The Central Bank of Nigeria (CBN) has directed all existing Bureau de Change Operators (BDC) to reapply for fresh licenses in their preferred category.
This was disclosed on Wednesday in a circular published by the central bank and signed by Haruna Mustafa, Director of the Financial Policy and Regulation Department.
However, BDC operators have rejected the new licensing standards, claiming that they go against best global practices.
However, the CBN stated that the changes aimed to streamline BDC operations and improve financial accessibility.
The CBN stated that BDCs were expected to follow corporate governance standards as well as anti-money laundering, counter-terrorism financing, and counter-proliferation funding regulations.
The latest circular comes a day after the central bank’s Monetary Policy Committee upped the benchmark lending rate to 26.25 percent in an effort to combat the country’s surging inflation.
Olayemi Cardoso, Governor of the Central Bank of Nigeria, read the meeting’s communiqué and stated, “Members further observed the recent volatility in the foreign exchange market, attributing this seasonal demand as a reflection of the interplay between demand and supply in a in a freely functioning market system.”
The naira has fallen dramatically since the CBN harmonised the country’s currency rates, fluctuating between 1,400 and 1,600 on the official and parallel markets in the last two weeks.
The updated guidelines, an update to the draft that was released earlier this year, go into effect on June 3. The CBN eliminated the required caution deposit, which industry players had argued against. CBN established two additional categories: Tier 1 and Tier 2 BDC licenses.
According to the new guidelines, 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) It shall maintain a minimum distance of one kilometre between its branches, between its branch and a franchisee, and between its franchisees.
d) It shall exercise oversight over 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 these guidelines.”
A Tier 2 BDC license permits the operator to operate from only one state of the federation, or the FCT, and it is permitted to open five branches in a state of operation, subject to the CBN’s written consent.
BDCs, whether existing or new, would be obliged to achieve the capital criteria for their license type within six months. Meanwhile, the President of the Association of Bureau de Change Operators of Nigeria, Aminu Gwadebe, spoke with reporters and 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.
The ABCON president also lamented 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 checking money laundering, and we may meet money laundering in the future,” he argued.
According to the new guidelines, Tier 1 BDCs must have a minimum capital requirement of N2 billion, pay a non-refundable application cost of N1 million, and pay a non-refundable license charge of N5 million.
According to the CBN, Tier 2 BDCs must have a minimum capital base of N500 million, a non-refundable application fee of N0.25 million, and a non-refundable license charge of N2 million.
