The Central Bank of Nigeria (CBN) has introduced a fresh set of guidelines to keep Bureau De Change (BDCs) in check.
Under the new guidelines BDCs in the Tier 1 category must have a capital requirement of N2 billion, while Tier 2 BDCs must have a capital requirement of N500 million.
Tier 1 BDCs formally were expected to cough out N15 million to acquire the license. This represents a 13,233.33 per cent licence fee hike.
The CBN was forced to come up with a new set of guidelines in order to address the ongoing foreign exchange crisis in the country.
The Financial Policy and Regulation Department of the CBN headed by Haruna B Mustafa detailed what is now expected of BDCs in Nigeria.
The guidelines specify that banks, government agencies, and NGOs are prohibited from having ownership stakes in BDCs. The permissible activities for BDCs include buying and selling foreign currencies, issuing prepaid cards, and acting as cash points for money transfer operators. BDCs are not allowed to take deposits, grant loans, deal in gold, or engage in capital market activities.
In terms of sourcing foreign currencies, BDCs can obtain forex from authorized dealers, travellers, hotels, embassies, and other sources. For large transactions exceeding $10,000, a declaration of the source is required.
Regarding the sale of foreign currencies, BDCs can sell forex for purposes such as travel, medical bills, and school fees, up to specified limits per customer annually. At least 75 per cent of the sales must be conducted through electronic transfers, while the remaining 25 per cent can be in cash.
There are two tiers of BDCs: Tier 1, which has a national presence with branches and franchises, and Tier 2, which is limited to operating in one state with a maximum of three locations.
BDCs are required to verify the identity of their customers, maintain transaction records, connect to CBN systems, and display rates clearly. They must also submit specified regulatory returns, make their records available for inspection, and comply with the guidelines.
The guidelines also outline standards for Tier 1 BDCs that appoint franchises, covering areas such as policy, monitoring, and branding. Prudential requirements are set for BDCs, including limits on open positions, fixed assets, borrowings, and dividend payments. Additionally, BDCs must comply with anti-money laundering and countering the financing of terrorism regulations, with regard to policies, monitoring, and reporting.
The Nigerian naira has recently hit an all-time low of N2,000 against the dollar due to the prevailing economic crisis in the country. In response, the National Security Adviser (NSA), Mallam Nuhu Ribadu, instructed the Economic and Financial Crimes Commission (EFCC), Department of State Services (DSS), and other security agencies to crack down on currency speculators in the forex market. This has led to raids on BDCs nationwide and the arrest of some illegal operators.
In a related development, the Central Bank of Nigeria (CBN) has announced new measures regarding the foreign exchange (FX) rate to be used for Import Duty Assessment.
The bank has advised that the Nigeria Customs Service and other relevant parties should adopt the closing FX rate on the date of opening Form M for the importation of goods as the rate to be used for assessing import duty.
This rate will remain valid until the completion of the importation and clearance of goods by the importers.
This decision the CBN said is intended to provide clarity and reduce uncertainty for both the Nigeria Customs Service and importers, allowing them to better plan and manage their revenue and cost structures amid fluctuating daily exchange rates.
“Effective from 26 February 2024, the closing rate on the date of opening Form M for the importation of goods and services will be the rate applied for the assessment of import duty” the CBN circular read.
This replaces the requirements outlined in Memorandum 9, J (2) of the Central Bank of Nigeria Foreign Exchange Manual (Revised Edition), 2018.
While the Central Bank of Nigeria acknowledges the initial volatility and price distortions following the liberalization of the FX market, it is confident that these reforms will ultimately stabilize the market and establish the necessary market confidence to attract investment capital for the growth and development of the Nigerian economy.
