24th June, 2014
The Central Bank of Nigeria (CBN), on Monday, said it has increased the minimum capital requirement for Bureaux de Change (BDC) operators from N10 million to N35 million.
Notice of the increase was contained in a statement signed by Isaac Okoroafor on behalf of the bank.
He said the development was in line with efforts to address deficiencies in the operations of BDCs in the country.
He stated that the bank made the modification in order to ensure that only genuine companies operate as BDCs in Nigeria.
“The minimum capital requirement for BDCs in Nigeria is reviewed to N35 million.
“The mandatory cautionary deposit is reviewed to N35 million and shall be deposited in a non-interest yielding account with the CBN upon the grant of Approval-in-Principle.”
He also stated that new fees had been approved for licensing of BDCs, noting that application fee was N100,000, licensing fee was N1 million, while Annual Renewal Fee was N250,000.
He warned that ownership of multiple BDCs was not permissible and punishable if detected.
“All existing BDCs and those currently operating with a Final Approval Letter are required to comply with the requirement on mandatory cautionary deposit by July 15, 2014.
“All applications are expected to comply with the new requirements.”
He said the compulsory membership of the Association of Bureau De Change Operators of Nigeria (ABCON) was no longer a requirement for licensing of BDC.
Explaining the new directive, he said that deficiencies in the operations of BDC had brought about sharp practices in the foreign exchange market.
He said the bank had taken steps to check the growing incidence of rent-seeking, depletion of external reserves, financing of unauthorised transactions and dollarisation, among others.
He added that the apex bank authorised the directive based on the Foreign Exchange Monitoring and Miscellaneous Provisions Act 17 of 1995 and the BOFI Act of 1991.
The Act gives the CBN the right to license and regulate BDC operations in Nigeria to achieve the various objectives.
He stated that the objectives would provide access to foreign exchange to small-scale end-users, as well as serve as tools for the management of exchange rate, among others.
On observations in BDC operations, he said the bank observed in particular, the avalanche of rent-seeking operators who were only interested in widening margins and profits from the foreign exchange market, regardless of prevailing official and interbank rates.
He said they include “weak and ineffective operational structure, resulting in the subsector completely abandoning the objectives for its establishment.
“Depletion of the country’s foreign reserves, in view of the unusually large number of BDCs.
“Potential financing of unauthorised transactions with foreign exchange procured from the CBN Window, gradual dollarisation of the Nigerian economy with attendant adverse consequences on the conduct of monetary policy and subtle subversion of cashless policy initiative.”
He stated that the CBN expectation was to have BDCs that would be properly structured, effectively regulated and well-capitalised to meet the objectives for which operators were licensed for.
“In particular, the CBN envisages the emergence of well-capitalised and structured entities that can effectively perform the roles of Bureau De Change in the economy.
“Partnership between BDCs and renowned companies engaged in inward and outward money transfers in Nigeria.
“It is in expectation of this collaboration that the CBN on June 18, 2014, approved the Guidelines for International Money Transfer Services in Nigeria.”
Okoroafor stated that under the Guidelines, Western Union, Moneygram and RIA Financial Services had been authorised to carry out inward and outward money transfer services in Nigeria.
This, he added, would facilitate the creation of robust and sustainable business franchises that would not be dependent on rent-seeking activities.
He said it would be properly situated to compete in the foreign exchange market and deliver superior values and returns.