A Bureau De Change (BDC) sector has remained an important unit of the Nigerian financial market playing a crucial role in exchange rate stability and job creation. It is a business where people exchange currency for another. This business has been defined by the Central Bank of Nigeria Manual to mean a retail foreign exchange dealer carrying on the business of Personal Travel Allowance (PTA), Business Travel Allowance, and also inward and outward transfer. It is a company that is licensed to carry out small-scale foreign exchange services in Nigeria and whose sole object is the carrying on of such business on a standalone basis.
A bureau de change is a viable business making its profit by buying foreign currency and then selling the same currency at a higher exchange rate or by charging commissions or fees. It is most times called foreign exchange or currency exchange which is indeed seen as a crucial part of international travel. Below are the procedures and requirements for applying for a BDC license in Nigeria
APPLICATION FOR BDC LICENCE
It is noteworthy that applying for a license is always in two stages, namely; Approval-in-Principle (AIP) and Final License. It is indispensable that a formal application is made to the Central Bank of Nigeria (CBN) Governor before promoters can be granted Approval in Principle to carry on the business of a BDC. However, some documents need to be attached to this application form such as the financial requirements, a feasibility report, a copy of the draft Memorandum and Articles of Association, a letter of intent, and personal information of the proposed shareholders.
Before a proposed BDC registers its name with the Corporate Affairs Commission, an approval-in-principle must have been obtained from the CBN because this will be presented to CAC for the BDC company registration. The Approval-in-Principle is not the approval for the commencement of business, as further steps need to be taken.
Consequently, the promoter of a proposed BDC is expected to submit an application for a final license six months after the grant of Approval-in-Principle.
FINANCIAL REQUIREMENTS FOR SETTING UP A BDC
The financial requirements for setting up a BDC are as follows;
- A minimum paid-up share capital of N35 Million
- A non-refundable application fee of N150,000
- A non-refundable licensing fee of N1 Million
- A Mandatory caution deposit of N35 Million
- Registration cost of N35 Million share capital company with CAC (fee can be negotiated with a CAC Agent)
- A non-refundable change of name fee of N150,000 (where applicable)
BOARD/ MANAGEMENT REQUIREMENTS
It is stipulated in the CBN revised guidelines for BDC operators that the minimum number of the board of directors is three while the maximum is five which is subject to the approval of the CBN.
OPERATION OF A BUREAU DE CHANGE
The affairs of a BDC in Nigeria are strictly to deal with banknotes and coins, plastic cards and other activities, as the CBN may approve from time to time. When it comes to dealing in foreign currencies by a BDC, these currencies are to be derived from private sources and other sources provided by the CBN for the purpose of funding Business Travel Allowance and Personal Travel Allowance.
Also, it is pivotal that every BDC keeps proper registers and records of all transactions for transparency and compliance with Anti Money Laundering Provisions, CBN Guidelines, Circulars or directives. Furthermore, the arrival amount sold to or bought from a customer should be issued by a BDC through a machine list or receipts.
NON-PERMISSIBLE ACTIVITIES
A licensed BDC is not permitted from engaging in the following activities:
- Dealing in offshore business or maintaining foreign correspondence relationship.
- Dealing in any trade-related import activities.
- Maintaining a foreign account in whatever form.
- Street trading of foreign exchange.
- Carrying on capital market activities and other activities that may be termed non-permissible by the CBN.
In closing, it is a law that a Bureau De Change is authorized and empowered as a unit institution and it is not permitted to have a branch office outside its registered office. Thus, every BDC must comply with the requirements of the Foreign Exchange (Monitoring & Miscellaneous Provisions) Act 1995, Monetary Policy Guidelines, the provisions of BOFI Act 2004, Money Laundering (Prohibition) Act 2011, rules and regulations on foreign exchange activities/business and other guidelines issued by the CBN from time to time.
By Corporate & Commercial Law Team at Resolution Law Firm
Email: info@resolutionlawng.com
