The Central Bank of Nigeria (CBN) has issued a draft revised guidelines in the financial services industry, which seek to raise the minimum share capital of Bureau De Change (BDC) operators to N2 billion and N500 million for Tier 1 and Tier 2 licenses.
The guidelines, which seek to enhance the regulatory framework for BDC operations as part of ongoing reforms of the Nigerian foreign exchange market, was contained in a circular signed by the apex bank’s Director, Financial Policy and Regulation Department, Mr Haruna Mustafa, and issued on Friday
The guidelines spelt out new licensing requirements, corporate governance and Anti-Money Laundering/Combating the Financing of Terrorism provisions as well as new record-keeping and reporting requirements, among others.
The circular reads, inter alia: “Pursuant to the powers conferred under Section 56 of the Banks and Other Financial Institutions Act, 2020 (BOFIA), the Central Bank of Nigeria (CBN) hereby issues this draft revised Regulatory and Supervisory Guidelines for Bureau de Change (BDC) Operations in Nigeria for stakeholder comments and/or inputs.
“The Guidelines significantly enhances the regulatory framework for the operations of Bureau De Change as part of ongoing reforms of the Nigerian foreign exchange market.
“The Guidelines revises the permissible activities, licensing requirements, corporate governance and Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) provisions for BDCs.
“It also sets out new record-keeping and reporting requirements, among others”, it added
Before the latest guidelines, which the apex bank is seeking public input before adoption, the general license was N35 million for a BDC.
For instance, in terms of the capital requirements for a BDC operation, the revised draft guidelines proposed minimum capital for a two-tier licence for BDC operators in the country.
The guidelines provide inter alia: “A Tier 1 BDC is authorized to operate on a national basis can open branches and may appoint franchisees, subject to the approval of the CBN.
“A Tier 1 BDC (which is the franchisor) shall exercise supervisory oversight over its franchisees. All franchisees shall adopt their franchisor’s name, branding, technology platform, and rendition requirements.
“A Tier 2 BDC is authorized to operate only in one state or the FCT. It may have up to three locations – a head office and two branches, subject to approval of the CBN. It is not permitted to appoint franchisees”, it added.
According to the revised draft guidelines, Tier 1 operators are expected to have N2 billion as minimum share capital while also depositing a Mandatory Caution Deposit of N200 million while the application and licence fees are N1 million and N5 million respectively.
Also, Tier 2 operators are expected to have N500 million as minimum share capital while depositing a Mandatory Caution Deposit of N50 million and the application and licence fees are N250,000 and N2 million respectively.
The revised draft guidelines also stated that the prescribed minimum capital of BDCs and any subsequent capital injection shall be subject to verification by the CBN.
Also, the proposed regulatory and supervisory guidelines provide that BDC licences are renewable annually subject to compliance with laws and regulations applicable to BDCs and the payment of the non-refundable annual licence renewal fee, which is N5 million for Tier 1 operators and N1 million for Tier 2.
Mustafa, who stated the draft guidelines were available on the CBN’s website, urged stakeholders to forward their comments to the CBN’s Director, Financial Policy and Regulation Department, with soft copies mailed to PolicyandRegulationDivision@cbn.gov.ng by March 4, 2024.
Some provisions of the 50-page draft guidelines seek to promote transparency, eliminate corruption and hoarding of Forex and reasons for preservation of records and conditions for revocation of BDC operations licence.
For instance, the draft clause 18.0 in the revised guidelines provided that “every BDC shall maintain documents obtained from its customers for at least five years after the consummation of the transaction-”
The revised guidelines also stated that the CBN might revoke the license of a BDC where the operator or its entities forges, mutilates, alters or defaces any foreign currency, or other foreign exchange instruments with intent to defraud.
This is even as the document also prohibited multiple ownership of BDCs; obtaining foreign currency from ineligible sources or from eligible ones in a fraudulent manner and spelt appropriate sanctions for violators of the guidelines.
