Liberty Reserve’s replacement! FX brokers wanting to tap into Nigerian markets now have a means of taking deposits

Liberty Reserve used to be a vital method of transferring client deposits to and from Nigeria. Now Travelex has stepped in, which provides a window of opportunity once again in Nigeria for Western retail FX brokerages.

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In the last few years of the previous decade and the early part of this decade, Nigeria had been on the radar for many retail FX brokerages as a developing economy which is home to many eager FX traders and potentially large scale introducing brokers.

Some firms began holding seminars across the African country, inviting potential clients to discuss FX trading in groups, and providing educational materials to a demographic of young Nigerians interested in trading global markets.

As a result of this, a network of introducing brokers emerged across the country, and Western brokerages began to amass client bases which contained some degree of retail traders from Nigeria, most of whom were only able to make their deposits and withdrawals via Liberty Reserve, which was a Costa Rica-based centralized digital currency service which was shut down by United States federal prosecutors under the Patriot Act in May 2013 after an investigation by authorities across 17 countries.

The United States charged founder Arthur Budovsky and six others with money laundering and operating an unlicensed financial transaction company. Liberty Reserve is alleged to have been used to launder more than $6 billion in criminal proceeds during its history.

The dissolution of Liberty Reserve signaled the end of any interaction with Nigerian clients, as there was no other method of transferring client funds to and from FX brokers outside Nigeria, especially bearing in mind that merchant services providers Visa and Mastercard are very averse to processing any transactions between FX brokeages and Nigerian retail clients.

Today, a new method of payment has emerged, in the form of a new arrangement between the Central Bank of Nigeria and British deliverable FX company Travelex which has taken the place of the 3,000 Bureaux De Change operators in Nigeria, and can also facilitate global transactions of money to and from Nigeria.

One of the main aspects that will perhaps be a catalyst in opening up the transfer of funds capabilities in Nigeria is that as a result of this partnership, Travelex will start disbursing $15,000 to each of the 3,000 registered Bureaux De Change (BDC) operators across Nigeria as of today.

Aminu Gwadabe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), who disclosed this yesterday, stated that with each of the 3,000 BDCs getting $15,000 each, a total of $45 million will flow into the system.

He lauded the Central Bank of Nigeria for authorising Travelex to take responsibility of disbursing huge dollar inflows from the diaspora estimated at $21 billion annually to BDCs.

Acessibility to global markets by Nigerian investors and traders has been severely limited of late, as a result of sanctions by governments and also by the risk-averse nature of merchant services providers.

Mr. Gwadabe believes that the experience and integrity of Travelex would be key in getting the dollars down to Bureaux de Change, which are offices that many Nigerians rely on for transferring funds abroad, including to investment firms or brokerages.

Additionally, Mr. Gwadabe said the Travelex biometric data capturing would enable the Bureaux de Change to access the International Money Transfer Operators (IMTOs)/Travelex dollars window, resolving some of the compliance related difficulties often experienced when receiving remittances from Nigeria.

Travelex being a large national firm that does not operate under the radar in the way that Liberty Reserve did has the ability to generate a stable environment for transferring funds to brokerages, as well as from brokerages to client accounts, which has to be a good thing indeed.

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