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CBN Raises BDCsí Minimum Capital Requirement to N35m

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The Central Bank of Nigeria (CBN) has announced a new minimum capital requirement of N35 million for the operation of Bureau de Change (BDC) firms in the country, up from the N10 million previously stipulated by the central bank.

The CBN in a statement yesterday also warned that the ownership of multiple BDCs is no longer allowed, maintaining that any dealer that flouts the directive would be punished.

The central bank said the new requirements were introduced in a bid to correct observed deficiencies in the operation of BDCs in Nigeria, which it insisted had led to gross inefficiencies and sharp practices in the foreign exchange market, rent-seeking, depletion of the external reserves, financing of unauthorised transactions and dollarisation, among others.

THISDAY had exclusively reported yesterday that owing to the perennial depletion of Nigeria’s foreign exchange reserves, the central bank was going to introduce new measures this week that would tighten the licensing requirements for BDC operators in the country.

The CBN said, while the capital requirements for all other CBN-regulated entities had been reviewed upward over the years, that of the dealers in the sub-sector of the forex market had remained the same. 

The CBN also expressed concern over the prevailing ownership of several BDCs by the same promoters in order to buy forex multiple times from its window. This, it stressed, was clearly related to the low capital requirement in the sub-sector.

Continuing, the central bank in the statement titled, “New Requirements for BDCs”, also reviewed the mandatory cautionary deposit for BDCs to N35 million, adding that the fee shall be deposited in a non-interest yielding account in the CBN upon the grant of approval-in-principle.

In addition, while the application fee was raised to N100,000, the licensing fee to N1 million, the annual renewal fee for the forex dealers was also increased to N250,000.

“All existing BDCs and those currently operating with a final approval letter are required to comply with the requirement of a mandatory cautionary deposit by July 15, 2014, while all current applications are expected to comply with these new requirements.

“Furthermore, the compulsory membership of the Association of Bureau de Change Operators of Nigeria is no longer a requirement for the licensing of BDCs,” the statement signed by Mr. Isaac Okorafor, on behalf of the Director, Corporate Communications Department, CBN added.
CBN said the move would lead to BDCs that are properly structured, effectively regulated and well capitalised to meet the objectives for which they were licenced.

Specifically, the central bank pointed out that it expects “the emergence of well-capitalised and structured entities that can effectively perform the roles of BDCs in the economy; and partnership between BDCs and renowned companies engaged in inward and outward money transfer in Nigeria."

“It is in expectation of this collaboration that the CBN approved the Guidelines for International Money Transfer Services in Nigeria.
“Under the guidelines, Western Union, Moneygram and RIA Financial Services have been authorised to carry out inward and outward money transfer services in Nigeria.

“The creation of robust and sustainable business franchises that are not dependent on rent-seeking activities, but are properly situated to compete in the forex market, deliver superior values and returns,” the statement said.

Article Credit: Thisdaylive

Updated 5 Years ago

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