‘N2bn capital requirement, no FX credit to customers’ — CBN sets guidelines for BDCs

The Central Bank of Nigeria (CBN) has released guidelines for the sale of foreign exchange (Forex) by Bureau De Change (BDC) operators within the country.

CBN said the guidelines will enhance the regulatory framework for the operations of BDCs as part of the ongoing reforms of the Nigerian foreign exchange market.

The apex bank disclosed this on Friday in a document titled ‘Revised Regulatory and Supervisory Guidelines for Bureau De Change Operations in Nigeria’.

A BDC is a company licensed by the CBN to carry out only retail foreign exchange business in Nigeria.

According to the CBN, the guidelines revise the permissible activities, licensing requirements, corporate governance and anti-money laundering/combating the financing of terrorism (AML/CFT) provisions for BDCs.

“It also sets out new record-keeping and reporting requirements, among others,” the financial regulator said.

“No person shall carry on the business of BDC in Nigeria except with the prior authorization of the CBN.”

According to the circular, commercial, merchant, non-interest, and payment service banks shall not be allowed to participate in the ownership of BDCs — directly or indirectly. 

Also, CBN said other financial institutions (OFIS), including holding companies and payment service providers are not permitted to own BDCs.

Other ineligible entities, the apex bank said, include non-governmental organisations, serving staff of financial services regulatory and supervisory agencies, governments at all levels, public officers, and cooperative societies, among others.

‘CUSTOMERS WITH $10,000 AND ABOVE MUST DECLARE SOURCE OF FX’

CBN said sellers of the equivalent of $10,000 and above to BDCs are required to declare the source of the foreign exchange “and comply with all AML/CFT/CPF regulations and foreign exchange laws and regulations”.

“Customers may transfer foreign currencies from their individual domiciliary accounts with Nigerian banks to BDCs,” the apex bank said.

“All digital/transfer purchases of foreign currencies shall be credited to the BDC’s Nigerian domiciliary account.

“Payments for all digital/transfer purchases of foreign currency by a BDC shall be by transfer to the customer’s Naira account. If the customer is non-resident (whether Nigerian or not), a BDC may issue the customer a prepaid NGN card. 

“Where such a card is issued, relevant maximum credit and cumulative limits, in line with relevant Know Your Customer requirements, shall apply.

“Payments to customers for cash purchases of foreign currency, the equivalent of above USD500, shall be by transfer to the customer’s Naira bank account.”

If the customer is a non-resident (whether Nigerian or not), according to the circular, a BDC shall issue the customer a prepaid naira card.

Where such a card is issued, CBN said relevant maximum credit and cumulative limits, in line with relevant know your customer (KYC) requirements, shall apply.

SALE OF FOREIGN CURRENCY

The financial regulator said forex sales by BDCs must fall within the scope of personal travel allowance (PTA), and business travel allowance (BTA), “provided that a person who receives BTA on behalf of a non-individual entity shall not be entitled to PTA for the same period”.

Others listed by CBN include payment of medical bills, payment of school fees, and the repurchase of unused naira from a non-resident from whom the BDC had sourced foreign currency in the course of the visit.

‘75% OF FX SALE BY BDCS MUST BE TRANSMITTED ELECTRONICALLY’

A beneficiary of BTA or PTA shall receive up to 25 percent of the foreign currency in cash, according to the CBN, and the remaining 75 percent shall be transferred to the customer electronically (to the customer’s Nigerian domiciliary account or prepaid card).

“Payments for all sales of foreign exchange by BDCS shall be by transfer to the BDC’s Naira account,” CBN said.

However, the apex bank said beneficiaries of BTA or PTA of $500 or less can receive the forex in cash.

In the same vein, the financial regulator said payments to customers for cash purchases of forex of the equivalent of $500 and below may be made in cash.

Furthermore, CBN said BDC operators can not engage in street trading, maintenance of any type of account for the public, and opening or maintaining any account with any financial institution outside Nigeria.

They are also banned by the CBN from engaging in offshore business, financing political activities, and selling FX on credit to customers.

The apex bank restricted the BDCs from dealing in gold or precious metals, granting loans, as well as international inward transfers (except for operators that serve as cash-out points for International Money Transfer Operators).

CBN also said the minimum capital requirement for tier 1 BDCs is N2 billion and N500 million for tier 2 BDCs.

The financial regulator raised the minimum capital requirement from N35 million previously set for all BDCs.