CEM REPORT, FINANCE| The Central Bank of Nigeria (CBN) has announced a major shakeup in the country’s Bureau De Change (BDC) sector. In a move aimed at strengthening the BDC industry and promoting transparency, the apex bank has directed all existing BDC operators to reapply for new operational licenses.
The directive effective June 3rd, 2024, comes alongside a significant increase in the minimum capital requirements for BDCs.
The new guidelines, outlined in the document titled “Regulatory and Supervisory Guidelines for Bureau De Change Operations in Nigeria,” mandate all existing BDCs to reapply for licenses under a tiered system.
“All existing BDCs shall re-apply for a new licence according to any of the Tiers or licence category of their choice as provided in the Guidelines,” the release stated.
Reapplication and Increased Capital Requirements
The most prominent change mandated by the CBN is the introduction of a tiered licensing system with substantially increased minimum capital requirements. This system introduces two categories of BDCs: Tier 1 and Tier 2.
Tier 1 BDCs: These operators will require a minimum capital base of ₦2 billion.
Tier 2 BDCs: These BDCs will need a minimum capital of ₦500 million.
Application Fees and Deadlines
The CBN has set a deadline of six months from June 3, 2024, for existing BDCs to meet the new capital requirements and reapply for their licenses. Additionally, the application process comes with non-refundable fees:
Tier 1 BDCs: Application fee – ₦1 million, License fee – ₦5 million.
Tier 2 BDCs: Application fee – ₦250,000, License fee – ₦2 million.
“All existing BDC’s shall meet the minimum capital requirements for the licence category applied for within six (6) months from the effective date of the guidelines,”
Restricted Activities for BDCs
The new guidelines also outline a number of activities now prohibited for BDCs, including:
Futures, Options, and Derivative Trading: This restriction aims to limit BDCs’ involvement in complex financial instruments.
Outward International Transfers: BDCs can no longer facilitate outward money transfers.
Receiving International Inward Transfers: This further restricts BDCs’ scope to domestic foreign exchange transactions.
Dealing with Crypto Assets: BDCs are prohibited from any transactions involving cryptocurrencies or entities associated with them.
“This Guidelines supersedes the Revised Operational Guidelines for Bureau De Change in Nigeria issued in November 2015 and all related circulars and directives.”
Conditions for Forex Sales by BDCs
The CBN has also clarified the conditions under which BDCs can sell foreign exchange:
Personal Travel Allowance (PTA): BDCs can continue to provide foreign currency for personal travel purposes.
Business Travel Allowance (BTA): Businesses can obtain BTA through BDCs, but individuals receiving BTA for a company cannot also receive PTA for the same trip.
Overseas Medical Bills: BDCs can facilitate payments for overseas medical treatment.
School Fees Abroad: Payments for educational expenses abroad can be made through BDCs.
Professional Examination and Annual Subscription Fees: BDCs are allowed to handle payments for professional exams and annual subscriptions incurred overseas.
Repurchase of Unused Naira: Non-residents can sell back unused Naira to BDCs, but only upon presenting the original purchase receipt.
Read Also: CBN Act Amendment: NASS Proposes New Leadership Structure
If You Ask Me
The CBN’s new regulations represent a significant shift for the Nigerian BDC industry. The increased capital requirements and restricted activities aim to promote a more robust and transparent BDC sector. While the short-term impact may involve consolidation and adjustments for existing operators, the long-term benefits could include increased stability and efficiency in the foreign exchange market.
The coming months will be crucial as BDCs navigate the reapplication process and adapt to the new regulatory environment.
