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When Mr. Godwin Emefiele, new Governor of the Central Bank of Nigeria (CBN) assumed office on June 3, 2014, he left no one in doubt about his intention to make indelible imprints on the nation’s financial system. He had declared in clear and unambiguous terms that his mission is to ensure that the nation’s apex monetary authority continues to focus on maintaining exchange rate stability and preserve the value of the domestic currency. He explained that the CBN under his leadership would strive to build-up and maintain a healthy external reserves position and ensure external balance.
Barely a few days after assumption of office and unveiling his vision for the CBN, Emefiele swung into action. In a bid to sanitise the Foreign Exchange Market (FOREX) and correct observed lapses in the operations of Bureaux de Change (BDCs), the new CBN governor had on June 23 announced modified guidelines for their business. The modification reviewed the minimum capital requirement for the operation of BDCs in Nigeria from N10 million to N35 million. In the same manner, the mandatory cautionary deposit was reviewed to N35 million which shall be deposited in an account in the CBN and interest paid on it based on banking industry savings account rate. Other provisions are that ownership of multiple BDCs was not permissible and would be punishable if detected. Also, fees for the licensing of BDCs are now N100, 000 for application fees, N1 million for licensing while the annual renewal fees is N250, 000. However, the earlier July 15, 2014 deadline for compliance with the New Licensing Requirements was extended to July 31, 2014 following appeals by the operators of BDCs.
The nation’s apex monetary authority decided to take these measures because the BDCs were fomenting “gross inefficiencies and sharp practices (such as) growing incidence of rent-seeking, depletion of external reserves, financing of unauthorized transactions and dollarisation, among others”. With these new measures, the CBN expects to have BDCs that are properly structured, effectively regulated and well capitalized to meet the objectives for which operators are licensed. The new CBN governor expects to see the creation of robust and sustainable business franchises that would not depend on rent-seeking activities but are properly situated to compete in the foreign exchange market and deliver superior values and returns.
Expectedly, the New Licensing Requirements have ignited controversy as operators of BDCs kicked against the policy. The leadership of the Association of Bureaux de Change Operators of Nigeria (ABCON) called for a complete reversal of the policy as it would force many of their members out of the market. Members of the National Assembly equally expressed concerns over CBN’s action which they described as “policy somersault” and called for a “systematic review” of the policy.
Our cover story is on the CBN’s New Licensing Requirements for the BDCs, the controversy it is generating and the endorsements the policy has received from financial experts who believe it would address the deficiencies in the operations of the BDCs. The story titled: Emefiele’s Clampdown on BDCs was written by Dike Onwuamaeze, Associate Editor.