Nigerian BDCs face shakeup as CBN mandates new licenses, capital requirements

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The Central Bank of Nigeria (CBN) has announced a significant shakeup in the Bureau de Change (BDC) sector, requiring all existing operators to reapply for new licenses under a revised regulatory framework.

This was announced on Wednesday in a circular issued by the apex bank which was signed by the Director, Financial Policy and Regulation Department, Haruna Mustafa.

“All existing BDCs and promoters of proposed BDCs are to note the following: Re-apply for a new license according to any of the Tiers or license category of their choice as provided in the Guidelines,” CBN said.

“Meet the minimum capital requirements for the license category applied for within six (6) months from the effective date of the Guidelines.”

This move, outlined in the recently issued “Regulatory and Supervisory Guidelines for Bureau De Change Operations in Nigeria,” signifies the CBN’s intent to strengthen oversight and potentially consolidate the BDC industry.

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The new guidelines introduce a tiered licensing system, with varying capital requirements. Tier-1 BDCs, envisioned as larger players, will need a minimum capital base of N2 billion (roughly $4.4 million), while Tier-2 BDCs, likely smaller operations, will require a minimum of N500 million (approximately $1.1 million). Existing BDCs have six months to meet these new capital requirements and reapply for their chosen tier.

This significant increase in capital requirements is likely to impact the number of BDCs operating in Nigeria. Smaller operators may struggle to meet the new thresholds, potentially leading to consolidation within the industry. The CBN also introduced restrictions on BDC activities, prohibiting them from engaging in futures, options, and derivative trading, as well as international money transfers and cryptocurrency transactions.

The coming months will be crucial as BDC operators navigate the new licensing process and adjust to the revised regulations. The CBN’s actions signal a stricter regulatory environment for BDCs, with the potential to reshape the landscape of foreign exchange transactions in Nigeria.