By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-The central bank of Nigeria (CBN) on Monday issued a new minimum capital requirement of N35 million for bureau de change (BDC) operators in Nigeria.
This is contained in a statement by Isaac Okoroafor for director, corporate communications department of the CBN and posted on its official website.
According to the CBN, the new capital requirement is part of its bid to correct observed deficiencies in the operation of BDCs in Nigeria which have led to gross inefficiencies and sharp practices in the foreign exchange market.
The CBN said the new requirements is to ensure that only genuine companies operate as BDCs in Nigeria and has taken steps to check the growing incidence of rent-seeking, depletion of external reserves, financing of unauthorised transactions and dollarisation, among others.
Other requirements include reviewing the mandatory cautionary deposit to N35 million which shall be deposited in a non-interest yielding account in the CBN upon the grant of approval-in-principle.
The CBN said for BDC operators to be granted license, they are required to pay an application fee of N100, 000.00, licensing fee of N1 million and annual renewal fee of N250,000.00.
The Nigeria’s central bank affirmed that ownership of multiple BDCs is not permissible, and would be punishable if detected.
‘’All existing BDCs and those currently operating with a final approval letter are required to comply with the requirement on mandatory cautionary deposit by 15 July 2014 while all current applications are expected to comply with these new requirements,’’ the CBN said.
Apart from the N35 million capital requirement, the CBN said the compulsory membership of the association of bureau de change operators of Nigeria (ABCON) is no longer a requirement for the licensing of BDCs.
The Nigeria’s central bank said it observed deficiencies in the operational effectiveness of BDCs, which runs counter to the objectives to which they were set up these include:avalanche of rent-seeking operators only interested in widening margins and profits from the foreign exchange market; regardless of prevailing official and interbank rates, weak and ineffective operational structure, resulting in the subsector completely abandoning the objectives for its establishment.
Others are the depletion of the country’s foreign reserves, in view of the unusually large number of BDCs potential financing of unauthorised transactions with foreign exchange procured from the CBN Window and gradual dollarisation of the Nigerian economy with attendant adverse consequences on the conduct of monetary policy and subtle subversion of cashless policy initiative.
Apart from these, the CBN pointed to inadequate level of minimum paid-up capital. ‘’The required minimum paid-up capital of BDCs is set at N10 million. While the capital requirements of all other CBN-regulated entities have been reviewed upwards over the years, the one for BDCs has remained the same,’’ the CBN said.
Also, the Nigeria’s apex bank said it observed prevailing ownership of several BDCs by the same promoters in order to buy foreign exchange multiple times from the CBN Window, which is clearly related to the low level of capital requirements for licensing BDCs.
