stringent recapitalization requirements. Despite a six-month extension from the initial December 3, 2024, deadline, an alarming number of licensed operators are reportedly still far from compliance, raising concerns about mass exits and job losses within the sector.
A Dire State of Compliance
The current situation paints a grim picture. Aminu Gwadabe, president of the Association of Bureaux De Change Operators of Nigeria (ABCON), revealed that less than 10 percent of the approximately 1,500 licensed BDCs have completed the recapitalization process. This low compliance rate threatens the livelihoods of over three million people, directly and indirectly, according to Gwadabe, who described it as a "disturbing phenomenon." He expressed significant doubt that many operators would meet the current deadline.
The New Capital Regime and Its Implications
Introduced in February 2024, the CBN's new recapitalization framework mandates a two-tier structure for BDCs. Tier-1 BDCs are now required to hold a minimum capital of N2 billion, granting them nationwide operational licenses with broader scope. In contrast, Tier-2 BDCs must raise at least N500 million, limiting their operations to a single state. This significant increase in capital requirements is designed to strengthen the sector, professionalize operations, and ensure greater stability in the retail foreign exchange market.
However, for many smaller operators, these thresholds present an insurmountable hurdle. The expectation is that this new regime will inevitably lead to a consolidation of the industry, with smaller players either forced to exit, merge with larger entities, or seek substantial external investment.
Appeals for Extension and Engagement
In light of the low compliance, ABCON has made an urgent appeal to the CBN for a further extension of the deadline. Gwadabe also called for a reconsideration of the financial thresholds, emphasizing that many operators are striving to meet the criteria but need more time and flexibility.
Beyond an extension, ABCON is urging the CBN to maintain active engagement with stakeholders. This continued dialogue, Gwadabe believes, would help alleviate the mounting anxiety and pressure within the sector. Additionally, he called for the swift processing of license applications for existing and prospective investors who have met or are working towards meeting the new requirements, stressing the need for clarity and direction.
Strategic Solutions and Industry Consolidation
Recognizing the potential for widespread job losses and forced market exits, ABCON is actively pursuing strategic solutions. The association is engaging with the CBN and lobbying other relevant agencies to cushion the impact. Internally, ABCON is holding strategic sessions with its members to explore various structural solutions.
One key initiative is the promotion of mergers, where willing operators can group into sets of 5, 10, 15, or 20 to form new entities capable of collectively meeting the recapitalization threshold. ABCON has also applied to the CBN for a "no objection" to establish a public limited liability company, which could potentially accommodate a significant number of its members. While a holding response has been received, the association remains hopeful for a positive outcome.
Industry experts also foresee a period of significant consolidation. Tilewa Adebajo, CEO of CFG Advisory, believes that while some BDCs will succeed, many will not, leading to a more structured and professional industry. Ayodele Akinwunmi, senior relationship manager at FSDH Merchant Bank, echoed this sentiment, anticipating that many BDCs will be unable to meet the new capital levels and will likely engage in mergers and acquisitions, resulting in the emergence of bigger and stronger players in the retail FX market.
The coming days will be crucial for Nigeria's BDC sector as operators race against time to meet the recapitalization deadline. The outcome will undoubtedly reshape the landscape of foreign exchange operations in the country, potentially ushering in an era of fewer, but stronger and more regulated, BDC entities.