CBN to crack down on forex-selling ‘mallams’

Street hawking of foreign exchange is no longer permissible, the Central Bank of Nigeria (CBN) has said in its latest circular which sets out new guidelines for the operations of bureaux de change (BDCs). 

Street sale of foreign exchange by the so-called “mallams”, which is very common in Lagos, has endured for over three decades, surviving civilian and military administrations.

The CBN, in a circular available to TheCable, did not outline how it will deal with hawkers but said from January 1, 2016, street trading of the dollar is “non-permissible” and will be severely punished by the bank.

“Similarly, it shall be a ground for the revocation of Licence should any street trader in foreign currencies be found to have any business relationship with a Licenced BDC,” the guideline reads.

The circular, titled “Revised operational guidelines for bureaux de change in Nigeria”,  prescribes that for a BDC to be considered valid in 2016, its must meet a financial requirement of depositing N71.45 million with the CBN.

Download the revised BDC Circular and Guidelines

According to section four of the circular, financial requirements, which may vary at the discretion of the CBN, are as follows:

“Minimum paid-up share capital of N35 million, non-refundable application fee of N100,000, non-refundable licensing fee of N1 million, mandatory caution deposit of N35 million, non-refundable annual licensing renewal fee (payable not later than30 days after the end of each calendar year) of N250,000 and non-refundable change of name fee of N100,000”.

BDCs to be treated as banks

Some of the requirements in the new guidelines also say that BDCs would be treated like banks by use of bank verification number and selection of board of directors.

“The number of directors on the board of a BDC shall be a minimum of three and a maximum of five. The appointment of directors shall be subject to prior approval of the CBN,” it says.

“The qualifications and experiences of the Managing Director/CEO shall befirst degree or its equivalent in any discipline with three years post-graduation experience.

“In line with the BOFI Act (as amended), all the conditions stipulating the exclusion of certain individuals from the management of banks shall apply to the management of BDCs except with written permission of the Governor of the CBN.”

Travellers must show evidence of travel before dollar purchase

Travellers, who seek to purchase dollars, must present their “BVN, validly issued and genuine travelling documents (ticket, passport, visa)”.

“No bureau de change shall have a branch office outside its registered office. All bureaux de change that under the 2002 guidelines have branches are required to close such branches within 90 days of the 2015 guidelines.”

BDCs shall also present its audited financial statements to the CBN “not later than 3 months after the end of its accounting year”.

Effect on the naira

A reduction of dollar sales by the CBN to about 1,600 BDC operators saw the naira fall by N17 in 13 days.

A further cut of BDC operators via this stringent means would reduce the number of BDC operators and may consequently lead to dollar scarcity, which is known to lead to further depreciation of the naira on the parallel market.

In the circular signed by Kevin Amugo, the director of financial policy and regulation, the CBN expressed optimism that the new regulation would strengthen BDCs and improve operational efficiency.

Despite its stringent foreign exchange policy, the naira has been on a nosedive in the past few months, sinking to a 42-year-low on Friday at the parallel market.

On December 3, the CBN cut dollar sales to bureau de change (BDC) operators, selling for only to 1,219 of 2,818 of the registered operators in the country.

This move caused dollar scarcity on the parallel market and saw the naira fall from 243 to 260 in two weeks.