Alternative Bureau De Change Operation Models in Nigeria (In light of the CBN BDC License Restrictions)

The Central Bank of Nigeria announced that effective from July 29, 2021 that it would no longer be making weekly allocations of FX to Bureaux De Change in Nigeria and that BDCs will now have to source their FX needs from private sources. The CBN also announced that it was temporarily halting the granting of new BDC licenses to applicants, along with a consequent order for refunds of the 35 Million Naira refundable licensing deposit already paid by BDC license applicants recently.

What this article will focus on without further ado are the alternative operation models for applicants still desirous of operating BDC services in Nigeria.

Nigeria is currently an import-dependent economy, so there has been a high demand for foreign exchange made worse in recent times by the Central Bank of Nigeria CBN placing restrictions on the local Forex retail market led by Bureaux De Change (BDCs).

Bureaux De Change in Nigeria currently no longer source foreign exchange from the CBN due to excessive allegations of forex allocations abuses.

Forex can now only be gotten from authorized dealers (Commercial banks) in Nigeria.

Also, BDC license applications have been temporarily halted by the CBN.

Cut off from the CBN window source, BDCs have been left with the problem of how to source forex. This is where your business can come in.

Permissible activities for BDCs

BDCs can still engage in:-

– Dealing in bank notes, coins and plastic cards.

– Getting FX from private sources for selling as Business Travel Allowances (BTAs) & Personal Travel Allowances of not more than $4,000.00 per PTA customer transaction and $5,000.00 per BTA customer transaction

– Opening Naira and Domiciliary Accounts

– maintaining a difference of not more than 3.5% between forex buying & selling rates

Non-permissible activities for Bureaux De Change in Nigeria

– Engaging in offshore businesses or maintaining foreign correspondences

– trade-related import activities

– maintaining foreign bank accounts

– round-tripping forex gotten from the CBN

– capital market activities

– operating office branches (BDCs can only have 1 registered operating address.

Forex can only be gotten in Nigeria via :-

1. Buying directly from banks or through the e-Form A on the CBN Digital Trade Monitoring System for the purpose of PTA, BTA, medical tourism, educational tourism & other listed remittances on the CBN foreign exchange manual.

2. Buying from private sources in Nigeria

What are your options?

Most BDCs and Banks , due to the high scarcity of forex are now operating digitally. First, you need to register at least 2 companies in Nigeria :- 

1.A digital BDC in Nigeria :- Because the CBN has currently banned BDC license applications in Nigeria, you’ll have to engage in a Joint Venture lease agreement with a licensed BDC for the use of its license as a regulatory cover with an application for the approval of the CBN.

2. A Company that will serve as a sister company to the BDC for the purpose of maintaining foreign accounts through which you can import or remit FX into Nigeria.

To operate initially, you should do the following which is already being done by many companies here:-

1.Engage in the sale of Stablecoins :- Stablecoins are a type of Cryptocurrency tied to Fiat currencies like the US Dollar . Blockchain Technology is legalized in Nigeria and Stablecoins have been exempted from all our Cryptocurrency regulations here. Moreso, US Dollar Stablecoins have been recognized and regulated in the US via the Stablecoin Transparency of Reserves & Uniform Safe Transactions Act (The “TRUST” Act)

The official exchange rate for the US Dollar is $1 = 437.00 Naira

1 USDC (Stablecoin) = 433.00 Naira

1 USDT (Stablecoin) = 437.00 Naira

US Dollar = 746.00- 765.00 Naira (Parallel Black Market Rate)

2. For physical cash FX, your digital platform must require each customer to have a Domiciliary Account which you can send FX to . You can either buy FX from an authorized dealer in Nigeria (a Bank) through a proposed FX purchase agreement or simply import your FX (through a certificate of capital importation obtained here in Nigeria).

Getting a BDC license usually costs the following :-

– A minimum share capital requirement of 35 Million Naira(about 560,000.00 Naira in Incorporation costs minus Legal fees)

-An application fee of 100,000 Naira

– A licensing fee of 1 Million Naira

– A license renewal fee of 250,000.00 Naira

– A mandatory refundable caution deposit of 35 Million Naira payable to the CBN 

Total :- 37 Million Naira ($84,691.00 at the official exchange rate)

Operating digitally on the other hand will cost you the following :-

– Merger/License lease agreement costs with a licensed BDC – a minimum of 10-12 Million(minus license renewal costs of 250,000.00 Naira which you can offer to handle & Legal Documentation costs)

– Cost of incorporation for 2 companies (Digital BDC & Sister Company, 5 Million Naira share capital each) – 500,000.00 Naira(Legal costs inclusive)

– Trademark Registration – 120,000.00 Naira per Trademark

Total – 13,120,000.00 Naira($30,022)

In addition to the above you need the following :-

-an AML/CFT(Anti-MoneyLaundering/Combating the Financing of Terrorism) Compliance Framework set-up 

– a Data Protection Compliance Framework

– a CBN and Corporate Affairs Commission (CAC) compliance Framework.

These are the alternative operation models currently in use for FX procurement and sales in Nigeria.