The Central Bank of Nigeria (CBN) raked in a total of N1.38 billion from Bureaux De Change’ (BDCs) annual license renewal fees for this year, New Telegraph’s findings show. Statutorily, every BDC is expected pay an annual license renewal fee of N250,000 by the end of January each year.
Thus, with latest data obtained from the CBN showing that the total number of BDCs in the country stood at 5,530 as at the end of October 2020, it means that the apex bank earned about N1.38 billion in BDCs’ annual license renewal fees for 2021. The figure is N92.5 million more than the N1.29 billion that the CBN made from the same process in the previous year.
There was speculation in some quarters that the tough business environment, occasioned by the coronavirus (COVID-19) pandemic, would make the regulator to extend the January 31 deadline for payment of the license renewal fee.
For instance, the CBN had, between late March and early September last year, suspended the sales of foreign exchange to BDCs due to the Federal Government’s suspension of international flights and other measures aimed at reducing person-to-person contact and curbing the transmission of the virus.
A Lagos-based BDC operator, who did not want to named, however, told New Telegraphthat most BDCs had promptly paid the license renewal fee as they did not want the apex bank to penalize them.
He said: “Most of us (BDCs) have paid the license renewal fee. Apart from the fact that the fee is statutory, the CBN has in recent months turned up the heat on BDCs in order to ensure full compliance with its forex regulations.”
In June 2014, the regulator announced new requirements for BDCs that it said were part of measures to ensure exchange rate stability and curb unethical practices in the sub-sector.
The requirements included new minimum capital requirement of N35 million for operators; a mandatory cautionary deposit of N35 million; an application fee of N100,000; licensing fee of N1 million and annual license renewal fee of N250,000.
However, in 2016, the apex bank refunded operators the mandatory cautionary deposit of N35 million, but retained the N1 million and N250,000 licensing fee and annual renewal fees respectively paid by each of the BDCs.
Although the CBN said at the time that it introduced the new licensing regime in order to address the: “Depletion of the country’s foreign reserves, in view of the unusually large number of BDCs,” the number of the forex dealing firms has been on a steady increase since then.
New Telegraph’s analysis of CBN data, for instance, shows that from the about 3,000 that were licensed by the regulator in early 2015, the number of the BDCs increased by over 2,530 to 5,530 at the end of October last year.
Financial analysts point out that the CBN has continued to license BDCs because the operators’ sale of forex for Personal Travel Allowance (PTA) and Business Travel Allowance (BTA), enable it to deepen forex liquidity in the retail end of the market.
In fact, in its H1 2020 Economic Report, the apex bank stated that: “The number of licensed BDCs increased to 5,300 at end- June 2020, compared with 5,164 at end December 2019. The increased licensing reflected the desire of the bank to deepen foreign liquidity, especially in the retail end of the market.”
However, while the CBN’s capacity to maintain regular dollar sales to authorised dealers, including licensed BDC operators, plays a critical role in ensuring exchange rate stability in the country, analysts note that the sharp drop in the price of oil – the commodity that accounts for about 90 per cent of the country’s export earnings – coupled with the COVID-19 crisis, resulted in a decline in external reserves, thus forcing the apex bank to scale down the amounts it injected into the forex market to defend the naira in 2020.
Indeed, New Telegraph reported in December that the CBN sold foreign exchange amounting to $3.96 billion to the BDC segment of the foreign exchange market between January and September last year, as against the $10.42 billion it sold to the same segment of the forex market in the corresponding period of 2019.