BDC Operators Have Until December to Reapply as CBN Releases Approved Guidelines

The approved rules to control the operations of Bureau de Change (BDC) operators throughout the nation have been released by the Central Bank of Nigeria (CBN).

According to a new circular issued on Wednesday, Tier-1 BDCs have a minimum capital base of N2 billion and Tier-1 is fixed at N500 million. A obligatory caution deposit of N200 million was also eliminated for holders of tier-1 BDC licences and waived for holders of tier-2 licences.

Director of Financial Policy and Regulation at CBN, Haruna Mustafa, stated in the circular notifying BDCs that the approved guidelines will go into force on June 3, 2024.

The apex bank instructed current BDCs to reapply for new licences and satisfy the minimum capital requirements for the licence type sought for within six months of June 3, 2024.

Among other things, the CBN outlawed street trading, international external transfers, funding of political activities, dealing in gold or other precious metals, dealing in cryptocurrency or any other virtual assets.

Once transactions exceed USD 500, the CBN mandated that BDCs transit them through digital channels.

Part of the circular said, “The Central Bank of Nigeria (CBN) issued the Draft Operational Guidelines for BDC Operations in Nigeria in February 2024, for stakeholder comments/inputs, as part of reforms to re-position the Bureau De Change (BDC) sub-sector to play its envisioned role in the foreign exchange market in Nigeria.

“The Central Bank of Nigeria (CBN) is sending out the accompanying Regulatory and Supervisory Guidelines for Bureau De Change Operations in Nigeria 2024 now that the stakeholder consultations are over and as mandated by Section 56 of the Banks and Other Financial Institutions Act (BOFIA) 2020. These guidelines have to be followed by all operators and promoters of planned BDCs in Nigeria.

“Among the rules are new types of BDCs and licencing criteria; they also update the financial, corporate governance, authorised operations, and AML/CFT/CPF standards for BDCs.

According to the Guidelines, all current BDCs must reapply for a new licence under any of the Tiers or licence categories of their choosing.

Within six (6) months of the Guidelines being into effect, satisfy the minimum capital criteria for the licence category you have applied for.

“Applicants for a New BDC Licence Applicants for a new BDC licence must fulfil the requirements for the licence to be granted in line with the Tier or category of BDC selected as specified in the Guidelines. Application processing and receipt will start on the day the Guidelines go into effect.

Once BDCs reach a value of USD 500, the CBN mandated that they route their transactions through digital means.

The rules said, “BDCs shall source foreign money under the following conditions:

“i. Sellers to a BDC of the equivalent of USD10,000 and above must disclose the source of the foreign exchange and abide by all foreign exchange laws and regulations as well as AML/CFT/CPF regulations.

“ii. Customers can sell foreign currencies to BDCs from their personal domiciliary accounts with Nigerian banks. Such sales will all be applied to the Nigerian domiciliary account of the BDC.

iii. All BDC digital or transfer purchases of foreign currency must be paid for by transfer to the customer’s Naira account. A BDC may provide a customer a prepaid NGN card if they are not residents of Nigeria. Relevant maximum credit and cumulative limits in compliance with applicable Know Your Customer (KYC) regulations will apply where such a card is issued.

“iv. Customers will receive transfers to their Naira bank accounts for cash purchases of foreign currency exceeding USD500. Should the customer not be a resident of Nigeria, a BDC will provide them a prepaid NGN card.

“v. Cash payments to customers for foreign currency purchases equivalent to USD 500 and below may be made.”

The last year since President Bola Tinubu took office has seen previously unheard-of volatility in the Nigerian currency. In May 2023, the Naira was valued at roughly N700/1$. It fell to an all-time low of about N1,900/1$ in February 2024, then rose in April to about N1,100/1$ before suddenly falling to N1,600/1$ in May of that same year.

Tuesday saw CBN Governor Olayemi Cardoso blame “seasonal demands” for the volatility in the foreign exchange market.