Reasons why CBN ban 4,173 BDCs operators

In recent news, the Central Bank of Nigeria banned 4,173 BDCs operators. Therefore limiting the number of these entities in the country and ensuring monitoring and guidance. A reason for such a ban was because of the persistent hike of the Nigeria Naira against the United States Dollars. The dollar was known to be at an all time high of not less than 1,800 Naira per dollar. But that's not the only reason why the apex bank banned the BDCs. Below we explained them as stated by the Bank.

1. Who are the BDCs?

These are Bureau De Change operators in Nigeria. They provide the platform through which individuals in Nigeria can access foreign currencies without going to the bank. It is referred to as black market operators. They fixed their rate based on the demand for foreign exchange. The higher the demand for Forex the higher the rate. 

Generally, they register with the central bank of Nigeria. Also, the CBN provides foreign currencies to them through commercial banks. They buy the Forex and sell it to the public. Individuals who want a foreign currency with ease get them through the BDCs. Rather than waiting for the long process with a commercial bank. 

2. Reasons why CBN ban BDCs

There are three reasons why the CBN bans the more than 4,000 BCs across states in Nigeria. 

2.1 Rendition of returns

One of the reasons why this happens is the lack of rendition of returns by these black market platforms to the relevant department in the apex bank. There are monthly returns according to the guidelines that are expected to be sent by registered Forex traders in Nigeria. But the 4,173 firms failed to do so.

2.2 Payment of necessary fees to the CBN

The CBN requires the BDCs to pay fees in line with the guidelines and pay a license renewal fee for them to continue trading foreign currencies within a specified period. But they failed to make payment within that period. Therefore, their license was reversed.

2.3 Matters relating to compliance

The more than 4,000 BDCs failed to comply with CBN guidelines and regulations on issues relating to Anti-Money Laundering, Countering of the financing of terrorism via FX and Counter Proliferation Financing (CPF) regulations in Nigeria. 

3. Conclusion

From the foregoing, the CBN justified the reasons why the 4,173 BDCs had to go out of business. Also, the Bank has a big plan for the Forex market including re-registration for tier one and tier two BDCs for 2 billion and 500 million respectively. With these we hope that it will help regulate the market and fetch out bad actors.