The Central Bank of Nigeria (CBN) has reviewed its guidelines for Bureau de Change (BDC) operators and issued new regulations to govern their activities.
Key Changes in the New Guidelines
In a circular released on Wednesday, the CBN set the minimum capital base for Tier-1 BDCs at N2 billion and for Tier-2 BDCs at N500 million. The mandatory caution deposit of N200 million for Tier-1 BDC license holders and N50 million for Tier-2 license holders has been removed.
CBN’s Director of Financial Policy and Regulation, Haruna Mustafa, stated that the new guidelines will take effect from June 3, 2024. Existing BDCs must reapply for new licenses and meet the minimum capital requirements within six months from this date.
New Guidelines for BDCs
The reforms aim to reposition the BDC sub-sector to play a more effective role in Nigeria’s foreign exchange market. According to the circular:
- The guidelines ban BDC operators from street trading, international outward transfers, financing of political activities, dealing in gold or other precious metals, and dealing in crypto assets or other virtual assets.
- Transactions above USD 500 must be conducted through digital means.
- Sellers of USD 10,000 and above to a BDC must declare the source of the foreign exchange and comply with all AML/CFT/CPF regulations.
- Foreign currency sales in individual domiciliary accounts with Nigerian banks to BDCs must be credited to the BDC’s Nigerian domiciliary account.
- Payments for digital/transfer purchases of foreign currency by a BDC shall be transferred to the customer’s Naira account. Non-resident customers may be issued a prepaid NGN card.
- Payments for cash purchases of foreign currency equivalent to USD 500 and below may be made in cash.
Impact on the Foreign Exchange Market
Nigeria’s currency, the Naira, has experienced significant volatility in the past year. The Naira, which was around N700/USD in May 2023, fell to an all-time low of about N1,900/USD in February 2024. It recovered to about N1,100/USD in April before dropping again to N1,600/USD in May 2024. CBN Governor Olayemi Cardoso attributed the instability to “seasonal demands.”
Bottom Line
The CBN’s new guidelines for BDCs are part of broader efforts to stabilize the foreign exchange market and curb illicit financial activities. By tightening regulations and setting clearer operational standards, the CBN aims to enhance the integrity and efficiency of the BDC sub-sector. These measures are expected to foster a more robust and transparent forex market, ultimately contributing to the stabilization of the Naira.
