The Nation Newspaper

Tag: BDCs

  • 2,836 BDCs recapitalise

    The Central Bank of Nigeria (CBN) has confirmed that 2,836 bureaux de change (BDCs) have complied with its new N35 million capitalisation requirement and another N35 million cautionary deposits for operators.

    In June last year, CBN raised the minimum capital requirement for BDCs from N10 million to N35 million.

    The list of the confirmed BDCs was released by CBN’s Financial Policy and Regulation Department in a circular titled: “Updated list of confirmed Bureaux de Change in compliance with new requirements.”

    The apex bank had stated that interest would now be paid on the mandatory cautionary deposit based on banking industry savings account rate.

    In order to ensure that the foreign exchange dealers comply with the new capital requirements, the CBN had extended the deadline to July 31, 2014 from the previous July 15 deadline.

    The CBN had in May last year, published a list of 2,618 licensed BDCs, which it said had complied with its new capital requirements as at July 31 last year. There were 3,208 registered BDCs in the country before the expiration of the  July 31 deadline for operators to recapitalise.

    The regulator had pointed out that on the expiration of the July 31 deadline, last year, it would cease to fund any BDC that failed to comply with the new requirements, adding that “only BDCs that meet the new requirements would qualify to be engaged as agent by the licenced international money transfer operators for inward and outward transfer business in Nigeria.

    The CBN said it introduced the new requirements in a bid to correct observed deficiencies in the operation of BDCs in the country, which it noted had led to gross inefficiencies and sharp practices in the foreign exchange market, rent-seeking, depletion of the external reserves, financing of unauthorised transactions and dollarisation, among others.

    The apex bank noted that while the capital requirements for all other CBN-regulated entities had been reviewed upward over the years,  that of the dealers in the sub-sector of the forex market had remained the same.

  • Forex: CBN, BDCs head for showdown

    Forex: CBN, BDCs head for showdown

    Bureaux De Change (BDCs) are facing regulatory hurdles over continued foreign exchange (forex) volatility in the wake of falling oil prices. The BDCs jittery that the Central Bank of Nigeria (CBN) may shut them out of the official forex window, writes COLLINS NWEZE.

    Bureaux De Change (BDC) are critical stakeholders in the Central Bank of Nigeria (CBN) – moderated foreign exchange (forex) market. But they are the first point of adjustment every time there is a forex crisis.

    The fear of Association of Bureau De Change Operators of Nigeria (ABCON) president Alhaji Musa Gwadabe that CBN is considering closing the official forex window to BDC operators is not helping matters. It portends a grave danger for operators. Gwadabe linked the fear of closure of the forex window to BDCs as one of the factors fueling naira speculation and hoarding in the market.

    The ABCON chief has therefore sent a letter to the regulator, accusing it of over regulating the sector.

    The group said the increasing challenges arising from over regulation and complex documentation requirements that licensed BDC operators are facing in carrying out their daily legitimate operation, is worrisome.

    These, he said, have had negative impact on their efforts toward compliance to statutory and regulatory requirements.

    The ABCON chief said that six units within the CBN are involved with BDC regulations, supervision, licensing, monitoring, saying this  constitutes multiple regulation of a unit of the financial sub-sector that is only involved as a small market player.

    “A BDC operator is expected to render daily, monthly, quarterly, half yearly and annual returns to these various departments of the same corporate body, which could be very cumbersome, repetitive and time consuming for both the operator and the regulator,” he said in a statement.

    “In addition to the above, the BDC is also under obligation to render same returns to the Economic and Financial Crimes Commission /Nigeria Financial Intelligence Unit, while at the same time reporting to other statutory government establishments, including  the Federal Inland Revenue Service and Corporate Affairs Commission respectively”.

    Gwadabe also disclosed that the BDCs had in recent months, come under severe pressure from the CBN for observed infractions. For instance, the CBN recently suspended 437 BDC operators from the forex window.  The affected BDCs, which were slammed with N2 million fine each for non-rendition of their monthly returns to the apex bank, were also  denied access to the $30,000 weekly allocations to operators by the regulator. The affected firms failed to provide detailed reports on how previous dollars sourced from the CBN were utilised. They failed the returns rendition test which carries sanctions of fines or revocation of licences.

    “Unfortunately, some have had to pay high penalties to different departments where instant regulations were violated. The result of this is heavy burden on the BDC considering the little margin of profit allowed on their transactions,” he said.

