BDC operators reject amended CBN licensing guidelines

Alex Omenye
Alex Omenye

Foreign exchange dealers under the umbrella of the Bureau de Change Operators of Nigeria have rejected the new licensing guidelines directive by the Central Bank of Nigeria.

This was disclosed in a statement by the President of the Association of Bureau de Change Operators of Nigeria, Aminu Gwadebe, stating that, it is contrary to best global practice, according to The Punch.

The Central Bank of Nigeria had in a circular directed all existing Bureau De Change Operators to re-apply for new licenses in their preferred category.

The CBN pointed out that these adjustments were aimed at streamlining BDC operations and increasing financial accessibility.

The Central Bank underlined that BDCs were expected to comply with corporate governance requirements, anti-money laundering, counter-terrorism financing, and counterproliferation financing provisions.

This comes a day after the Monetary Policy Committee of the Central Bank raised the benchmark lending rate to 26.25 % in order to combat the country’s rising inflation.

In his speech, the Governor of the CBN, Olayemi Cardoso, said, “Members further observed the recent volatility in the foreign exchange market, attributing this seasonal demand, a reflection of the interplay between demand and supply freely functioning market system.”

The new guidelines will enter into force, On 3 June which is an update of the draft that was published earlier this year.

The Central Bank has withdrawn the mandatory security deposit, which the key players in the industry had objected to.

CBN set up two new categories; Tier 1 and Tier 2 BDC licences.

According to the new guidelines, “A Tier 1 BDC: a. May operate in any State of the Federation and the Federal Capital Territory, b. May establish branches and appoint franchisees in any state and FCT, subject to the written approval of the CBN. c. Shall maintain a minimum distance of one kilometer between its branches, its branch, and a franchisee, and between its franchisees. d. Shall exercise oversight on its franchisees.

All franchisees shall adopt their franchisor’s name, logo, branding, technology platform, and regulatory rendition requirements. 2 Classified as Confidential: e. Shall comply with the franchising standards prescribed in this guidelines.”

A tier 2 BDC Licence affords the entity to operate from only one state of the federation or the FCT and shall be allowed to set up five branches in a state of operation subject to the written approval of the Central Bank of Nigeria

The company shall also be obliged to maintain a distance of at least one kilometre from its branches and is not able to appoint the franchisees.

In addition, within six months the BDCs existing or new would have to comply with the capital requirements of their licence category.

in his remarks, the President of the Association of Bureau de Change Operators of Nigeria, Aminu Gwadebe, said, “The requirement is huge. It is not in line with global practices. Capitalisation in the UK is 50,000 pounds; in Kenya, it is $50,000 and so on. I don’t think it reflects global practice. A BDC is not a deposit taker; it is only buying and selling.

“Also, I’m afraid, we would not go the way of Algeria when they came with such policies and at the end of the day, every other player runs to the open market operations and at the end of the day, Algeria had to look for that open market to even determine their local currency exchange rate. We should be careful so that we will not throw away our experience, capacity and investment,” he warned.

Gwadebe, expressed concerns about the deadline, stating that the deadline given to BDCs is short.

“When you are giving other sectors, one year, or two years, why the rush with the sub-sector? The deadline is quite short. It is not feasible and then we should also guide against what we are trying to avoid. The CBN in its mind is checkmating money laundering and we may meet money laundering in the future,” he argued.

In accordance with the new rules, BDCs in the Tier 1 category will be required to have at least a capital requirement of N2 billion, payment of an application fee of not more than N1 million, and no less than N5m as licence fees.

In the Tier 2 BDCs category, the apex bank disclosed that BDCs would be required to have a minimum capital base of N500m, N0.25m as a non-refundable application fee, and N2m as a non-refundable licence fee.

The new rules will allow BDCs to operate as dealers on the Nigerian foreign exchange market, following their application and approval by the Director of Trade & Exchange for an authorised dealer licence.

The CBN said while BDCs could source dollars from individuals, adding, “Sellers of the equivalent of $10,000 and above to a BDC are required to declare the source of the foreign exchange and comply with all AML/CFT/CPF regulations and foreign exchange laws and regulations and customers may sell foreign currencies in their individual domiciliary accounts with Nigerian banks to BDCs. All such sales shall be credited to the BDC’s Nigerian domiciliary account.

“Every BDC shall conspicuously display its buying and selling rates. Such rates shall apply throughout all its branches, and where applicable, its franchisees. Disclaimers or statements by a BDC to the effect that an exchange rate indication is not to be relied on are prohibited. i. A BDC shall not give customers price indications that are misleading or make price comparisons that are not genuine or fair. Every BDC shall maintain adequate records of all its transactions for transparency and compliance with CBN Guidelines, AML/CFT/CPF provisions, circulars or directives,” part of the guidelines stated.

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