By Uche Usim
AT the weekend, the Central Bank of Nigeria (CBN) took audacious and radical steps by hiking the Tier 1 licensing fee of Bureau De Change (BDC) operators from N35 million to N2 billion.
The move feeds into its urgent plans of cleansing the Bureau De Change (BDC) segment of the
foreign exchange market, currently quaking in manmade
tempest.
With the release of new operational guidelines for the BDCs, it has become a sink or swim situation for them.
Economic experts have hailed the move, charging the apex bank to take no prisoners as it struggles to snatch the FX market from manipulators and saboteurs, who have vandalised
it in no small way.
CBN’s actions follow the tumbling of the naira to an
all-time low at N1,960/$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 new guidelines of BDCs, released by the Financial Policy and Regulation Department of the apex bank, puts the capital required for licence of BDCs in Tier 2 at N500 million.
Other guidelines are: Non-Eligible Promoters. Here, entities like banks, government agencies, NGOs are not allowed to have ownership stake in BDCs. The new rule outlaws that. 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.
The new rule leaves no room for ambiguities. 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 per cent of sale must be via transfer, 25 per cent 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.
Reacting to this new template,
the Director General, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf described the action of the CBN as a masterstroke designed to retrieve the Nigerian economy
from die-hard speculators and saboteurs.
He said: “It’s a right step in the right direction and will help sanitize that space. For me it’s good.
“The new template is in tiers which defines the volume of transactions you can handle. Just like the banks. We have microfinance banks and all that.
“Let’s know the real BDCs and the fake ones causing speculation and distorting the system”.
On monitoring, he said the CBN will have fewer BDCs to supervise as the new fee will weed out many of them.
“It’s time to bring the real BDCs into the forex ecosystem.
“Banks should focus on bigger transactions and BDCs handle the retail end. They’ll be fewer and it’ll be easier to monitor them. If the CBN intends to set up a different unit to monitor
the BDCs like they do with the banks, why not? It’s worth it given the critical role of FX in the system.
“Where necessary, the BDCs have to merge. There is good business in that space”.
Also commenting on the
matter, a lawyer, Bashir Shehu, said it was a soothing development to see that the CBN has started to take control and do the needful to rein in the criminals and saboteurs and forex speculators.
He charged the apex bank to ensure strong enforcement without any iota of compromise.
“However you look at it, it is not correct that we allow a few manipulators and speculators to take charge of our legitimate forex market. Demolishing all illegal stalls (online and offline) used for illegal forex markets is good, moving forward. I can attest that Zone 4 is now given a clean shave, just like NCC has
been directed to block all illegal websites being used for forex speculation.
“Therefore, we can continue other strategic policies implementation including high-tech control of forex manipulation that is usually done through crypto and others. Gradually, we will get there”, he said.
Shehu also advised the apex bank to defiantly call the bluff of the World Bank and International Monetary Fund against their manipulative advice to float the naira without considering the peculiarity of the Nigerian markets and marketers.
“Nigeria’s economy has everything for us to survive without taking any exploitative capitalist advice from the IMF and WB. It’s all about natural resources which we have in abundance, we only have to harness them and earn more
FX. When we control the physical FX liquid in circulation
and stop all criminal round-tripping, we will see a sanitized system.
“I will not shy away from the fact that Abacha called the bluff of these global capitalists, pegged the naira-to-dollar exchange rate
for years and Nigeria did not fall. On the contrary, we did better.
“Malaysia and Saudi Arabia will never float their currencies to give any advantage to the dollar, why are we doing it to please the
West. So, CBN should take further steps to stop the blackmail by IMF and WB, even though America and the UK are still officially controlling their FX. What are we talking about”, he
queried?
Below are the key points from CBN’s reversed regulatory and supervisory guidelines for bureau de change operations in Nigeria.
•Franchising Standards: 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. •Penalties: Non-compliance
may lead to sanctions including revocation of licence., among others.
“In summary, the guidelines aim to regulate all aspects of BDC operations from licensing, governance, sources of funds, forex transactions, reporting, supervision etc in line with
Central Bank objectives.
“What is now required is for CBN to strictly and stringently monitor commercial banks and their
CEOs and should not hesitate to use the biggest hammer to penalize anyone who flouts these regulations. If we can maintain these and improve on them, enforcing without compromise, we will see a better market forces and an improved economy”, he said.