BDC operators challenge CBN over new capital requirements

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Nigeria’s Bureau De Change (BDC) operators are calling on the Central Bank of Nigeria (CBN) to reverse recently announced recapitalization guidelines. The CBN issued new regulations last week, introducing a tiered system with varying capital requirements for different categories of BDC licenses.

The BDC operators, at the end of a virtual meeting themed ‘New CBN Regulatory & Supervisory Reforms for BDCs: Challenges and Way Forward’ on Tuesday, decried the move by the CBN.

They noted that the apex bank was threatening their business and came up with recommendations that they claimed would be presented to the CBN.

Reading the recommendations of the association, the President of ABCON, Aminu Gwadebe, demanded, “Immediate reversal of the financial requirements to our submitted proposal on the draft guidelines for Tier 1 N500m, N100m for Tier 2 and N35m for Tier 3 with each having different levels of engagement with the regulators.

“They should allow the existing owners of both the eligible BDCs and revoked BDCs to recapitalise instead of reapplying.”

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The money changers demanded that the existing N35m capital requirements should be recognised and be part of recapitalisation.

“The CBN should embark on nationwide enlightenment to address the fears of the willing investors. The timing for compliance should be extended to two years for fairness. Existing BDCs to be allowed to use their generic names as against registration of new names at the CAC.

“The terms of engagement for mergers and acquisitions should be properly explained to allow for inclusion. The ratio of 75 per cent cards and 25 per cent cash should be reversed inversely to encourage smooth takeoff,” the association noted.

The Association of Bureau De Change Operators of Nigeria (ABCON) argues that the new capital requirements are too high and will force many BDCs out of business. They are requesting the CBN to:

• Maintain the existing N35 million capital base: ABCON wants the current minimum capital requirement to be grandfathered in and contribute to the new requirements.
• Educate potential investors: The association believes the CBN needs to address concerns from potential investors who may be apprehensive about the BDC market.
• Extend compliance deadline: ABCON is requesting a longer timeframe for BDCs to meet the new capital requirements.

The CBN, however, has stated that the new guidelines are necessary to strengthen the BDC sector and improve compliance with anti-money laundering regulations. They believe a more robust BDC system will promote greater stability in the foreign exchange market.

This disagreement highlights the tension between the CBN’s desire for a more formalized BDC sector and the concerns of existing operators about financial strain and potential exclusion. In the coming months, further negotiations may be needed between ABCON and the CBN to determine the final structure of the recapitalization plan.