European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.12, No.6, 2020 1 Effect of Bureau De Change Establishment on the Stability of Exchange Rates in Nigeria Umar Abbas Ibrahim, PhD 1 Aisha Muazu 2 1.Department of Business Administration, Nile University of Nigeria, Abuja Abbas.ibrahim@nileuniversity.edu.ng 2.Department of Business Administration, Nile University of Nigeria, Nigeria Abstract The purpose of this study is to examine the effect of Bureau de change establishment on the stability of the exchange rate in Nigeria. Ex post-facto and correlation research designs are employed for this study. The sample relied on for the purpose of this work was for the period from 2008-2018. The study relies on secondary data sources such as books, journals, magazines, newspapers, internet, speeches, and document from CBN, NSE and Bureau for public enterprises. The data estimation technique used was ordinary least squares. The findings of the study revealed that the bureau de change establishment impact the stability of the exchange rate in Nigeria. The result indicated that is the long-run relationship between Bureau De change and stability of the exchange rate. The study recommended that participants in the foreign exchange market should undertake forward transactions to serve as an insurance cover (shield) for their spot transactions. The exchange rate of the bureau de change should be closely monitored by monetary authorities to reduce the gap between these rates and the official rates. The government should adopt measures that would bring down the exchange rate of the naira to a US dollar so that Nigerian producers who make use of imported raw materials can continue in business. Keywords: Bureau De Change, Exchange Rate, Stability, Monetary, Naira. DOI: 10.7176/EJBM/12-6-01 Publication date: February 29 th 2020 1.1 INTRODUCTION The significance of a stable exchange rate to the sustainable development of developing economies is well recognized. Anigbogu and Okoye (2014) noted that exchange rates have been highly unstable in Africa especially since the move to a floating exchange rate system with negative consequences for trade, investment, and growth. Nigeria for example practiced a fixed exchange rate before 1986, but she embraced flexible exchange rate policy afterward. As a result, the official Naira exchange rate was allowed to float, within a pre-specified band, in relation to other currencies thereby allow changes within the band to be determined by market forces of demand and supply. Some of the policies employed to guarantee exchange rate stability include among others: second-tier foreign exchange market, bureau de change, independent foreign exchange market, inter-bank foreign exchange market, the enlarged foreign exchange market, and Dutch auction system (DAS), which comprises the retail and wholesale DAS. The uselessness of each of the policies to achieve sustainable stability in the Nigerian exchange rate led to the adoption of another. A bureau de change is a business that, in competition with other related businesses, makes its profit by buying foreign currency and then selling the same currency at a higher exchange rate. The exchange rates charged at the bureau are generally correlated with the spot prices accessible for large interbank transactions and are accustomed to ensure a profit. The rate at which a bureau will buy currency varies from that at which it will sell it; for every currency, it trades both will be on display, generally in the shop window (Chamalwa & Idris 2016). Nigerian Government through monetary authority has propagated many policies to maintain exchange rate stability (Ali, 2015). This makes transnational trade and investment decisions harder because instability increases exchange rate insecurity and risk. Hence, the exchange rate had risen ominously making it difficult for businesses to endeavor. As a result, the domestic market is harmfully affected, unemployment rose and per capita income abridged. Changing money at a bureau is often more costly than withdrawing it from an automatic teller machine at one’s terminus or paying directly by debit or credit card, but this varies subject to the card issuer and the type of account. Fees from multiple ATM withdrawals should also be considered. Some people may feel uncomfortable carrying a lot of cash and so fancy to use a card and carry token cash for tipping cabs, hotels, and restaurants. Hotels and rental cars many times also need cards for short-term holds (Ajibola and Omotosho 2015). Some may also prefer to hold foreign currency rather than change it back if they are expecting to return to where it is used. Companies that regularly send employees abroad may in essence act as their exchange by compensating their employees in the local currency and holding the foreign currency. If exchange rates are moderately steady, the fees charged by a bureau may surpass any likely fluctuation and it also makes the company's accountancy easier.