The Central Bank of Nigeria (CBN) has adopted a strict approach to the Bureaux De Change (BDC) operations to tackle the foreign exchange problem. The minimum capital required of all Tier-1 BDCs is N2 billion, whilst Tier-2 BDCs must boost it to N500 million. With a capital of N35 million, 1,588 authorized BDC operators are present.
Haruna Mustafa, Director of CBN's Financial Policy and Regulation Department, announced the recommendations Wednesday. He said that the new policy was a component of efforts to realign the BDC subsector so that it could effectively fulfill its function in the country's foreign currency market.
The guidelines, he said, were released after stakeholder discussions came to an end and as part of the CBN's exercise of the authority granted to it by Section 56 of the Banks and Other Financial Institutions Act (BOFIA) 2020.
"Among other things, the guidelines update the AML/CFT/CPF provisions, corporate governance requirements, permissible activities, and financial and licensing requirements for BDCs. They also introduce new categories of BDCs and license requirements." The regulations allow Tier-1 BDCs to operate across the country and Tier-2 BDCs in a single state.
Subject to the express consent of the CBN, Tier-1 BDC is permitted to operate in all 36 states as well as the Federal Capital Territory (FCT). It is also required to keep a minimum of one kilometer between its branches and franchisees.
Additionally, it can monitor its franchisees, who may use the franchisor's name, trademark, branding, technological platform, and legal rendition specifications. A Tier-2 BDC may only operate in one state or the Federal Capital Territory (FCT) under the new rule, and it may open five branches within a state with the CBN's prior written consent. It won't be permitted to designate franchisees, and it must keep a minimum of one kilometer between each of its locations. By the standards, BDCs are also permitted to purchase foreign currency from a variety of sources, sell it, establish Naira and foreign currency accounts with commercial or non-interest banks (CNIBs), and work with their bankers to provide prepaid debit cards.
The rules, which go into effect on June 3, also prohibit commercial, merchant, non-interest, and payment service banks, financial holding companies, and other Financial Institutions (OFIs) from holding BDC licenses. These include International Money Transfer Operators and payment service providers, as well as serving employees of regulated financial services providers and financial service regulatory and supervisory agencies. Except Business Travel Allowance (BTA), BDCs are no longer permitted to carry out retail sales of foreign currencies to non-individuals, maintain any kind of account for any member of the public, accept any asset for safekeeping or custody, accept deposits from or lend money to members of the public in any currency, or street trade foreign currencies.
In addition, the BDCs are prohibited from opening or keeping any kind of account with a bank or other financial organization outside of Nigeria without the CBN's prior written consent. Additionally, the key owners, board of directors members, and senior management of the proposed BDC must have passed the "fit and proper" people test to obtain license approval in theory. "The projected earnings of the planned BDC are reasonable and the funding is coming from reliable sources. "The shareholders' payment for the shares is adequately documented, appropriately receipted and complies with the manner requirements (cash financing is not permitted).
The bank stated, "Promoters of the proposed BDC shall submit an application for a final licence, accompanied by the supporting documents, within 60 days of the grant of provisional approval." In addition, it is anticipated that the BDCs would complete the integration of their IT infrastructure with the CBN. Connectivity with the apex bank's extranet gateway (virtual private network) and pertinent systems, including the Financial Analysis (FinA), Tax Identification Number Verification Portal of the Federal Inland Revenue Service (FIRS), Financial Institutions Foreign Exchange Reporting System (FIFX), TRMS, Centralized AML/CFT/CPF Rendition Platform (CARP), and returns rendition system, are all covered by the system integration.
Additionally, it is anticipated that they will complete the Nigeria Interbank Settlement System (NIBSS) IT infrastructure integration. Among other IT needs, system integration with NIBSS will include communication with the Bank Verification Number (BVN) database. Within two years, banks were required to recapitalize by the CBN. The recapitalization plans submitted by the banks last month marked the start of the process.