    The Corporate Affair Commission, he added, has also hiked their incorporation fees and with the review of the operational requirements which made it mandatory for every BDC operator to recapitalise their initial capital and so upgrade their documentation with the CAC, they were charged enormously for the perfecting of their documents.

    Furthermore, the ABCON boss said operators had to grapple with the problem of erratic network at the electronic Financial Analysis and Surveillance System (e-FASS) platform around the country in the last couple of months. This situation, he said, hampered the rendition of BDC returns to the CBN by operators and eventually many were recently penalised as a result thereof.

    He said the documentation requirement to process a Personal Travelling Allowance of say $10,00 requires an international passport, valid visa, ticket among others, making the process cumbersome, complex and inconvenient for both the buyer and the BDC operator. Also, payment for medical fees of say $3,000 requires hospital bill, international passport, ticket, valid visa among others, to consummate the transaction.

    He also faulted the inability of the regulators, statutory agencies to effectively monitor, supervise, train the ever growing number of the BDCs as a result of these multiple and overlapping regulations of the various department of the CBN and other related agencies.

    He said: “The CBN should consider the introduction of dollar denominated cards and coupons to BDCs for retailing to the public. We shall welcome your invitation at your convenience to shed more light on this. We suggest a single BDC directorate at the CBN to be in charge of the BDC sub-sector in order to enhance efficiency, productivity and transparency. This would engender proactive involvement of both the regulators and the BDCs for the growth and dynamism of the sector,” he said.

    “The CBN is to consider as alternative requirement other means of identification such as drivers licence, voters card, and international passport”.

    For instance, the apex bank recently, suspended 437 BDC operators from the forex window, The Nation had reported.

    The affected BDCs, which have been slammed with N2 million fine each for non-rendition of their monthly returns to the apex bank, were  denied access to the $30,000 weekly allocations to operators by the regulator.

    The affected firms failed to provide detailed reports on how previous dollars sourced from the CBN were utilised. They failed the returns rendition test which carries sanctions of fines or revocation of licences.

    The source said the level of abuse was so massive that the CBN decided to hit their pockets to serve as deterrent to others. “Given that BDCs were long viewed as a potential source of forex leakage in the system, these measures should boost confidence in the sustainability of the forex band,” the source said.

    Gwadabe confirmed the development, and described the sanctions as punitive, and will further weaken the already fragile naira.

    He said the CBN will make nearly N1 billion when the 437 BDCs pay the stipulated penalties and that will add undue pressure on the finances of the operators already wailing from the burden of increased capital base and N35 million mandatory cautionary deposit.

    “My suggestion to the CBN is that instead of demobilising the affected BDCs for non-rendition by denying them access to forex market, their N35 million cautionary deposit should be debited with the penalty sum,” he said.

    This is coming as CBN had in July, licensed additional 70 BDCs, bringing the total approved operators to 2,688 since the request that operators increase their  capital base from N10 million to N35 million plus another cautionary deposit of N35 million kept with the CBN. There were 3,208 registered BDCs before the apex bank ordered them to recapitalise latest by July 31, 2014.

    The regulator has, however, kept updating its list of BDCs, even though the deadline elapsed since July last year despite earlier stand that it would cease to fund any BDCs that failed to beat the initial deadline.

    Besides, the CBN has consistently adjusted its forex policies to maintain exchange rate stability.

    Chief Economist, Africa Global Research at Standard Chartered Bank, Razia Khan, hinted that the apex bank is already under intense pressure to re-open two-way interbank forex trading.

    In a report: “When perception is not reality” obtained by The Nation, the analyst explained that given the current perceived market shortage of dollar, a re-opening of the market is likely to see dollar-naira trade higher.

    She said the ‘negative watch’ period for the continued inclusion of Nigerian bonds in the widely tracked GBI-EM index was extended in June, to allow the new government the time to formulate policy.

    “Unless interbank determination of the forex rate is reintroduced, with a resulting improvement in forex liquidity, Nigeria risks being excluded from the GBI-EM index. Failure to re-open the FX market may deter direct investment as well. Few foreign investors are ready to commit new investment to Nigeria ahead of an forex adjustment that they believe to be imminent,” she said.

    Khan said Nigeria’s changing economic fundamentals call for a rethink of forex policy, in order to better absorb external shocks.

    “We see Nigeria’s current account surplus moving to a deficit, both in 2015 and in the years ahead. The pace of accumulation of new forex reserves will not easily support a fixed exchange rate system.

