As CBN categorises BDCs, raises capital requirements to N2bn

In a significant move, the Central Bank of Nigeria (CBN) on Friday proposed a substantial increase in the capital requirements for Bureau De Change (BDC) operators, marking a staggering 57,143-fold surge. The new capital requirement now stands at N2 billion, up from the previous N35,000.

The revised guidelines, unveiled by the CBN, introduce a tiered system categorizing BDC operators into tier 1 and tier 2 categories. Tier 2 BDCs face a capital requirement of N500 million, representing a more than 10-fold increase from the previous baseline.

Moreover, the mandatory caution deposit for both tier 1 and tier 2 operators has been significantly raised to N200 million and N50 million, respectively, up from the initial N35,000 requirement.

In addition to the capital requirements, the CBN has also adjusted the application fees, license fees, and annual fees for BDCs. A non-refundable application fee of N1 million for tier 1 and N250,000 for tier 2, along with non-refundable license fees of N5 million and N2 million for tier 1 and 2, respectively, have been stipulated. Furthermore, BDCs are now subject to non-refundable annual fees of N5 million and N1 million for tier 1 and 2, respectively.

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The guidelines outline distinct operational parameters for tier 1 and tier 2 BDCs. Tier 1 BDCs are authorized to operate nationwide, including the establishment of branches and the appointment of franchisees, subject to CBN approval. On the other hand, Tier 2 BDCs are restricted to operating within a single state or the Federal Capital Territory (FCT), with a maximum of three locations and no provision for appointing franchisees.

Regarding foreign currency sales by BDCs, the guidelines introduce conditions aimed at ensuring compliance and transparency. Sales of foreign currencies by BDCs are now strictly limited to specific purposes, including personal and business travel allowances, medical bills, school fees, and repurchase of unused Naira from non-residents.

Additionally, the guidelines mandate that at least 75 percent of any foreign currency sale by a BDC must be transferred electronically to the customer’s Nigerian domiciliary account or prepaid card.

The CBN’s move to bolster capital requirements for BDCs signals a significant shift in regulatory oversight aimed at enhancing the stability and integrity of the foreign exchange market in Nigeria. The new guidelines are expected to reshape the landscape for BDC operations and foster greater accountability within the sector.

In a move aimed at enhancing transparency and accountability in Nigeria’s financial sector, the Central Bank of Nigeria (CBN) has introduced a detailed procedure for obtaining a license to operate as a Bureau De Change (BDC). This initiative seeks to regulate the BDC market effectively and ensure compliance with established standards.

Prospective BDC operators are required to initiate the licensing process by submitting an application for Approval-in-Principle (AIP) directly to the Governor of the CBN. Alongside the application, applicants must provide specified documents.

The CBN meticulously evaluates each application to ascertain various criteria, including the competence of the management team, the sufficiency of capital, alignment with regulatory guidelines, and the integrity of key stakeholders. Successful applicants are issued an AIP, indicating preliminary approval pending further requirements.

Following the AIP stage, promoters of the proposed BDC must proceed to obtain a final license through a two-stage process: Provisional Approval and Final License.

Within six months of receiving AIP, promoters must submit an application for Provisional Approval to the Director, Financial Policy and Regulation Department, CBN, Abuja, accompanied by the necessary supporting documents.

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The CBN conducts a rigorous pre-licensing inspection to assess the readiness of the proposed BDC to commence operations. This inspection involves evaluating infrastructure, reviewing submitted documents, inspecting shareholder records, assessing security measures, and meeting with the board and management team.

Upon satisfactory completion of the pre-licensing inspection, the proposed BDC may be granted provisional approval to commence integration with relevant agencies and institutions.

The CBN’s introduction of a transparent and thorough licensing process for Bureau De Change operations underscores its commitment to fostering a well-regulated and stable financial environment in Nigeria. By adhering to the outlined procedures, prospective BDC operators can contribute to the integrity and growth of the BDC sector, ultimately benefiting the country’s economy as a whole.

With the issuance of provisional approval, promoters of aspiring BDCs now face a concise timeline of 60 days to submit their final licensing application, accompanied by requisite documentation.