CBN Proposes Increase in BDC Minimum Share Capital to N2 Billion for Tier 1 License.
The Central Bank of Nigeria (CBN) is considering a substantial increase in the minimum share Capital requirements for Bureau De Change (BDC) operators, aiming for N2 billion for Tier 1 licenses and N500 million for Tier 2 licenses.
Previously, the minimum share capital stood at a mere N35 million for a general license.
This development comes as part of the draft REVISED REGULATORY AND SUPERVISORY GUIDELINES FOR BUREAU DE CHANGE OPERATIONS IN NIGERIA, recently published by the CBN.
The proposed guidelines introduce significant changes to the operational framework for BDCs in Nigeria. If ratified, these guidelines will take effect on a date determined by the CBN.
Key Points of the New Minimum Capital Requirements:
- Tiered Licensing System: The CBN is introducing a two-tier licensing system for BDC operators.
- Tier 1 BDCs: These are authorized to operate nationally, open branches, and potentially appoint franchisees, subject to CBN approval. Additionally, Tier 1 BDCs (franchisors) will oversee their franchisees, with all franchisees adopting their franchisor’s name, branding, technology platform, and operational requirements. Tier 1 operators are required to maintain a minimum share capital of N2 billion and a Mandatory Caution Deposit of N200 million. Application and license fees for Tier 1 operators amount to N1 million and N5 million, respectively.
- Tier 2 BDCs: These are authorized to operate within a single state or the Federal Capital Territory (FCT), with a maximum of three locations (a head office and two branches), subject to CBN approval. Tier 2 operators are not permitted to appoint franchisees. The minimum share capital for Tier 2 BDCs is set at N500 million, with a Mandatory Caution Deposit of N50 million. Application and license fees for Tier 2 operators are N250,000 and N2 million, respectively.
- Renewal and Compliance: BDC licenses are subject to annual renewal, contingent upon compliance with relevant laws and regulations, as well as the payment of non-refundable renewal fees. Tier 1 operators are required to pay N5 million for license renewal, while Tier 2 operators pay N1 million.
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What You Need to Know:
The Association of Bureau De Change Operators of Nigeria (ABCON) has expressed reservations regarding the proposed increase in the capital base, advocating for the efficiency and profitability of operations within the current threshold of N35 million. ABCON President, Aminu Gwadebe, emphasized that BDC operations are not capital-intensive, as they do not accept deposits or provide credit facilities, but rather facilitate forex transactions using existing customer funds. Gwadebe urged industry consolidation over recapitalization, warning that higher capital requirements could disadvantage established professionals.
Previously, the Federal Government proposed reducing the number of BDCs from 5000 to 200 to improve regulatory oversight and address forex market irregularities. The CBN’s proposed guideline seeks to increase BDC share capital, potentially leading to significant sector consolidation through mergers and acquisitions. This regulatory measure aims to curb unauthorized forex transactions and enhance oversight, contributing to the stabilization of the forex market and ensuring sector-wide compliance.
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