Nigeria: CBN Prohibits Commercial Banks and Others from Owning BDCs, Raises License Fee

In an effort to stabilize the naira exchange rate, the Central Bank of Nigeria (CBN) has introduced revised regulatory and supervisory guidelines for Bureau De Change (BDC) operators in the country.

Under the new regulatory framework, the CBN has excluded entities such as governments, commercial banks, merchant banks, Other Financial Institutions (OFIs), public officers, and others from directly or indirectly owning Bureau De Change (BDCs). The CBN emphasizes that conducting BDC business in Nigeria without its authorization is not permitted. Additionally, the central bank has increased the license fee, setting a minimum capital requirement of N2 billion for Tier-1 firms within the sub-sector, while Tier-2 BDCs are required to have a minimum capital of N500 million.

These regulatory guidelines follow the CBN’s recent advice to the Nigeria Customs Service (NCS) and other relevant parties to adopt the closing foreign exchange (FX) rate on the date of opening Form M for the importation of goods for import duty assessment.

Section 2.0 of the guidelines outlines the entities that are not allowed to participate in the ownership of BDCs, either directly or indirectly. These include commercial, merchant, non-interest, and payment service banks, OFIs (including holding companies and payment service providers), serving staff of financial services regulatory and supervisory agencies, serving staff of regulated financial services providers, governments at all levels, public officers, non-governmental organizations, cooperative societies, charitable organizations, academic and religious institutions, non-Nigerian non-resident natural persons, non-Nigerian resident natural persons, non-resident non-regulated companies, telecommunication services providers, sanctioned individuals and entities, shareholders in another BDC, and any other entity designated by the CBN from time to time.

The regulations prohibit BDCs from engaging in street-trading, maintaining accounts for the public, accepting assets for safekeeping or custody, taking deposits from or granting loans to the public, retail sale of foreign currencies to non-individuals (except for BTA), international outward transfers, offshore business, maintaining foreign correspondent relationships with foreign establishments, and opening or maintaining accounts with banks or financial institutions outside Nigeria, among other restrictions.

Furthermore, BDCs are barred from borrowing sums exceeding the equivalent of 30 percent of their shareholders’ funds unimpaired by losses, based on the audited financial statements of the preceding year. The draft regulation also mandates sellers providing the equivalent of $10,000 and above to a BDC to declare the source of the foreign exchange and comply with all Anti-Money Laundering (AML), Combating the Financing of Terrorism (CFT), Combating Proliferation Financing (CPF) regulations, and foreign exchange laws and regulations.