One of the major issues raised at a stakeholders meeting with regulators and Association of Bureaux De Change Operators of Nigeria (ABCON) was fomerlisation of Bureau De Change (BDCs) operations.
Formalization according to IGI Global refers to the extent to which explicit rules, regulations, policies and procedures govern organizational activities.
BDCs suffer from low level formalization of operations, whereby street traders are now competing for the forex market with CBN-licenced operators.
“The challenge of poor formalization of BDCs operation makes us inefficient and difficult to fulfill CBN’s mandate. We want the CBN to step in and formalize BDCs operations and make it difficult for street forex traders to operate,” Aminu Gwadabe, president of ABCON, said.
Another challenge was on the cost of obtaining a license, which Gwadabe noted that getting a BDC license costs around N40 million in Nigeria, when it costs only $5,000 to get the same license in Kenya. Yet, both the public and regulators have continued to castigate Nigerian BDCs.
The Association appealed to the CBN to approve the ABCON training institute to provide more avenues for continuous training of its members on current trends in illicit financial flows and anti-terrorist financing.
“ABCON appeals to the CBN to issue a Letter of Consent to our proposed training institute. This is going to boost the current ABCON Management commitment to capacity building of its members meant to stimulate competency in the sector,” he said.
He said there was no way over 6,000 people can be trained in one hall, making the need for a training institute crucial to achieve the desired capacity building gains for the industry.
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Regulatory Compliance A Must for BDCs
Despite these challenges, Gwadabe advised BDCs to continually comply with all extant rules & regulations prescribed by the CBN, as the regulator closely supervises and monitors their operations.
He said ABCON would continue to sensitize its members to comply with (CFT) guidelines which include registering on NFIU Portals and rendering returns. Compliance will be in the best interest of the Operators, the Association and the Country’s Financial System.
For Gwadabe, ABCON leadership under his watch will continue to ensure that the market gains the needed liquidity, exchange rate remains stable and illegal operators are put out of business.
It was a gathering of champions with a clear mandate geared towards setting the Nigerian Bureaux de Change (BDCs) on a path of sustainable growth.
The Annual General Meeting (AGM) held on Zoom recently in Lagos was opportunity for Gwadabe to restate the prime role played by Central Bank of Nigeria (CBN)-licensed BDCs in promoting exchange rate stability, forex liquidity and forex sale to retail end of the market.
Gwadabe spoke extensively about the N1 trillion turnover milestone achieved by BDCs which reaffirms the sector’s prime position in the economy. He also listed the challenges facing the sub-sector, especially the low transaction margins on dollar sales, which continuously threaten the survival of BDCs businesses.
The meeting, which had the backing of CBN Governor, Godwin Emefiele was also attended by the apex bank directors, Representatives of Nigerian Financial Intelligence Unit (NFIU), Economic and Financial Crimes Commission (EFCC), Financial Action Task Force (FATF), DataPro CEO and over 550 top BDC directors, traders and other attendees nationwide.
All the financial sector regulators, watchdogs and facilitators at the event took turns to chart a formidable future for BDCs. They are confident of a future for BDCs built on regulatory compliance, fight against illicit financial flows, and support for CBN’s exchange rate stability mandate.
ABCON boss Gwadabe further highlighted the urgent need to foster a better and positive image for the BDC sub-sector. He said the BDCs needed a positive and rewarding image different from what the naysayers have fed the public with.
“We need to tell everyone that ABCON members are different. Majority of BDCs are not criminals. We need respect from members of the public,” he stated.
He said with over 20,000 Nigerians employed by the sub-sector, there was need to support the BDC business for sustained economic growth and employment generation.
Gwadabe who spoke on the theme: “BDCS Operations: A Trillion Naira Sub Sector, Issues of Formalisation, Regulation and Way Forward” said foreign currencies dealt in by a BDCs are derived from private sources and such other sources which may include the CBN window as determined by the CBN from time to time for the purpose of funding Business Travel Allowance (BTA), Personal Travel Allowance (PTA), School Fees Payment abroad, Medicals, mortgage and subscription. There are also other autonomous sources such as Diaspora Remittances, walk in customers and bank sources.
He said ABCON is now training Compliance Officers to ensure they are acquainted with what is required of them, especially on monthly rendition of results and tracking illicit capital flows through compliance.
According to Gwadabe, BDCs are complying with the rendition of suspicious transactions reports as directed by NFIU, CBN, and EFCC.
“Directors of BDCs are being trained, and after training, whoever is found wanting will be recommended for sanctions,” he said.
He said BDCs are required to comply with all extant rules & regulations prescribed by the CBN, while the CBN closely supervises and monitors their operations.
