There is widespread apprehension in the foreign exchange market following the continued silence of the Central Bank of Nigeria (CBN) on the number of Bureaux de Change (BDCs) that have met the new requirements announced on June 23rd.
Vanguard investigations however reveal that about 2,385 existing BDCs have so far met the new requirements. Investigation revealed that most banks are not selling foreign exchange to BDCs due to uncertainty about their compliance with the new requirements. BDC sources who spoke to Vanguard on condition of anonymity confirmed that the banks said they would not sell dollars to BDCs until the CBN announces the list of BDCs that have met the requirement.
This has however aggravated the scarcity of dollars in the market, leading to further depreciation of the naira in the parallel market last week. The parallel market exchange rate on the average rose further to N173.5 per dollar. This implies that the naira has depreciated by N8.5 or 5.1 percent since new requirement was announced on June 23rd.
The new requirements for BDC operations include 250 percent increase in minimum capital base to N35 million, and an increase in the mandatory caution deposit from $10,000 to N35 million. While announcing the new requirement in a press release on June 23rd, The CBN said that the new requirements were to correct observed deficiencies in the operation of Bureaux de Change (BDCs) in Nigeria which have led to gross inefficiencies and sharp practices in the foreign exchange market, has taken steps to check the growing incidence of rent-seeking, depletion of external reserves, financing of unauthorized transactions and dollarization, among others.
“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, Moneygram 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.
“In view of the background and vision provided above, and in order to ensure that only genuine companies operate as BDCs in Nigeria, the CBN makes the following modifications to the “Bureaux De Change Guidelines”:
“The minimum capital requirement for the operation of 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 in the CBN upon the grant of Approval-in- Principle; The following fees shall apply to the licensing of BDCs: Application Fee—N100,000.00; Licensing Fee—N1 million; and Annual Renewal Fee—N250,000.00; and Ownership of multiple BDCs is not permissible, and would be punishable if detected.”
