The Association of Bureau de Change Operators of Nigeria (ABCON) is actively encouraging its members to pursue mergers as a strategic response to the challenges faced in the current financial landscape. In light of recent foreign exchange changes implemented by the Central Bank of Nigeria (CBN), which did not manage to attract back international investors, the ABCON sees mergers as a necessary step to bolster the business model of Bureau de Change (BDC) operators.
ABCON's president, Aminu Gwadabe, outlined a proposal that would raise the minimum capital requirement for dealers from N35 million to a substantial N350 million. This initiative aims to enhance the operational capacity of BDCs, enabling them to better manage remittances from Nigerians abroad and support small and medium-sized enterprises (SMEs) more effectively.
The proposed mergers are expected to significantly reduce the number of BDCs operating in Nigeria, from approximately 5,000 to around 500. This consolidation is intended to empower the remaining operators to handle greater volumes of foreign currency exchanges, thereby stabilizing their business model and improving their competitiveness in the market.
Merger to Enhance BDC Capacity
According to reports from Bloomberg, the adjustments proposed by ABCON will lead to a notable decrease in the number of money changers. The merger is aimed at creating a more robust structure for the remaining BDCs, allowing them to navigate the complexities of the foreign exchange market effectively.
Increased capital requirements are expected to facilitate a larger allocation of dollars to meet the needs of SMEs and other businesses reliant on foreign currency. Gwadabe emphasized that this strategy will empower BDCs to manage higher remittance volumes, ultimately benefiting the broader economy.
Impact of Currency Devaluation on BDCs
In response to a significant 40% depreciation of the naira and the abolishment of multiple exchange rates, ABCON's push for mergers becomes even more critical. The devaluation has imposed additional pressure on BDC operators, compelling them to consolidate their operations to remain viable in the market.
The CBN's decision to stop selling dollars to BDCs in 2021 has further complicated the situation, leading to increased operational challenges. As rates continue to fluctuate and the market struggles to regain the confidence of international investors, the BDCs must adapt by restructuring their business models.
In earlier reports, ABCON urged the CBN to sell foreign exchange directly to its members, which could alleviate some of the strain on the naira and help stabilize the market. The association believes that a collaborative approach between regulators and BDCs is essential for creating a stable foreign exchange environment.
As the landscape evolves, BDCs are not only facing challenges but also opportunities for growth and adaptation. Through mergers and increased capital requirements, they aim to emerge as stronger players in the foreign exchange arena.
