The N35million minimum capital base imposed on Bureau de Change operators by the Central Bank of Nigeria effective from Thursday, July 31, 2014 has remained a hotly debated issue with stakeholders, raising many questions and concerns as to the real intent of the new policy regime. Ibrahim Apekhade Yusuf reports.
SINCE the announcement by the nation’s apex bank that Bureau de Change operators would henceforth pay the sum of N35million as capital base as a prerequisite for setting up shop, the centre has refused to hold again as operators in the industry are crying blue murder over what they described as an “orchestrated plan by the powers that be to frustrate them out of business.”
Crux of the matter
When the CBN in mid June first mooted the idea of the new capital base and set aside July 15 as the deadline, not a few people were happy about the development.
The CBN had recently increased the capital base of the BDC companies from N10m to N35m, among other guidelines. It gave the BDC companies until July 31, 2014 to comply.
Among those who raised their voices above the din was the Chairman, Senate Committee on Finance, Senator Ahmed Makarfi.
Makarfi had in clear terms described the whole thing as hogwash, saying that the N35m minimum capital base imposed on Bureau de Change operators was unfair.
While addressing journalists in Abuja, he had assured then that both chambers of the National Assembly were already making moves to intervene in the matter.
He said, “The House of Representatives has taken it up as a motion, but we in the Senate will adopt a different method to bring about dialogue between the operators and the regulators so that something more workable, more humane may emerge at the end of the day.”
He maintained that the Central Bank of Nigeria could only justify the imposition of a huge capital base on the BDC operators if the regulatory agency had enough foreign exchange to sell to them at regulated rates.
He advised that the apex bank should make the payment of the minimum capital base optional if it could not guarantee enough forex for all the operators.
He said, “If the reason for raising the capital base is because of scarcity of forex, that means government does not have enough to sell. There is no harm in making such a policy. If it wants to raise capital base for those that are buying forex, it may do so, but the bulk of the operation of bureau de change should not be because they are going to buy from government.
“In other countries, government can sell forex to bureau de change in order to regulate exchange rate through various means. But the day-to-day activities of the bureau de change are not like that, they sell based on what they buy.
“With the minimum capital requirement, for you to open bureau de change, you should be allowed to operate and buy your forex where you can get them to sell and make a living but if the CBN is saying you need a minimum capital base of N10m or more before it can sell, then it must sell what is commensurate with what the capital outlined out. The CBN should make it an option, pay the minimum capital base if you want to buy forex from the CBN or ignore the directive if you have an alternative way of sourcing forex.”
Makarfi asked the CBN to guarantee selling at minimum rate of exchange.
“For me, a policy like that could make sense if they have much to sell but to slam such a standard on everybody, without an assurance of what they can sell, that will be commensurate with the capital you are asking the people to tie down. I think it is not just; it is not fair; it is not equitable.”
Makarfi also cautioned the CBN Governor, Mr. Godwin Emefiele, against making sensitive statements that could affect his reputation.
A breather
In deference to the complaints by the lawmakers, last week, CBN swiftly amended the fresh capital requirements for BDCs unveiled on June 23 and extended the deadline to July 31, from the initial July 15th date.
In a circular, Director, Financial Policy and Regulation at CBN, Kelvin Amugo, said interest would be paid on the mandatory cautionary deposit of N35 million, based on the savings account rate.
The CBN, Amugo said, would on expiration of the deadline, cease to fund any BDC that fails to comply with the fresh requirements.
Groundswell of opposition
Expectedly, stakeholders in the sector are not happy with the so-called remedy offered by the CBN, and leaving anything to chance in their quest to ensure that the status quo is maintained.
Specifically, the Association of Bureaux de Change Operators of Nigeria (ABCON), an umbrella body of operators, said the recapitalisation was an indirect attempt to empower few operators and force many into liquidation.
Speaking on behalf of the group, ABCON President, Alhaji Aminu Gwadabe, said the amendments were far from the recommendations made by the association during a meeting with the CBN Governor, Mr Godwin Emefiele, on July 1.
