*Raises capital base by 250%
The Central Bank of Nigeria (CBN) yesterday reduced the volume of weekly foreign exchange sales to Bureaux De Change (BDCs) by 70 percent to $15,000 per BDC.
In another a related development, the CBN announced a 250 percent increase in the capital base for BDCs to N35 million from N10 million. In addition, the mandatory caution deposit was reviewed upward to N35 million from $20,000 per BDC while the licensing fee was raised to N1, 000,000 from N100, 000. Application fee and annual renewal fee was pegged at N100, 000 and N250, 000 respectively. The apex bank also banned ownership of multiple BDCs, and said that membership of the Association of Bureaux De Change Operators of Nigeria (ABCON) would no longer be a compulsory licensing requirement. “All existing BDCs and those currently operating with a Final Approval Letter are required to comply with the requirement on mandatory cautionary deposit by 15 July 2014 while all current applications are expected to comply with these new requirements,” the apex bank said.
Though the 70 percent reduction in volume of foreign exchange sales to each BDC, is yet to be formally announced, Vanguard was reliably informed that the implementation would commence this week.
The increase in capital base and other requirements were announced through a press release signed by Mr. Isaac Okoroafor, for the Director of Corporate Communications.
The CBN stated that the new licensing requirements were introduced to ensure that only genuine companies operate BDCs. This, it said followed observation of deficiencies in the operational effectiveness of BDCs.
The statement said, “The CBN has observed with grave concern the deficiencies in the operational effectiveness of BDCs, which runs counter to the aforementioned objectives. In particular, the Bank has observed the following unintended outcomes; Avalanche of rent-seeking operators only interested in widening margins and profits from the foreign exchange market, regardless of prevailing official and interbank rates; 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 unauthorized transactions with foreign exchange procured from the CBN Window; Gradual dollarization of the Nigerian economy with attendant adverse consequences on the conduct of monetary policy and subtle subversion of cashless policy initiative; and Inadequate level of minimum paid-up capital. The required minimum paid-up capital of BDCs is set at M10 million. While the capital requirements of all other CBN-regulated entities have been reviewed upwards over the years, the one for BDCs has remained the same; and Prevailing ownership of several BDCs by the same promoters in order to buy foreign exchange multiple times from the CBN Window, which is clearly related to the low level of capital requirements for licensing BDCs.
“The CBN’s expectation is to have BDCs that are properly structured, effectively regulated, and well-capitalised to meet the objectives for which operators are licensed. In particular, the CBN envisages the following: 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 as at 18 June 2014, approved the “Guidelines for International Money Transfer Services in Nigeria”. Under the Guidelines, Western Union, Monegram and RIA Financial Services have been authorised to carry out inward and outward money transfer services in Nigeria; Creation of robust and sustainable business franchises that are not dependent on rent-seeking activities but are properly situated to compete in the foreign exchange market, and deliver superior values and returns.”
