Ethiopia Opens Doors to Independent Forex Bureaus

The first wave of applications by private operators has begun to capitalise on the opportunity to establish independent foreign exchange bureaus, following the central bank’s recent directive allowing them to apply for Forex Bureau licenses, the National Bank of Ethiopia (NBE) disclosed in a statement.

However, the central bank has not disclosed the number of the applicants.

Effective at the end of July 2024, the directive permits independent forex bureaus to engage in the buying and selling of foreign currency cash notes. Exchange rates can be negotiated between the bureaus and their clients, moving away from the previous rigid system of posted bank rates.

Eligibility for applying for an independent forex bureau license extends to entities owned by Ethiopian nationals, non-resident Ethiopians, and foreign citizens of Ethiopian origin, thereby introducing a diverse range of potential participants in the market. A capital threshold of 15 million Br is required from prospective applicants, demonstrating the ability to make a 30 million security deposit. Safety and security standards, counterfeit detection equipment, staff credibility, and insurance are also required to be issued with the permits.

According to the NBE, these bureaus are expected to enhance the foreign exchange market, addressing the needs of customers seeking to buy or sell foreign currency cash notes. There is anticipation that the operations of these bureaus will contribute to the establishment of market-driven exchange rates.

“This endeavor is part of the NBE's ongoing strategy to fundamentally transform the financial sector in Ethiopia in terms of size, shape, and scope in the coming years,” said Mamo Mihretu, the governor of the Central Bank, in a statement the NBE issued today, August 8, 2024.

According to the statement, the strategic importance of this development is a milestone to open Ethiopia's financial sector and align it with global standards and best practices.

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