“We recommended that deadline for compliance should not be less than one year as it is the tradition of the CBN in the recapitalisation exercise for other regulated entities. This is because no organisation can meet the statutory requirements for recapitalisation, either by raising fresh capital or through mergers/acquisition, within the period stipulated as deadline by the CBN for BDCs to meet the new minimum capital requirements. By asking BDCs to recapitalise within one month, the CBN is probably asking them to disregard these statutory requirements, and hence commit illegality.
“We also recommended that the mandatory caution deposit should be eliminated as there is no justification for such deposit. BDCs are not deposit-taking organisations, we operate on cash and carry basis. We pay for CBN dollars two days in advance. So there is no need for such deposits,” Gwadabe said.
ABCON, he said, also rejected the CBN decision to limit the weekly dollar sale to BDCs that meet the new requirements by July 31. This, he said, would bring back the activities of black market and fake currency operation, which the BDCs were able to abolish following their emergence as monetary tool of the CBN in 2006.
The policy, Gwadabe said, would give banks opportunity to hijack the weekly dollar sales to BDCs. “Before CBN started selling dollars to BDCs in 2006, banks were not interested in BDC business. But as soon as the dollar sale started, they saw it as an avenue to make cheap profit, and pressurised the CBN to categorise the sub-sector into Class “A” and Class “B” BDCs.”
He explained that the minimum capital requirement for Class “A” BDCs, mostly owned by banks and money bags, was set at N500 million, adding that they were allowed to buy $1 million per week, while Class “B” BDCs, with N10 million minimum capital requirement, were allowed to buy just $50,000 per week. That was how the CBN allowed the banks and money bags to hijack the dollar sales to BDCs in 2009, he added.
“This, we believe is what will happen once the CBN limits dollar sales to BDCs that meet the N35 million minimum capital requirement, and mandatory caution deposit. It is an indirect way of handing over the weekly dollar sales to banks and money bags, which had no interest in BDC business until CBN started selling dollars to BDCs.
“The savings interest rate on caution deposit should also be reviewed to reflect market reality as the chunk of deposits to be realised by the CBN would be placed in treasury bills that attract between nine and 10 per cent per annum presently,” Gwadabe said.
Like Gwadabe, a patron, while not entirely against the initiative, however, appealed to the CBN to tarry awhile before full implementation of the policy.
“Much as we want to appreciate the CBN for the initiative, I think the CBN should give BDCs adequate time to recapitalise or merge. For God’s sake, one month is not adequate except if you deliberately want to send many youths back to the labour market or into crime once again. The time is just too short,” Marcel Okeke, a BDC operator in Ikeja, Lagos, said in an interview with The Nation over the weekend.
Blessed assurance from CBN
The CBN has assured that the new policy on the regulation of Bureau De Change in the country was not a deliberate one to annihilate the business interests of any section of the country.
Instead, the CBN governor, Mr. Godwin Emefiele, said the policy was directed at conserving the nation’s foreign reserves and strengthen its economy, just as he appealed to the House to support the policy.
He said the CBN’s expectation is to have in place BDCs that are well-capitalised, properly structured and can effectively perform the roles of BDCs in the Nigerian economy.
Relatedly, the CBN boss disclosed that over 200 Bureau de Change companies had met the new guidelines introduced by the bank recently.
Emefiele, who stated this when he appeared before the House of Representatives’ Committee on Banking and Currency, said the time frame given to the BDC operators to comply was adequate.
According to the CBN governor, the bank is committed to stemming the depletion of the country’s foreign reserves from unproductive transactions.
Far from achieving the objectives for which BDC companies were set up, Emefiele said the operations of the BDC had been characterised by rent-seeking, weak operational structure, financing of illicit transactions, gradual dollarisation of the economy and multiple ownership of BDC licences.
The governor, therefore, reiterated that the bank had resolved to sanitise the operations of the BDC companies, among other measures, to stop what he described as haemorrhage in the foreign reserves of the country.
Contrary to the misconception that the policy was targeted at a particular section of the country, he noted that the central bank formulated policies for the good of the entire country.
He appealed to the legislators to support the bank in its resolve to strengthen the economy for the benefit of all Nigerians.
Notwithstanding the assurances b y the apex bank, operators are not convinced that the much touted initiative is a blessing after all because they are yet to see the big picture.
Pray, would the CBN still be persuaded to shift grounds on the planned implementation of the new policy regime? Time will tell.