    With a fixed exchange rate, forex reserves rather than the naira bear the brunt of any external shock, hurting Nigeria’s creditworthiness, and potentially raising the cost of any external borrowing,” she predicted.

    The economist said the risk is that the longer it takes to re-open the forex market, the greater the likelihood of forex overshooting when conditions do eventually normalise.

    She said the debate over forex policy would continue to take centre-stage in this quarter, culminating in a reopening of the interbank forex market, and a likely move higher in the dollar-naira exchange rates. “The authorities, mindful of other reform priorities and the need to limit inflation, are unlikely to favour naira depreciation for its own sake. These reform priorities include a probable doubling of the rate of Value Added Tax to 10 per cent in order to boost state government revenue, as well as some form of fuel subsidy adjustment,” she said.

    The CBN had, after a series of measures aimed at arresting the continued fall in naira value, announced the closure of the RDAS, thereby, leaving the interbank foreign exchange market as the only official one.

    The decision became necessary given the wide gap between the rates at the CBN official exchange market and the interbank market; a development which analysts said largely fuelled the current speculative activities in the foreign exchange market in the country.

    The RDAS or official forex window allows banks and other authorised dealers to place bids on behalf of individual clients who qualify to buy forex at the official auction.

    Unlike the Wholesale Dutch Auction System (WDAS) scrapped in September 2013 over widespread abuse, the RDAS allows the CBN to monitor more accurately various sources of forex demand and any potential duplication of demand in the system to address speculation in the market which has put naira under pressure.

    The CBN is also closely monitoring BDCs to ensure they comply with anti-money laundering policies. The regulator has consistently urged banks, BDCs and Other Financial Institutions (OFIS) on the importance of rendition of returns and compliance with anti-money laundering regulations.

    CBN Director, Banking Supervision, Mrs Tokunbo Martins said during the Chartered Institute of Bankers of Nigeria (CIBN) anti-money laundering workshop held in Abuja, that the CBN always wants to ascertain if lenders are complying with Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) regulations.

    Matins said: “Section 29 of the CBN AML/CFT Regulations, 2013 (as amended) requires financial institutions to maintain all necessary records on transactions, both domestic and international for at least five years after completion of the transactions or such longer period as may be required by the CBN and Nigeria Financial Intelligence Unit (NFIU), provided that this requirement shall apply regardless of whether the account or business relationship is on-going or has been terminated”.

    She disclosed that financial institutions are expected to maintain records of the identification data, accounts files and business correspondence for at least five years after the termination of an account or business relationship or such longer period as may be required by the CBN and NFIU on a timely basis.

    She said that financial institutions are required to forward their AML/CFT Compliance Manual to the CBN for off-site review of the document as well as carry out enhanced customer due diligence for high risk customers and effective Know Your Customer (KYC) processes.

     

     

  • Foreigners, BDCs abuse forex transactions, says CBN

    Foreigners, BDCs abuse forex transactions, says CBN

    The Central Bank of Nigeria (CBN) has said because of the ease of accessing foreign exchange (forex) in Nigeria, foreign businessmen particularly Ghanaian businessmen who access forex from Bureau De Chnages (BDCs) abuse the system.

    Speaking at the 20th Seminar for Finance Correspondents and Business Editors  on the impact of crude oil prices on external reserves and exchange rate management in Nigeria yesterday in Calabar, Cross River State, its Director, Monetary Policy, Mr. Moses Tule said the CBN has discovered that “Ghanaian businessmen come to Nigeria to source for forex because they believe it is easy to get it in Nigeria. As much as $1 million can be demanded by these foreign businessmen from BDCs.”

    He warned that the “private sector must not be predatory in their activities and should be patriotic for the economy to grow.”

    Tule noted that Nigeria is the only country in the world that funds BDCs and advised that since “achieving its objectives, the CBN should have withdrawn from funding the BDCs” and left them to source for their forex as other countries around the world do.

    Tule cautioned: “If we do not control our consumption pattern, we will not have a naira, because you cannot plan on the volatility of the price of crude oil alone. We need to change our structure of production to avoid a further forex crisis, and we need to be very careful how we share money from Excess Crude Account (ECA).”

    The CBN director also expressed concern that as the country approaches the end of the year, there has not been any implementation of capital projects across the country noting that “when a government does not execute capital projects, there is no future for the country. Execution of capital projects such as hospitals, roads and bridges help to reflate the economy with the jobs they create and the opportunities they provide.”

