This is not a laughing matter but everywhere in Nigeria, someone is chasing someone, in the financial sector. Now the consumer protection watchdog has recruited fintechs to chase online lenders. But you know what? These fintech companies have no chance since some of these online lenders are NOT even registered in Nigeria. It is like a voodoo how they still operate with bank accounts to cause so many problems.

Like I explained in a banking conference in South Africa when someone tried to emphasize Nigeria’s paltry national budget (~ $42 billion depending on your exchange rate) to South Africa’s $157 billion, Nigeria is a place where most things are outside the power of governments. In South Africa, you pay taxes on your properties and lands.

 In Nigeria, there is nothing like that at scale and people keep their funds. If you include those informal non-receivables, Nigeria’s budget would be much higher (a 0.5% annual tax on properties and lands in Lagos, Abuja and River State will add so much to the respective jurisdictional/national budgets). Unfortunately for the government, the money is with the people and there is nothing to spend.

That explains why a lending company has become invisible and invincible because the government has no way to stop it since it never even registered with the government! In physics, you have optical illusion; here, you have financial illusion. You keep chasing but you never get there.

 Read the head of the consumer protection (FCCPC), Mr. Babatunde Irukera.

“The information available to the commission demonstrates that Soko Lending appears to be the most consequential digital money lender with multiple apps and brand names.

“It is covering a significant share of the digital or online lending market, and one of the most prolific actors in violating consumer privacy, fair lending terms, and ethical loan repayment/recovery practices.

“Prior to this operation, the commission had previously, on March 11, 2022, carried out a similar enforcement action with respect to multiple lenders; which action and continuing investigation has reduced previously high and escalating unethical, obnoxious, and unscrupulously exploitative practices in the industry.

“With the operations today, the commission expects an appreciable additional reduction in these unacceptable practices. The commission has also today entered further Orders that will disable or diminish violators’ ability to devise circumvention efforts or alternative mechanisms to circumvent the objective of the investigation and protection of citizens.’’  executive chairman of FCCPC, Mr. Babatunde Irukera 

FCCPC Has Barred All Fintechs From Providing Payments Or Transaction Services To Online Money Lenders in Nigeria

It goes without saying that foreign currency demand will be a booming market for a long time to come, but it’s also a given that many people still do not have a clear idea of what constitutes a legitimate foreign exchange retailer, neither do they know that foreign currency services are licensed and come with their own Regulatory Framework. 

The most common aspect of the Foreign Exchange value chain is the Bureau De Change, which is basically a business licensed to engage in the provision of services relating to the sale, purchase or exchange of foreign currency or foreign exchange. 

What this article aims to do is treat the following topics of :- 

– The Regulatory Framework governing Bureaux De Change.  

– The licensing requirements for Bureaux De Change in Nigeria. 

– The extent of permissible and non-permissible activities involved in the day to day operations of Bureaux De Change in Nigeria. 

Which Regulatory Agency is in charge of governing Bureaux De Change in Nigeria? 

Bureaux De Change in Nigeria are governed by the Central Bank of Nigeria (CBN) through the CBN Revised Operational Guidelines For Bureaux De Change in Nigeria 2015. 

It should be noted that it is a criminal offence to operate an unlicenced Bureau De Change in Nigeria. 

What are the stated permissible and non-permissible activities for Bureaux De Change in Nigeria based on the CBN Guidelines? 

The following are the permissible activities for Bureaux De Change in Nigeria under the CBN Guidelines:- 

– BDCs are allowed to deal in Bank notes, coins, plastic cards . 

– Rendering Personal Travel Allowance (PTA), Business Travel Allowance (BTA), Medical & School fee-related foreign exchange retail services. 

– BDCs can deal in Stablecoins. 

– BDCs are allowed to source foreign currencies from private sources. 

The following activities are non-permissible for BDCs under the CBN Guidelines:- 

– Offshore businesses or maintaining a Foreign correspondence relationship. 

– Maintaining a foreign account (this can be circumvented legally). 

– Round-tripping Forex acquired through the CBN window 

– Capital Market activities. 

– Trade-related import activities. 

– Street forex trading. 

What is the procedure for obtaining a Bureau De Change licence in Nigeria? 

The granting of a Bureau De Change licence in Nigeria comes in 2 stages which are:- 

– The Approval-In-Principle stage. 

– The final license stage. 

