News Column

BDCs Purchased U.S.$600 Million Forex in Three Months - CBN

July 30, 2014

Kingsley Ighomwenghian

Central Bank of Nigeria (CBN) sold a total of $600 million in foreign exchange through various bureaux de change (BDCs) between January and March 31, 2014.

The figure, which amounted to N94.769 billion, representing a decrease of N3.740 billion or 3.8 per cent below the amount recorded in the preceding quarter, represented $25.60 million or 4.1 per cent drop, when compared with the $625.60 million reported in the preceding quarter.

According to the CBN's 2014 first 'Quarterly Statistical Bulletin', published by its Statistics Department, "The monthly average exchange rates applied during the review quarter peaked at N158.72/$ in March 2014 up from N157.52/$ recorded in December 2013 of the previous quarter".

Within the review period, the CBN said the highest selling monthly average exchange rate was recorded in March, which stood at N160.65/$, compared to the previous quarter's N159.49/$ average.

Also, monthly forex purchases by the BDCs rose by 0.8 per cent to N31.743 billion, while the BDCs monthly sales increased by 0.6 per cent and 0.5 per cent to N32.13 billion in March, as against the levels recorded in January and February, respectively.

Meanwhile, the deadline for BDC operators to raise their capital base from N10 to N35 million, in line with the reviewed guideline for operating in the sub-sector, expires tomorrow.

The deadline was extended from the initial July 16 date, following various representations by stakeholders, including the House of Representatives.

The BDCs are now to raise their minimum capital base to N35 million on or before July 31, as against the previous July 16.

A CBN's circular dated July 7 said the shift was based on the recommendation of stakeholders.

It assured that interest based on ruling savings deposit rate would be paid on the mandatory cautionary fees deposit.

The apex bank in the circular signed by Kevin Amugo, Director, Financial Policy and Regulations Department, warned that it would "cease to fund any BDC that fails to comply with the new requirements after July 31".

It also warned that BDCs that fail to comply with the new requirement after the deadline will not qualify to be engaged as agents by licensed international money transfer operators for inward and outward money transfer business in the country.

The CBN had in a previous circular dated June 23, noted the unusually large number of BDCs with inadequate level of minimum paid-up capital.

It noted that the required minimum paid-up capital of BDCs had remained at "N10 million (whereas) the capital requirements of all other CBN-regulated entities have been reviewed upwards over the years, the one for BDCs has remained the same".

In addition to the new minimum capital, the apex bank pegged mandatory cautionary deposit at N35 million, which shall be deposited in a non-interest yielding account in the CBN upon the grant of Approval-in-Principle, besides pre-licensing fees such as "application fee--N100,000; licensing fee--N1 million; and annual renewal fee--N250,000".

The statement also lamented a situation where several BDCs are owned by the same promoters "in order to buy foreign exchange multiple times from the CBN Window, which is clearly related to the low level of capital requirements for licensing BDCs".

Henceforth, the statement added, "ownership of multiple BDCs is not permissible, and would be punishable if detected.

"All existing BDCs and those currently operating with a Final Approval Letter are required to comply with the requirement on mandatory cautionary deposit by 15 July 2014 while all current applications are expected to comply with these new requirements."

CBN Governor, Godwin Emefiele, had on July 16, when he appeared before the House of Representatives Committee on Banking and Currency, said over 200 BDCs had met the new capitalisation guidelines, insisting that the time frame given to the BDC operators to comply was adequate.

According to the CBN boss, the bank was committed to stemming the depletion of the country's foreign reserves from unproductive transactions.

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Source: AllAfrica

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