     Tule also said for the first time, the CBN contributed N2 billion for the rebasing of the economy last year. This amount he said is different from what the Federal Government and other agencies contributed to the exercise.

    In spite of these contributions, he said the economy is living on the illusion of being strong as some sectors considered informal were not captured in the rebasing exercise yet the country brags of being the largest economy in Africa.

    When asked to comment on what was responsible for the growth of the external reserve since the advent of the Buhari administration, Tule said: “The increased is because of Buhari’s directive, and the fact that he stood his ground, that all revenue collecting agencies must remit all revenue into the Federation Account with the CBN and close all other accounts. We cannot build reserves in a culture of impunity.”

    In his presentation, the Chief Executive Office, Financial Derivatives ,  Mr. Bismarck Rewane said Nigeria’s external reserve and foreign exchange rate crisis is tied to both resource and management problems as “resources are dwindling and management of these is not improving.”

    He said N2 trillion was spent on subsidy over time till 2012 for the importation of between 12 and 15 million litres of petroleum products, which did not make sense.

    The naira he said is “technically undervalued” and one way to address this crisis is to “get rid of subsidy.”

    The country he said “must align spending with earnings and the right people should be put in place to execute this. If subsidies are not removed, it will make the adjustment more painful.”

    The CBN he said has to be independent and autonomous, and if faced with difficult situations that goes against the grains of sound monetary policy, the best thing for the CBN governor to do if his advise is not accepted is to quit, because the policy environment has to be consistent.

  • CBN mandates BDCs to provide customers’ BVN

    CBN mandates BDCs to provide customers’ BVN

    The Central Bank of Nigeria (CBN) has directed Bureau De Change operators (BDCs) to ensure that their customers obtain their Bank Verification Numbers (BVN).

    The direcive which takes effect from August 1, 2015, is to ensure greater transparency in  transactions of licensed BDCs

    In a circular released yesterday, the said the provision of customers’ BVN “must be included in the Returns to the CBN.”

    The circular, signed by the Director, Financial Policy and Regulation Departmeny, CBN, Kevin Amugo, noted that “in the case of corporate customers, the BVN of a Director or an Authorized signatory of the entity must be provided.”

    The CBN also mandated “all licensed BDCs to provide the BVN of all their Directors before 15th August 2015, as failure to meet this requirement may affect their continued participation in the foreign exchange market.”

    Kevin Amugo further threatened a fine of One million Naira (N1,000,000) as penalty for first offenders while subsequent violation may lead to revocation of license.

    According to circular, “BDC operators should please note that any BDCs that fails to provide the required information in its returns, or provides a wrong BVN, would be penalized. First offenders will be required to pay a fine of One Million Naira (N1,000,000), while any subsequent violation of the requirement may lead to the revocation of the operating license of the BDCS.”

    According to the CBN, “the list of all licensed BDCs would be provided by the Central Bank of Nigeria, to the Nigerian Interbank System (NIBBS), to enable the country provide the necessary hardware token that would be used by the BDCs in accessing the NIBSS website”.

  • 2,660 BDCs get $79.8m CBN’s allocations weekly

    The 2,660 Bureax De Change (BDC) operators are allotted $79.8 million weekly, the Central Bank of Nigeria (CBN) has said.

    Each BDC takes $30,000 weekly, down from $50,000. This followed the approval of over 80 additional BDCs following the expiration of the July 31 deadlines for their regularisation.

    The regulator had pointed out that on the expiration of the deadline on July 31, that it would cease to fund any BDC that failed to comply with the new requirements, adding that “only BDCs that meet the new requirements would qualify to be engaged as agent by the licenced international money transfer operators for inward and outward transfer business in Nigeria’’.

    However, the continuous approval of more BDCs by the CBN, after the deadline elapsed last December, is causing ripples in the subsector.

    Older operators are alleging compromise by the apex bank after it yesterday, and fourth time in a row, raised the number of BDCs that met the regulatory requirement to 2,660.

    President, Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe,  said the action of the CBN is suspicious.

    He said the group had approached the regulator and complained about the continuous update of operators’ list, which keeps depleting the volume of foreign exchange allocated to operators.

    The CBN, he said, claimed that the newly approved list of members were those that met the deadline, but had their names cut off, until it carried out internal reconciliation.

    The CBN had in February, published a list of 2,586 licensed BDC firms which it said had complied with its new capital requirements of N35 million as at July 31.

