Forex Crisis: BDCs to Recapitalise, Re-apply for Licenses in CBN Reform Plan

The Central Bank of Nigeria (CBN) has implemented stringent reforms aimed at overhauling the operations of Bureaux De Change (BDCs) to address the ongoing forex crisis. The reforms, announced by Haruna Mustafa, the CBN’s Director of Financial Policy and Regulation Department, mandate BDCs to recapitalize and revalidate their licenses under new guidelines.

Key Reforms and Requirements

The new regulations introduce two tiers of BDCs, each with distinct capital requirements:

• Tier-1 BDCs must have a minimum capital of N2 billion and are allowed to operate nationally, establish branches, and appoint franchisees subject to CBN approval.
• Tier-2 BDCs are required to maintain a minimum capital of N500 million and can operate within one state, establishing up to five branches with CBN approval but cannot appoint franchisees.

Additionally, the CBN has prohibited the street trading of foreign currencies and imposed several operational restrictions on BDCs. These include prohibiting BDCs from maintaining accounts for the public, accepting deposits, granting loans, or engaging in the retail sale of foreign currencies to non-individuals except for Business Travel Allowance (BTA).

Licensing and Operational Conditions

To secure license approval, BDCs must ensure that major shareholders, board members, and top management pass the “fit and proper” persons test. The capital must come from acceptable sources, and payment for shares must be documented without cash transactions. Once a provisional license is granted, promoters have 60 days to apply for a final license with supporting documents.

IT Integration and Compliance

The CBN also requires BDCs to integrate their IT infrastructure with the CBN’s systems, including the Financial Institutions Foreign Exchange Reporting System (FIFX) and other relevant platforms. This integration extends to the Nigeria Interbank Settlement System (NIBSS), particularly the Bank Verification Number (BVN) database.

Implementation Timeline

These guidelines, effective June 3, 2024, mark a significant shift in the regulatory landscape for BDCs, aiming to enhance their role in Nigeria’s foreign exchange market and curb illegal forex trading practices.

Broader Impact

These reforms come as part of broader efforts by the CBN to stabilize the forex market and ensure compliance among financial institutions. The recapitalization directive, which also affects banks, began last month with the submission of recapitalization plans.