FX crisis: CBN hits BDCs with N2bn licensing fee

.. Orders them to declare source of FX above $10,000

By Uche Usim

As foreign exchange crisis engulfs the Nigerian economy, the Central Bank of Nigeria (CBN) has reacted by rolling out tougher operational measures for Bureau De Change (BDCs) to weed out those not cut out for the real business but join in speculative actions.

This follows the tumbling of the naira to an all-time low at N2,000/$1at the weekend.

Before now, the National Security Adviser, Mallam Nuhu Ribadu, ordered the Economic and Financial Crimes Commission (EFCC), Department of State Services (DSS) and other security agencies to crack down on currency speculators in the forex market.

Also, the President, Association of Bureau De’Change Operators of Nigeria (ABCON), Mr. Aminu Gwadabe, backed the federal government’s relentless raid on individuals hawking foreign exchange on the streets of major cities in Nigeria.

He said this fuels currency speculation that ultimately hurts the economy.

However, on Friday, the Financial Policy and Regulation Department of the apex bank, released a new set of guidelines to all BDC operators and stakeholders in the financial sectors.

According to the guidelines, the capital required for licence of BDCs in Tier 1 category is N2 billion, while that of Tier 2 is N500 million.

Other guidelines are:Non-Eligible Promoters. Here, entities like banks, government agencies, NGOs are not allowed to have ownership stake in BDCs.

With regards to permissible activities, BDCs can buy and sell foreign currencies, issue prepaid cards, serve as cash points for money transfer operators etc. They cannot take deposits, grant loans, deal in gold or engage in capital market activities.

For sources of Foreign Currencies, BDCs can source forex from authorized dealers, travellers, hotels, embassies etc. Large transactions above $10,000 require declaration of source.

As regards sale of foreign currencies, BDCs can sell forex for travel, medical bills, school fees etc up to specified limits per customer annually. At least 75% of sale must be via transfer, 25% can be cash.

There are 2 tiers of BDCs – Tier 1 with national presence, branches and franchises; Tier 2 restricted to 1 state with max 3 locations.

For operations, BDCs must verify customer identity, keep transaction records, connect to CBN systems, display rates clearly etc.

As a way of ensuring stricter supervision, specified regulatory returns must be rendered, records available for inspection, compliance with guidelines required.

For franchising standards, the standards specified for Tier 1 BDCs appointing franchises regarding policy, monitoring, branding etc.

Prudential Requirements: Specified limits on open position, fixed assets, borrowings, dividend payment etc.

– AML/CFT Requirements: Must comply with AML/CFT regulations on policies, monitoring, reporting etc.