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CBN may revoke licences of 2400 BDCs

By on July 20, 2014

Up to 2,400 Bureaus de Change are unlikely to meet the new capitalisation requirements of the Central bank of Nigeria and will subsequently lose their operating licence at the expiration of the July 31, 2014 deadline set by the central bank, investigation by our correspondent has revealed.

The CBN had, in a bid to reposition the foreign exchange market, last month released new capitalisation guidelines for BDCs in the country.

It said that BDCs which failed to meet the new guidelines by July 31 would automatically lose their licence.

In the guidelines, the central bank increased the capital base for BDCs from N10m to N35m and asked them to make a caution deposit of N35m, among other requirements.

BDCs, under the aegis Association of Bureaux de Change Operators of Nigeria, had since challenged the new guidelines, arguing that the development would lead to the closure of their businesses which in turn would result in loss of jobs among other things.

However, the CBN and industry sources disclosed to our correspondent on Thursday that no fewer than 2,400 out of a total of 3,208 BDCs officially registered by the CBN would lose their licence at the expiration of the deadline.

“I can confirm to you that from what we have seen so far, over 2,400 BDCs will not be able to meet up with the new guidelines; the number of BDCs that have met the new guidelines is still less than 350 but more will meet up before July 31,” a source close to the CBN revealed.

The Governor of the CBN, Mr. Godwin Emefiele, had during his appearance before the House of Representatives Committee on Banking and Currency on Wednesday, revealed that over 200 BDCs had met the requirements of the new guidelines.

Emefiele, who noted that there was no going back on the implementation of the new guidelines, said the CBN was committed to stemming the depletion of the country’s foreign reserves from unproductive transactions.

He said far from achieving the objectives for which BDCs were set up, the operations of the BDCs had been characterised by rent-seeking, weak operational structures, 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 BDCs, among other measures to stop what he described as haemorrhage in the foreign reserves of the country.

Meanwhile, the new Director of Corporate Communications, CBN, Mr. I. Mua’zu, was not available for comments on the possible revocation of the BDCs’ licences. An e-mail and text message sent to him were not replied. His telephone line was switched off when our correspondent tried to call him.

However, the Acting National President, ABCON, Alhaji Aminu Gwadabe, argued that dollar sales to the BDCs were not be responsible for the depletion of the external reserves, saying the amount sold to the sub-sector was negligible.

According to Gwadabe, the new policy guidelines have the potential to crush most BDCs out of business, thereby destabilising the foreign exchange market.

This, he said, would lead to the empowerment of black market and widening of the exchange rate premium.

Consequently, the ABCON president said that rather than introduce policy that would ultimately lead to revocation of some BDC licences, the CBN should categorise the BDCs, among other measures.

Gwadabe said, “We recommend the categorisation of the BDCs with different scope of business rather than outright revocation of licences.

“Our capital requirements do not warrant periodic increases like those of other financial institutions. However, it has been reviewed from N250,000 to N500,000 and then N10m. Therefore, we recommend that BDC capitalisation requirement should be reviewed to N15m maximum.”

 

[Punch]