Nigeria’s foreign exchange situation continues to worsen, and in the latest blow, Bureau De Change (BDC) operators in Abuja and Kano have shut down operations, with the peer-to-peer digital asset market among the headwinds blamed for the shutdown.
Last week, Abdulahi Dauran, who chairs the BDC chapter in the capital, announced that the operators would shut down on February 1. Nura Usman, who heads the Kano state BDC chapter, voiced support for the move and announced a similar indefinite shutdown.
The operators have cited the scarcity of U.S. dollars for their woes. They blame commercial banks, which they accuse of hoarding the greenback to capitalize on the current shortage to maximize profits. The Central Bank of Nigeria (CBN) has ordered banks to sell their excess dollars, which led to a tripling of the dollar trading volume on Monday.
BDC Operators reportedly shut down their business in Abuja due to the scarcity of U.S. Dollars.
The Abuja chapter of Association of Bureau De Change (BDC) Operators has announced the closure of their business premises indefinitely from Thursday, February 1, 2024.
According to… pic.twitter.com/264DMWUzP5
— Instablog9ja (@instablog9ja) February 1, 2024
They also blamed the digital asset peer-to-peer market, which they claim has been operating under significantly lower USD rates. However, the local digital currency community has dismissed the unfounded claims.
‘Blaming digital assets is a distraction’
The naira has continued to slip against the dollar in the past year, with the depreciation exacerbating in the past three months. In June 2023, it traded at N460 to the dollar, but last week, it dipped to a record low of N1,531.
Nigeria is the world’s second-largest digital asset peer-to-peer market after the U.S. The West African country has dealt with a CBN ban on digital currency banking services for years, leading many to the P2P route. This ban was recently lifted but hasn’t impacted the P2P market significantly.
The digital asset community has brushed the accusations of the BDC operators off. Seun Dania, whose Alpha Geek Technologies offers Web3 development and consulting services, says the BDC’s antics are a distraction that takes the spotlight away from the real issues.
In an interview with a local TV station, Dania acknowledged that digital assets are increasingly gaining market share in cross-border transfers. In a January interview, Yellow Card, a regional exchange, revealed to CoinGeek that it’s processing an increasing number of transactions catering to outbound transfers.
However, according to Dania, the volume transacted through digital assets is not significant enough to cripple BDC operators. According to Chainalysis, in the year ending June 2023, Nigerian transacted $56.7 billion in digital assets.
Dania added that the BDC industry can learn from digital assets and evolve to meet the changing needs of its clientele. For starters, digital assets incur very low transaction charges (BSV averages $0.000012 per transaction), while forex platforms charge around 0.5% of the transacted value. Digital assets are also conveniently accessible on digital platforms; with BDCs, users must physically hop from one operator to another and negotiate rates before settling on the best deal.
Kue Barinor Paul, a Nigerian blockchain lawyer, urges BDC operators to quit the sideshows and address the real challenges. Nigeria’s dwindling balance of trade, which almost wholly relies on crude oil, dollar hoarding, and a stagnant economy, are more to blame for the BDCs’ woes, he told one outlet.
While most of Nigeria’s digital asset volume is for speculative trading, Nigerians are increasingly exploring digital assets to hedge against the naira’s depreciation, Chainalysis noted in its 2023 report.
Watch: Digital Nigeria 2023 highlights Nigeria’s effort to leapfrog into the modern world
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