Forex crisis: BDCs to recapitalise, re-apply in CBN reform plan

To combat the forex crisis, the Central Bank of Nigeria (CBN) has taken a tough stance on the operations of the Bureaux De Change (BDCs) operations.

All Tier-1 BDCs are to raise N2 billion minimum capital, while Tier-2 BDCs are to up their minimum capital to  N500 million.

There are 1,588 recognised BDC operators with N35 million capital.

The guidelines were released yesterday by CBN’s Director, Financial Policy and Regulation Department, Haruna Mustafa.

According to him, the policy shift was part of reforms to reposition the BDC sub-sector to properly play its role in the nation’s foreign exchange market.

He said the guidelines were issued following the conclusion of stakeholder consultations and in the exercise of the powers conferred on the CBN by Section 56 of the Banks and Other Financial Institutions Act (BOFIA) 2020.

“The guidelines, amongst others, introduce new licensing requirements and categories of BDCs as well as revise the permissible activities, financial requirements, corporate governance requirements, and AML/CFT/CPF provisions for BDCs.”

Under the guidelines, the Tier-1 BDCs can operate nationally and Tier-2 in one state.

Tier-1 BDC may operate in any of the 36 states and the Federal Capital Territory (FCT); may establish branches and appoint franchisees in any state and FCT subject to the written approval of the CBN and shall maintain a minimum distance of one kilometre between its branches and a franchisee.

It will also be permitted to exercise oversight on its franchisees who could adopt the franchisor’s name, logo, branding, technology platform, and regulatory rendition requirements.

By the new rule, a Tier-2 BDC is permitted to operate only in one state or the FCT; and establish five branches in a state subject to written approval by the CBN.

It will also be required to maintain a minimum distance of one kilometre between its branches, but will not be allowed to appoint franchisees.

By the guidelines, BDCs are also authorised to acquire foreign currency from diverse sources,  sell and open foreign currency and naira accounts with commercial or non-interest banks (CNIBs) as well as collaborate with its bankers to issue prepaid debit cards.

The guidelines, which take effect June 3, also stop commercial, merchant, non-interest, and payment service banks, financial holding companies, and other Financial Institutions (OFIs), including International Money Transfer Operators and payment service providers, serving staff of financial service regulatory and supervisory agencies and serving staff of regulated financial services providers, among others from owning BDC licence.

BDCs are no longer allowed to engage in street-trading of foreign currencies, maintaining any type of account for any member of the public, including accepting any asset for safekeeping/custody, taking deposits from or granting loans to members of the public in any currency and any form or carry out retail sale of foreign currencies to non-individuals, except for Business Travel Allowance (BTA).

The BDCs’ are also not allowed to open or maintain any account with any bank or financial institution outside Nigeria without the prior written approval of the CBN, among others.

Also, to secure licence approval in principle, the major shareholders, members of the board of directors and the top management of the proposed BDC must have passed the “fit and proper” persons’ test.

“The capital emanating from acceptable sources and earning projections of the proposed BDC are realistic.

“The payment for the shares by the shareholders meets the requirements in terms of mode (no cash funding allowed), is properly receipted and duly documented.

“Upon the grant of provisional approval, promoters of the proposed BDC shall submit an application for a final licence within 60 days, accompanied with the supporting documents,” the bank said.

Furthermore, the BDCs are expected to conclude the integration of their IT infrastructure with that of the CBN.

The system integration with the apex bank will cover connectivity with its extranet gateway (virtual private network) and relevant systems such as the returns rendition system, Financial Institutions Foreign Exchange Reporting System (FIFX), Financial Analysis (FinA), Centralised AML/CFT/CPF Rendition Platform (CARP), TRMS, Tax Identification Number Verification Portal of Federal Inland Revenue Service (FIRS) and any other application that the CBN may deploy.

They are also expected to conclude the integration of their IT infrastructure with that of the Nigeria Interbank Settlement System (NIBSS).

System integration with NIBSS will cover connectivity with the Bank Verification Number (BVN) database, among other IT requirements.

The CBN had directed banks to recapitalise within two years.

The process began last month with the submission of the recapitalisation plans by banks.

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