Central Bank of Nigeria (CBN) has proposed two categories of Bureau De Change (BDC) licence- Tier 1 and Tier 2- that would see the minimum capital requirement of operators in the former and latter categories pegged at N2 billion and N500 million respectively.
The apex bank stated this in the draft Revised Regulatory and Supervisory Guidelines for BDC operations in Nigeria posted on its website late on Friday.
Under the extant regulations, BDCs had to apply for a general license and have a minimum capital requirement of N35 million.
The new guidelines contain several new changes to the guidelines for BDC operations in the country. If approved, the new guidelines will be effective at a date that will be announced by the CBN.
Specifically, the proposed new guidelines state that: “Tier 1 BDC is authorized to operate on a national basis. It can open branches and may appoint franchisees, subject to the approval of the CBN. A Tier 1 BDC (which is the franchisor) shall exercise supervisory oversight over its franchisees. All franchisees shall adopt their franchisor’s name, branding, technology platform and rendition requirements.
“A Tier 2 BDC is authorized to operate only in one state or the FCT. It may have up to three locations – a head office and two branches, subject to approval of the CBN. It is not permitted to appoint franchisees.”
Furthermore, in addition to the N2 billion capital requirement, a Tier 1 BDC is expected to pay an N200 million mandatory caution deposit, N1 million non-refundable application fee, N5 million non-refundable license fee and N5 million non-refundable annual fee.
Tier 2 BDC operators, apart from N500 million minimum share capital, are expected to deposit a mandatory caution deposit of N50 million as well as non-refundable application and license fees of N250,000 and N2 million respectively.
In addition, Tier 2 BDCs are expected to pay a non-refundable annual fee of N1 million.
The apex bank also stated that the prescribed minimum capital of BDCs and any subsequent capital injection shall be subject to its verification.
On operators’ permissible and non-permissible activities, the new guidelines propose that BDCs should 25 per cent of foreign exchange purchased for Business Travel Allowance or Personal Travel Allowance in cash while the remaining 75 per cent should be transferred electronically to the customer’s Nigerian domiciliary account or prepaid card.
However, the guidelines said that customers receiving $500 or less than $500 should be paid fully in cash.
The guidelines also stipulate that BDCs should retrieve resident customers’ Bank Verification Numbers, (BVN), or Tax Identification Numbers, TIN before carrying out foreign exchange transactions.
Other highlights of the guidelines include: “A BDC or its franchisee shall not engage in the following activities: Street-trading, maintaining any type of account for any member of the public, including accepting any asset for safekeeping/custody; Taking deposits from or granting loans to members of the public in any currency and in any form;
“Retail sale of foreign currencies to non-individuals, except for BTA International outward transfers; Engaging in off-shore business or maintaining the foreign correspondent relationship with any foreign establishment; Opening or maintaining any account with any bank or financial institution outside Nigeria;
“Acting as custodian of foreign currency on behalf of customers; International inward transfers, except for operators that serve as cash-out points for IMTOs;
“Borrowing sums which in aggregate exceed the equivalent of 30 per cent of its shareholders’ funds unimpaired by losses, in the BDC’s audited financial statements of the preceding year;
“ Engaging in forwards, futures, options, or other derivative/speculative transactions; obtaining foreign exchange from sources other than those listed in Section 4.0;
“ Granting of loans and advances in any currency; selling foreign exchange on credit to any customer; engaging in any trade-related import activities and serving as payment or collection agents on behalf of customers.”
