In response to the recent economic challenges facing Nigeria, the Central Bank of Nigeria (CBN) has rolled out new directives aimed at regulating Bureau De Change (BDC) activities more effectively.
The Nigerian naira’s value plummeting to an unprecedented low of N2,000 against the dollar prompted this move, with the National Security Adviser, Mallam Nuhu Ribadu, directing security agencies like the Economic and Financial Crimes Commission (EFCC) and the Department of State Services (DSS) to clamp down on currency speculators in the forex market. Consequently, raids on BDCs nationwide have led to the apprehension of several illicit operators.
The CBN’s Financial Policy and Regulation Department, under the leadership of Haruna B Mustafa, outlined the revised regulatory and supervisory guidelines in a statement titled “Revised Regulatory and Supervisory Guidelines for Bureau De Change Operations in Nigeria.”
Key Highlights of the New Guidelines
1. Capital Requirements
BDCs are now categorized into two tiers, each with specific capital requirements. Tier 1 BDCs must maintain a minimum capital of N2 billion, while Tier 2 BDCs are required to adhere to a capital threshold of N500 million. This marks a significant increase from the previous minimum capital requirement of N35 million for all BDCs.
2. Ownership Restrictions
Financial institutions, including commercial banks, merchant banks, non-interest banks, and payment service banks, are prohibited from owning or having indirect ownership stakes in BDCs. Additionally, entities such as non-governmental organizations (NGOs), financial regulatory and supervisory agency employees, government entities, public officials, and cooperative societies are barred from owning BDCs.
3. Operational Limitations
While BDCs are authorized to engage in specific activities outlined by the CBN, such as buying and selling foreign currencies and issuing prepaid cards, they are prohibited from accepting deposits, extending loans, trading in gold, or participating in capital market activities. They are also restricted from engaging in street trading, maintaining accounts for the public, or conducting offshore business.
4. Forex Sourcing and Sale
BDCs can source forex from authorized dealers, travelers, hotels, embassies, and other approved channels as specified by the regulatory guidelines. The sale of foreign currencies is permitted for purposes like travel, medical bills, and school fees, up to specified limits per customer annually. At least 75 percent of sales must be conducted through electronic transfers.
5. Customer Declarations
Individuals or entities selling $10,000 or more to BDCs must disclose the source of the foreign exchange and comply with all Anti-Money Laundering/Combating the Financing of Terrorism/Counter Proliferation Financing (AML/CFT/CPF) regulations and foreign exchange laws. Customers with digital or transfer transactions for purchasing foreign currencies will have payments credited to the BDC’s Nigerian domiciliary account, with payments made to customers’ Naira accounts.
These regulations aim to enhance transparency, accountability, and stability in the BDC sector while curbing illicit activities and safeguarding the Nigerian economy.