The Central Bank of Nigeria (CBN) has issued guidelines for the sale of foreign exchange (Forex) by Bureau De Change (BDC) operators within the country. The move aims to enhance the regulatory framework for BDC operations as part of ongoing reforms in Nigeria’s foreign exchange market.
Enhancing Regulatory Framework
In a document titled ‘Revised Regulatory and Supervisory Guidelines for Bureau De Change Operations in Nigeria,’ the apex bank disclosed the revised guidelines. These guidelines cover permissible activities, licensing requirements, corporate governance, and anti-money laundering/combating the financing of terrorism (AML/CFT) provisions for BDCs. The CBN emphasized the importance of new record-keeping and reporting requirements, among others.
According to the CBN, “No person shall carry on the business of BDC in Nigeria except with the prior authorization of the CBN.”
Ownership Restrictions and Eligibility Criteria
The circular specifies that commercial, merchant, non-interest, and payment service banks are prohibited from owning BDCs, either directly or indirectly. Additionally, other financial institutions (OFIs), including holding companies and payment service providers, are not allowed to own BDCs. The apex bank also listed ineligible entities such as non-governmental organizations, certain governmental bodies, public officers, and cooperative societies.
Transparency Measures for Forex Transactions
Under the new guidelines, sellers providing $10,000 or more to BDCs must declare the source of the foreign exchange and comply with all AML/CFT/CPF regulations and foreign exchange laws. Customers can transfer foreign currencies from their individual domiciliary accounts with Nigerian banks to BDCs. Digital/transfer purchases of foreign currencies shall be credited to the BDC’s Nigerian domiciliary account, and payments shall be made to the customer’s Naira account or via a prepaid NGN card for non-residents.
Restrictions on Forex Sales and Transactions
Forex sales by BDCs must align with personal travel allowance (PTA) and business travel allowance (BTA) categories. Beneficiaries shall receive up to 25 percent of the foreign currency in cash, with the remaining 75 percent transferred electronically to the customer’s Nigerian domiciliary account or prepaid card. Payments for all sales of foreign exchange by BDCs shall be made by transfer to the BDC’s Naira account.
Operational Limitations and Capital Requirements
The CBN imposes several operational restrictions on BDCs, including prohibiting street trading, maintaining public accounts, and engaging in offshore business or financing political activities. BDCs are also restricted from dealing in gold or precious metals, granting loans, and conducting international inward transfers, except for specific purposes.
The minimum capital requirement for tier 1 BDCs is set at N2 billion, while tier 2 BDCs must maintain a minimum capital of N500 million. This marks a significant increase from the previous minimum capital requirement of N35 million for all BDCs, as specified by the financial regulator.