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Nigeria's Central Bank Targets Illegal Foreign Exchange: A Review of the Currency Situation

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Oluwatomisin Amokeoja
New Update

The Central Bank of Nigeria Tightens Grip on Currency Exchange

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The Central Bank of Nigeria (CBN) has finalized its investigation into Bureau De Change (BDC) operator, Crown Agents, following suspicions of illegal transactions. The bank has accused the BDC of colluding with international organizations to facilitate unofficial currency transactions with Nigerian firms. The bank also revealed its intention to clamp down on BDCs that have not transitioned to electronic operations.

BDC Association Reacts to CBN's Measures

Aminu Gwadabe, the National President of the Association of Bureau De Change Operators of Nigeria (ABCON), has expressed the association's support for the CBN's reform measures. Gwadabe highlighted that ABCON members have already adopted digital operations, including real-time online interaction with the CBN and integration with the Nigerian Inter-Bank Settlement System (NIBSS) for client verification. Furthermore, suspicious transactions are reported through the Nigerian Financial Intelligence Unit's GoAML platform by ABCON members.

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ABCON's Commitment to Compliance and Digitization

Gwadabe emphasized that ABCON, as a self-regulatory organization, is collaborating with regulators and security agencies to raise awareness about the risks of money laundering and terrorism financing. He expressed the association's commitment to supporting the CBN's efforts to strengthen the local currency and reduce market volatility. Gwadabe also urged ABCON members to comply with the CBN's requirements to avoid penalties and license revocations.

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Increasing Number of Licensed BDC Operators in Nigeria

As of July 2023, the CBN has confirmed 5,687 licensed BDC operators in Nigeria, representing a significant increase from 74 in 2005. The CBN had previously announced plans to publish a full list of licensed BDC operators in the country to promote transparency.

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Nigeria and the Digital Currency Landscape

The Central Bank of Nigeria officially launched the eNaira, a central bank digital currency (CBDC), on October 25, 2021. The eNaira uses blockchain technology similar to cryptocurrencies like Bitcoin or Ethereum. However, it differs as it is not a financial asset in itself but a digital form of the national currency and draws its value from the physical naira to which it is pegged at parity. This digital currency is expected to increase financial inclusion, facilitate remittances, reduce informality, and mitigate potential risks associated with digital currencies.

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Conclusion

The Central Bank of Nigeria's commitment to cracking down on illegal currency transactions and promoting digitization in the Bureau De Change operations reflects a broader trend towards financial regulation and digital transformation in the Nigerian economy. The launch of the eNaira is a significant step in this direction. As Nigeria continues to navigate the digital currency landscape, the collaboration between the CBN, BDC operators, and other stakeholders will be crucial in managing risks and ensuring the stability of the financial sector.

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