Pivoting Nigeria’s Analog BDCs from Cash Arbitrage to Tech-Driven FX and Remittance Providers

By Emmanuel Okoegwale 

For decades, Nigeria's Bureau de Change (BDC) sector operated largely on arbitrage between official and parallel markets. With the previous minimum share capital requirement of $23,000 (₦35 million), entry was relatively easy, resulting in over 5,000 licensed operators before the regulator pulled the plug in 2025.

The prevalence of cash transactions among BDCs led to widespread non-compliance, undermining national monetary policy and exposing the system to money laundering and regulatory arbitrage. This made them unsuitable for a digitally driven and transparent financial ecosystem.

In response, the Nigerian regulator introduced a new BDC regulatory framework, increasing share capital requirements to $1.3 million (₦2 billion) for Tier-1 BDCs and $330,000 (₦500 million) for Tier-2 BDCs. This move aims to eliminate undercapitalized players and attract stronger entrants. The repositioning seeks to transform BDCs from fragmented, cash-arbitrage dealers into fit-for-purpose, technology-driven FX intermediaries aligned with Nigeria’s financial stability and digital economy goals. However, the move has drawn strong criticism from operators, who argue that the entry requirements are too high, especially when compared to other licenses such as Mobile Money ($1.3 million / ₦2 billion), Payment Solution Service Provider (PSSP) and Payment Terminal Service Provider (PTSP) authorizations ($66,000 / ₦100 million), and Microfinance Bank licenses ranging from ₦50 million to ₦5 billion (Tier-1, Tier-2, State, and National).

Recent FX reforms have increased transparency and narrowed the official/parallel market gap, reducing arbitrage opportunities. With local banks enabling international Naira card payments and the commencement of diaspora banking, the demand for low-value, physical FX transactions has dropped significantly.

For new BDCs to remain competitive, the traditional cash-arbitrage model is no longer sustainable. Revenues are shrinking due to lower margins on both transaction value and volume. Banks are innovating aggressively in the FX space, licensed fintechs are pushing boundaries, and unregulated local and international cross-border fintech providers are competing directly.

Regulatory constraints and compliance costs are also rising, with the CBN imposing stricter KYC rules, limits on transaction value and frequency, and FX rates tied to NFEM windows. Offshore remittance services must be routed through commercial banks only, further capping arbitrage opportunities while increasing costs.

To survive, BDCs must shift away from cash arbitrage and over-the-counter trading toward fee-based FX services. This requires investing in digital transformation and product diversification, such as:

• Partnering with International Money Transfer Organizations (IMTOs) to provide remittance payout hubs.

• Facilitating cross-border education, healthcare, and business payments.

• Issuing local and international travel FX cards and multi-currency accounts.

• Offering corporate FX settlement support for trade, tuition, and related needs.

At the same time, the regulator can help improve risk management and market certainty by:

• Reviewing share capital requirements in light of competition from unauthorized fintechs.

• Recalibrating transaction margins.

• Adjusting transaction limits and frequency, for example, raising the cap on annual cross-border tuition payments capped at $10,000  transaction limit per annum.