REGULATORY REFORMS IN NIGERIA'S BUREAU DE CHANGE SECTOR AND EXCHANGE RATE STABILITY: ASSESSING THE ROLE OF THE CENTRAL BANK OF NIGERIA

This conceptual paper critically examines the relationship between Central Bank of Nigeria (CBN) regulatory reforms in the Bureau De Change (BDC) sector and exchange rate stability. Following years of currency volatility and widening parallel-market premiums, the CBN launched a multi-phase regulatory overhaul in 2024: revoking thousands of licenses, imposing a two‑tier recapitalisation (₦2 billion for Tier‑1, ₦500 million for Tier‑2), prohibiting speculative activities, and finally reintegrating the 82 compliant BDCs into the official Nigerian Foreign Exchange Market with a $150,000 weekly purchase cap. Synthesising theories of purchasing power parity, interest rate parity, and optimal currency areas, the paper argues that the reforms have fundamentally reconfigured the BDC segment from an arbitrage‑driven channel into a regulated transmission arm of monetary policy. By late 2025–early 2026, the official/parallel spread had narrowed from over 60% to under 2%, and daily exchange rate volatility dropped from 4% to 0.5%. The paper identifies a critical gap: existing literature focuses on pre-2024 policies or general FX governance, but has not systematically theorised the causal mechanisms linking BDC recapitalisation, trading limits, and mandatory reporting to exchange rate stabilisation. Addressing this gap, the paper conceptualises a Regulatory Triad Framework; entry control, operational discipline, and liquidity channelling through which BDC regulation can anchor retail FX expectations. Recommendations for policy, practice, and future research are provided. Keywords: Bureau De Change, exchange rate stability, regulatory reform, Central Bank of Nigeria, foreign exchange market, recapitalisation