The Approval-In-Principle(AIP  Stage 

This is commenced by:- 

– Sending a formal application through your lawyer to the Central Bank of Nigeria for an AIP Bureau De Change licence grant addressed to the Director, Financial Policy & Regulation Department (FPRD) with the following: 

a). A non-refundable application fee of 100 thousand Naira in Bank draft payable to the CBN. 

b). Evidence of payment of the minimum required capital of 35 million Naira into the designated Central Bank of Nigeria account. This CBN shall refund this amount with interest after the proposed BDC has obtained its final license. 

c). A copy of the BDC’s feasibility report/Business plan containing information that includes – 

– aims & objectives of the proposed BDC; 

– a need gap for services offered by the BDC; 

– a proposed training program for the BDC’s staff and its management succession plan; 

– a 5-year financial projection for the operation of the proposed BDC, indicating expected growth and profitability; 

– details of the assumptions which form the basis of the financial (?) projection; 

– organizational structure of the proposed BDC indicating the functions and responsibilities of the BDC’s top management team; 

– the composition and CV of members of the board of directors of the BDC and other directorships held if any; 

– the AML/CFT (Anti-Money Laundering/Combating The Financing of Terrorism) policy and compliance manual; 

– conclusions based on the assumptions made in the feasibility report; 

– a copy of the BDC’s draft MEMART(Memorandum & Articles of Association); 

– a letter of intent to subscribe to the BDC’s shares signed by each subscriber; 

– a copy of the list of the proposed shareholders in tabular form showing their business & residential addresses as well as the names and addresses of their respective bankers as well as BVN details; 

The CBN upon the receipt and due consideration of the application will then grant an Approval-In-Principle which will last 6months  after which the BDC promoters can proceed to register the BDC with the Corporate Affairs Commission (CAC).  

The Final license Stage

This stage comes with the following processes:- 

– The submission of an application to the CBN Governor for the final grant of a BDC License not later than 6months after the grant of an AIP with the following attached – 

a). Evidence of payment of a non-refundable license fee of 1 Million Naira. 

b). The names, designations and signed CVs (Curriculum Vitae, confirm plural) of the proposed members of the top management of the BDC. 

c). Evidence of incorporation of the Bureau De Change with the CAC. 

d). Evidence of having suitable office acommodation for the BDC’s operations. 

e). Any other conditions as may be specified in CBN AIP. 

The CBN Governor may then grant a final license subject to the fulfilment of certain conditions which shall be complied with within such a period as may be specified by the CBN. 

How long does it take to process an Approval-In-Principle application? 

An Application-in-Principle application usually takes 3-6weeks to process after the submission of the application and other requirements. 

Are BDC licences renewable and what is the cost of license renewal if so? 

Yes, BDC licenses are to be renewed annually and cost a non-refundable renewal fee of 250Thousand Naira. 

What are the major provisions of the CBN Guidelines on Bureaux De Change in Nigeria? 

The major provisions of the guidelines include : 

– The compulsory requirement that a BDC must have a designated Compliance officer. 

– Anybody wishing to sell Forex above $10,000.00 to a BDC shall be required to disclosed his source. 

– Transactions with BDC’s shall be carried out on spot (immediate settlement) basis. 

– Every licensed BDC shall conspicuously display it’s buying & selling rates subject to a maximum spread of 3.5% . 

– Every BDC shall transact business at its registered office approved by the CBN. 

– No BDC is to have any business relationship with any street forex trader or it will be at risk of having its own license revoked. 

– No BDC shall have branches outside its registered offices.  

– Every BDC shall be required to open and operate both domiciliary & Naira accounts solely for its day-to-day operations with authorized dealers(Banks) in Nigeria and inform the CBN accordingly. 

Is it possible to set up and operate a Digital BDC in Nigeria? 

Technically, yes, as long the requirement of the CBN regarding instant/on-the-spot transactions is met . However,this will come with more stringent AML/CFT/ KYC as Data Privacy Regulatory Compliance requirements, in addition to requiring a partnership with a Bank for the instant digital assigning of NUBAN/Naira accounts and/or Domiciliary accounts to customers for easy payment and receipt of Forex and Naira payments. 

Conclusion:- It is hoped that a clearer understanding of the Legal Framework governing Bureaux De Change has been achieved by this article. However, there’s still a great need to know more about the CBN Guidelines on Bureaux De Change especially if you might be seeking to go into this business (possibly digitally),  hence the need to consult with your lawyer on this going forward.