CBN extends BDCs’ recapitalisation deadline to July 31

The Central Bank of Nigeria has extended the deadline for complying with the new requirements for the operation of Bureau De Change operators from July 15 to July.

The apex bank in a circular issued to the BDC operators a copy of which was made available to our correspondent on Monday night in Abuja said that the guidelines for the BDCs had been modified.

For instance, part of the modification is that interest will now be paid on the mandatory cautionary deposit of N35m, based on the banking industry savings account rate.

The circular said the new decision was reached following representations made by all stakeholders to the apex bank.

It reads, “Further to our circular ref: FPRD/DIR/GEN/CIR/01/009 of June 23, 2014 on ‘New requirements for the operation of Bureau De Change in Nigeria, the Central Bank of Nigeria, based on representations from stakeholders, clarifies as follows:

“Deadline for compliance with the new licensing requirements has been extended to July 31, 2014.

“Interest will be paid on the mandatory cautionary deposit of N35m, based on the banking industry savings account rate;

“The CBN, on the expiration of the deadline of July 31, 2014, will cease to fund any Bureau De Change that fails to comply with the new requirements.

“Only Bureaux De Change that meet the new requirements will qualify to be engaged as agents by the licensed International Money Transfer Operators for inward and outward money transfer business in Nigeria.”

The circular also stated that all the BDCs that paid the mandatory caution deposit of N500,000 to the CBN prior to 2009, should apply for their refund.

The apex bank had on June 23 reviewed the guidelines to check the persistent depletion in the country’s external reserves.

It explained that while the BDCs were licensed to provide access to foreign exchange to small-scale end uses and assist in the fight against illegal financial activities, the apex bank had observed weak and ineffective operational structure which made the sector to abandon the objectives for its establishment.

Other deficiencies observed in their operations are the depletion of the country’s foreign reserves, in view of the unusually large number of the BDCs; potential financing of unauthorised transactions with foreign exchange procured from the CBN window, and gradual dollarisation of the Nigerian economy with adverse effect on monetary policy.

It also listed inadequate minimums in paid-up capital, prevailing ownership of several BDCs by same promoters in order to buy foreign exchange multiple times from the CBN window as well as their huge interest in widening margins and profits from the foreign exchange market as some of the deficiencies on the system.

The statement noted that going forward, the expected role of the BDCs following their recapitalisation would be to deliver superior values and returns to the foreign exchange market.

“The CBN’s expectation is to have the BDCs that are properly structured, effectively regulated, and well capitalised to meet the objectives which operators are licensed.

“In particular, the CBN envisages partnership between the BDCs and renowned companies engaged in inward and outward money transfers in Nigeria, creation of robust and sustainable business franchises that are not dependent on rent seeking activities but are properly situated to compete in foreign exchange market,” it said.

Meanwhile, the President, Association of Bureaux De Change Operators of Nigeria, Mr. Aminu Gwadabe, has said that only 16 per cent of the total of amount foreign exchange being sold by the Central Bank of Nigeria goes to the Bureau De Change.

As a result, he said the continued sale of forex to over 3,000 BDCs in the country would not pose any threat to the nation’s external reserves, contrary to the CBN’s claim.

Gwadabe stated this during an emergency meeting of the South-West zone of ABCON in Lagos.

ABCON is hoping to stop the CBN from implementing the new guidelines it recently introduced for the BDC operators in the country.

Among other things, the CBN had raised the minimum capital base for the BDCs to N35m, up from N10m, while a mandatory caution fee of N35m was also introduced. The CBN asked the BDCs to comply before July 15 this year.

According to the central bank, the new requirements are aimed at correcting deficiencies in the operations of the BDCs.

But Gwadabe described the new guidelines as punitive and would lead to the closure of the BDCs across the country.

This, according to him, will cause the loss of employment and investment in the sector.

The ABCON president said, “Dollar sales to the BDCs constitute less than 16 per cent of the total foreign exchange sold by the CBN since 2006, and thus not as much as being claimed by the CBN.”

He added, “We argue against the necessity of N35m as a mandatory deposit; the BDCs are not deposit-taking institutions. We also aver to the 250 per cent increase in capital base; and three weeks for compliance is unfair when compared with the increase in capital requirements for other CBN-regulated entities.”

Gwadabe recalled that following the announcement of the new requirements, the executive council of the association had met and articulated its position in a letter to the CBN Governor, Mr. Godwin Emefiele.

Thereafter, he said ABCON had also taken the case to the two chambers of the National Assembly and met separately with the House Committee on Banking and Currency and the Senate Committee on Finance.

“I am glad to announce that these steps have started yielding some results. For example, the CBN governor, upon receiving our letter, invited the executive council for a meeting where we reiterated the position of ABCON on the new requirements,” he noted.

He explained, “Against this background, the executive council hereby appeals to all members to remain calm, patient and hopeful; that the new requirements will be reviewed and the deadline for compliance extended. Though we are hopeful of a review of the new requirements, we are not resting on our oars. We will continue to lobby and engage relevant stakeholders and authorities to ensure that the interests of the BDCs are protected.”