BDC Operators Push Back Against CBN
The Central Bank of Nigeria’s recent move to significantly raise capital requirements for Bureau de Change BDC operators has sparked a backlash from the sector. The Association of Bureau De Change Operators of Nigeria (ABCON) is demanding the apex bank reverse course on the new guidelines, which they argue threaten the viability of their businesses.
Last week, the CBN announced a recategorization of BDC licenses into two tiers with much higher minimum capital bases. Tier 1 BDCs would now require a staggering N2 billion capital, up from just N35 million previously. Even Tier 2 operators face a N500 million minimum capital ask.
The new rules, which also hiked application and licensing fees into the millions of naira, aimed to strengthen corporate governance and compliance standards in the BDC segment. However, ABCON insists the drastic capital hikes miss the mark and could cripple many outfits.
At a virtual meeting this week, the association’s leadership recommended the CBN revert to an earlier proposal of N500 million for Tier 1, N100 million for Tier 2, and retain the N35 million requirement for a proposed new Tier 3 category. They argued this calibrated approach balances regulatory oversight with operational realities.
ABCON also wants existing BDC Operators to be allowed to recapitalize instead of reapplying from scratch. They urged extending the 6-month compliance window to 2 years to give operators more time to meet the new capital thresholds.
The outcry reveals how blindsided many BDC Operators were by the CBN’s aggressive new capital diktat. There are concerns the regulator underestimates the sector’s fragility and could trigger mass closures and job losses through a heavy-handed approach.
From the CBN’s perspective, however, the new guidelines reflect a broader strategy of enhancing regulatory standards and compliance across Nigeria’s financial system. BDCs have long been viewed as potential conduits for money laundering and illicit forex flows.
The sheer scale of the 4,173 BDC licenses revoked earlier this year for infractions highlighted the vulnerabilities and underscored the need to weed out undercapitalized, unviable operators perpetuating governance lapses.
Whether the N2 billion capital base is justified or excessively draconian is certainly up for debate. ABCON seems amenable to higher thresholds but wants a more gradual, equitable phase-in roadmap sensitive to existing operational realities.
As stakeholder consultations continue, the CBN would do well to adopt a more conciliatory stance that enhances transparency while stopping short of market destabilization. A balanced approach reinforcing regulatory rigor without sparking a BDC meltdown needs to be the goal.
For Nigeria’s wider forex market stability and anti-money laundering posture, having a robust but functional BDC segment is arguably a necessity. If the new guidelines catalyze an implosion instead of strengthening the space, the CBN’s gambit could severely backfire with unintended consequences.
The coming weeks could prove decisive as operators and regulators engage in brinkmanship over this contentious issue. Compromise will likely be required from both sides to safeguard legitimate businesses while upholding regulatory integrity. The stakes are high with forex market credibility on the line.
Reference
BDC operators urge CBN to reverse recapitalisation guidelines published in Punch