    There were 3,208 registered BDCs in the country before the expiration of the deadline. The CBN had in June announced a new minimum capital requirement of N35 million for the operation of BDCs in the country, up from the N10 million it was previously.

    In order to ensure that the forex dealers comply with the new capital requirements, the CBN had extended the deadline to July 31. The forex dealers were previously given a deadline of July 15.

    The apex bank had also said interest would be paid on the mandatory cautionary deposit of N35 million, based on banking industry savings account rate.

  • CBN approved BDCs hit 2,586

    CBN approved BDCs hit 2,586

    The Central Bank of Nigeria (CBN) has given approval to additional 42 Bureau De Change (BDC) operators, bringing the total approved operators to 2,586 since the recapitalisation deadline elapsed in July, 2014.

    The CBN had last January, published a list of 2,544 licensed BDC firms which it said had complied with its new capital requirements of N35 million as at July 31, 2014.

    There were 3,208 registered BDCs in the country before the expiration of the deadline. The CBN had in June announced a new minimum capital requirement of N35 million for the operation of BDCs in the country, up from the N10 million it was previously.

    In order to ensure that the forex dealers comply with the new capital requirements, the CBN had extended the deadline to July 31, 2014. The forex dealers were previously given a deadline of July 15 2014.

    The apex bank had also stated that interest would now be paid on the mandatory cautionary deposit of N35 million, based on banking industry savings account rate. It among other requirements, also reviewed the mandatory cautionary deposit for BDCs upward to N35 million.

    The regulator had pointed out that on the expiration of the deThe Central Bank of Nigeria (CBN) has given approval to additional 42 Bureau De Change (BDC) operatorsadline on July 31, 2014, that it would cease to fund any BDC that failed to comply with the new requirements, adding that “only BDCs that meet the new requirements would qualify to be engaged as agent by the licenced international money transfer operators for inward and outward transfer business in Nigeria.

    Meanwhile, the Association of Bureaux De Change Operators of Nigeria (ABCON) has said that the $15,000 weekly sale to each BDCs by the CBN is inadequate to cover operating costs.

    “Considering the difficulties that BDCs are currently facing, due to the volume of the weekly sales granted to BDCs as against the associated costs in the business, we are strongly suggesting that the CBN consider increasing the weekly sales to BDCs from $15,000 to $50,000, the Association said in a letter of appeal sent to the CBN Governor.

  • CBN stops dollar sales to BDCs

    CBN stops dollar sales to BDCs

    The Central Bank of Nigeria (CBN) yesterday, stopped, with immediate effect, sale of dollars (forex) through the Retail Dutch Auction System (RDAS) and interbank to Bureau De Change (BDC) operators.

    A circular to authorised dealers signed by CBN Director, Trade & Exchange, Olakanmi Gbadamosi, however said the weekly sales of forex to BDCs will be sustained by the CBN based on the liquidity needs of the market.

    He explained that the regulator took the decision based on ongoing review of developments in the foreign exchange market and the need to check speculative demand in the market.

    Both the interbank and RDAS funds, he said, should be used for strictly funding of Letters of Credits, Bills for Collection and other invisible transactions. However, this is subject to appropriate documentation as provided by extant regulations.

    The RDAS and interbank funds, the he said, should no longer be sold to BDCs and other authorised dealers. “In continuation of the review of developments in the foreign exchange market and to curb speculative demand in the market, both the RDAS and interbank funds should henceforth be used, strictly for funding of Letters of Credits, Bills for Collection and other invisible transactions. It is also subject to appropriate documentation as provided by extant regulations,” Gbadamosi said.

    The CBN also reviewed upwards, the Net Foreign Exchange Trading position from 0.1 per cent of the shareholder’s fund unimpaired by loses, to 0.5 per cent of the shareholder’s fund unimpaired by loses.

    Currencies Analyst at Ecobank Nigeria, Olakunle Ezun told The Nation that the CBN by the circular has not only stopped selling dollars through the specified channels to BDCs, but also stopped banks from doing same.

    He said the circular followed CBN Governor, Godwin Emefiele’s directive that the regulator can only meet all legitimate transactions of dealers. He explained that before now, BDCs relied heavily on banks in souring their forex, and that with the policy directive; volume of dollars to the operators will shrink.

    The CBN two weeks ago, given approval to additional 102 BDCs, bringing the total approved operators to 2,544 since the recapitalisation deadline elapsed in July.

    The CBN had in June announced a new minimum capital requirement of N35 million for the operation of BDCs in the country, up from the N10 million it was previously.