“In compliance with the provisions of Bank and Other Financial Institutions (BOFIA) as amended, every BDC renders returns to the CBN in prescribed format and within the deadline stipulated by the CBN. The records of the BDCs are made readily available to the CBN examiners as and when requested including carrying out customer due diligence, corporate governance and tax returns,” he said.
He said that ABCON has over the years established itself as a key player in the BDC industry, and has also made several commitments and sacrifices to ensure that the sector continues to thrive despite all odds.
“The recognition of the role of BDCs in Nigeria’s financial sector remains the first step to building a sustainable and viable forex market that is comparable to what is obtainable in other developed economies. But getting the Nigerian BDC sector to where it is desired to be demands hard-work, quality leadership, regulatory foresight and sound government policies,” he said.
Digitization/ Transaction Margin Review
Gwadabe said that BDCs have achieved major success with the digitization of their operations as operators can now file their reports from convenient points without clustering at CBN’s offices.
He said ABCON digitized BDCs operations with the official launch and take off of the ABCON Live Run Automation Portal in Lagos. The project, which has the backing of the CBN, ended decades of manual filling of regulatory reports by BDCs and enhanced global competitiveness of operators.
The portal, which is a game changer in the Nigerian BDC Industry, is the final phase of automating all BDCs’ operations and integrating them with the operations of CBN, NFIU and Nigeria Inter-Bank Settlement System (NIBSS) for improved compliance with regulation and seamless operations.
Gwadabe also called on the CBN to review the transaction margin for BDCs to enable operators stay in business as the sector needs a profitable margin to sustain operators’ businesses.
He disclosed the N2 per dollar margin currently earned by BDCs was discouraging and insufficient to sustain their operations and discourages foreigners from investing in the sector.
Making BDCs Payments Agents of Diaspora Remittances
ABCON president, Gwadabe, also suggested to the CBN to make BDCs Diaspora Remittances Pay Agents.
He disclosed that the CBN introduced the Investors and Exporters (I &E) Window which allows foreign investors to freely bring their funds into the economy at a rate of their choice.
Similar plan was implemented by the CBN in 2016 /2017 and the impact was massive in boosting foreign capital flows to the economy and deepening exchange market liquidity.
Therefore, ABCON suggests that the CBN allows investors and Diaspora Remittances senders to freely interact with the BDCs bid and offer rates and make the BDCs pay out agents for remittances.
CBN, NFIU, NIBSS statements
In his presentation, CBN Director, Williams Kanya, said the apex bank acknowledges the support of BDCs under ABCON adding that the apex bank has key interest in ABCON operations.
He said: “I am happy that BDCs and ABCON have become more professional. The ABCON team has understanding beyond what they do and this makes CBN’s work easy. We are happy with what they are doing to keep the exchange rate stable and promote sustained economic growth. The CBN remains the biggest supplier of dollars to BDCs and has pumped enough liquidity to the sector”.
Continuing, Kanya said speculation remains a big problem, adding that CBN stands with ABCON on balancing of rates. “Speculation will be bad business going forward as people will keep losing money. Also, we need rendition of returns from BDCs not to witch-hunt anyone, but to take decisions that will favor the economy with the data”.
Acting Associate Director, Nigerian Financial Intelligence Unit (NFIU), Mohammed Jiya, urged BDCs to always file their returns on time, and even where there are no transactions to report, they can file Nil reports.
He said the agency needs the data from BDCs returns to know what is happening in the sector and take decisions that would favor the economy.
“The guideline clearly states that every BDC shall have an AML/CFT policy in compliance with AML/CFT Act 2011 for, amongst others, identification of customers using relevant means before carrying out a transaction or establishing a business relationship,” he said.
He said Compliance Officers are to ensure that there is a compliance programme, prepare suspicious transaction reports and render returns on the same to the NFIU and where there are no such transactions, a “Nil Return” shall be rendered monthly.
“All Licensed/Registered BDCs operating in the country are expected to register on goAML and NIL Reporting Portal to enable them respectively render Statutory Returns (STRs, SARs, CTRs and AIF) or NIL Return when there is no report for a given period,” Jiya advised.
In its presentation, DataPro, said data Protection is about data Security. It ensures that personal data is safeguarded from unlawful access by unauthorized parties. The firm said that BDCs that collect personal data, have the responsibility of protecting it from unauthorized access.
Also, representatives of Other Financial Institutions Department of the CBN, Nigeria Interbank Settlement System, FATF among others called for vigilance on the part of BDCs to ensure they follow regulations by conducting customer due diligence on all their transactions.