Citing Breach of Regulatory Provisions, CBN Revokes Licences of 4,173 BDCs

•Cardoso: Apex bank to clear genuine, verified FX backlogs of five banks soon  

•Sells N1.06tn OMO as interest rate on 361-day bill rises to 21.5%

James Emejo in Abuja, Nume Ekeghe and Kayode Tokede in Lagos

The Central Bank of Nigeria (CBN), yesterday announced the revocation of the operating licences of 4,173 Bureaux De Change (BDC) operators over violation of regulatory guidelines, among others.

The bank said the action was in exercise of the powers conferred on it under the Bank and Other Financial Institutions Act (BOFIA) 2020, Act No. 5, and the Revised Operational Guidelines for Bureaux De Change 2015 (the Guidelines).

The apex bank disclosed this in a statement issued by the acting Director, Corporate Communications Department, Mrs. Sidi Ali Hakama.

This comes just as the CBN Governor, Mr. Olayemi Cardoso, reassured foreign investors that the central bank would settle the outstanding FX liabilities of the five remaining banks within a few days.

Cardoso, who stated this during the Investor Virtual Call which was facilitated by the Nigerian Exchange Group (NGX Group), further reiterated that the country had so far attracted $2 billion in foreign portfolio inflows this year.

Continuing, Hakama said the affected BDCs failed to observe at least one of the regulatory provisions namely payment of all necessary fees, including license renewal, within the stipulated period in line with the guidelines as well as their inability to render returns in line with the operational guidelines.

The BDCs also failed to comply with guidelines, directives, and circulars of the apex bank, particularly Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT) and Counter-Proliferation Financing (CPF) regulations, the bank added.

The CBN acting director further stressed that the central bank was currently revising the regulatory and supervisory guidelines for BDC operations in the country.

She said when effective, compliance with the revised regulations would be mandatory for all stakeholders in the sector.

On February 23, the apex bank issued revised regulatory and supervisory guidelines to sanitise BDC activities in the country.

The exposure draft revises the permissible activities, licensing requirements, corporate governance and Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) provisions for the operators, and sets out new record-keeping and reporting requirements, among others.

The proposed framework, among other things, prescribed a minimum capital requirement of N2 billion for national BDC firms as well as N500 million for state operations.

However, addressing investors at the NGX engagement, Cardoso said, “Basically, what we have done with those is that we have paid as much as we can to the point where we have cleared the backlog of all the banks save five.

“All the banks’ genuine and verifiable backlogs have been cleared, save five. We are confident that we will shortly be in a position where the whole issue of forwards will be behind us. I would say in the next few days we should be in a position where the balance of the five would have been put behind us.

“I have tried as much as possible to be consistent on this matter. I don’t make promises I don’t fulfill. The last time I spoke on this matter, I was confident that within one month, we would be more or less out of it and I’m saying again that right now, I think in the course of the next few days, maybe a week and a half, this should be put behind us.”

The apex bank governor also revealed that Nigeria had attracted $2 billion in foreign portfolio inflows this year.

He said, “Last year, the total amount of inflow to the best of my knowledge from FPI was down to $ 3 billion. Already this year alone from the little we have done; we have attracted $2 billion. My point is this, with the right policies, approach, and open and transparent mechanism flow will start coming.

“We have done as much as possible to move the market to a more transparent and open market such that those who play in it can get the confidence that arguably lost over some time.”

On the nation’s foreign reserves, he noted that it has appreciated by $2 billion and is further expected to go up in a positive direction amid CBN’s policies implementations.

Cardoso said, “All the different measures we have taken towards boosting our reserves and indeed creating more liquidity in the market have started paying off.”

Responding to the hike in interest rate, CBN Deputy Governor, Economic Policy Directorate, Muhammad Sani Abdullahi, said, “As regards interest rates, I think that the MPC has been quite clear regarding direction, which wants for government securities in terms of treasury bills and bonds.

“I think that the direction is generally upwards and we are working to ensure that these rates are consistent with the tightening policy that is required to stem inflation over the short to medium term.

“We are confident that shortly, we will be able to bring inflation down to a target of now 21.4 per cent in the medium term, and these measures are required so that we tighten money supply and provide the necessary instruments to liquidity in the system.”

The CBN deputy governor said, “And so, while there is the major issue of crowding out the private sector, we do believe that in the short to medium term, there are moves to ensure that we’re able to break inflation in a way that allows us to be able to prepare better for the future.”

Earlier, the Chief Executive, NGX Group, Mr. Temi Popoola, stressed that investors play a critical role in capital formation and help to among other things, improve price discovery and efficiency in the markets.

According to him, foreign investors help to provide market liquidity and strengthen FX liquidity.

 CBN sells N1.06tn in OMO as interest rate on 361-day bill rises to 21.5 per cent.

Meanwhile, as the CBN continued in its ongoing effort to manage liquidity in the financial system, it sold N1.06 trillion in its latest open market operation (OMO) auction.

OMO is one of the monetary policy tools the apex bank uses to control money in circulation and inflation.

The auction, which held on March 1, 2024, attracted substantial interest from investors, with the CBN setting stop rates as high as 21.5per cent.

The auction was in three categories based on tenors: 95-day, 179-day, and 361-day OMO bills.

The apex bank offered N75 trillion in 95-day bills, with a stop rate of 19.00per cent, and received a subscription and total sales of N37.05 billion.

The 172-day bills saw N75 billion on offer at a 19.5 per cent stop rate, as investors subscribed N8.25billion, leaving CBN to settled for N6 billion.

Subscription levels for the 361-day OMO bill was robust, reflecting heightened investor appetite amidst the current economic landscape.

The 361-day bills recorded the highest rate at 21.5 per cent on a N350 billion amount offered by CBN.

Investors subscription stood at N1.09trillion and CBN eventually selling N1.01trillion for the 361.-day OMO auction conducted March 1, 2024.

Bids ranged from 19.0000% to 19.0000% for the 95-day bills, 119.4600% to 22.0000% for the 179-day bills, and 20.6900% to 23.5000% for the 361-day bills.

These ranges show the variability of investor expectations regarding yield, with some investors willing to accept lower rates, while others aimed for the higher end of the spectrum.

However, the naira versus dollar exchange rate sustained its gain for three consecutive days on the official window yesterday, but depreciated marginally on the parallel market.

On the parallel market, it depreciated to N1,575 to a dollar yesterday, from the N1,550 to a dollar it exchanged on Wednesday. On the other hand, at the official Nigerian Autonomous Foreign Exchange (NAFEM) the naira exchange rate closed at N1,548.25 to a dollar, signifying a N46.86 gain compared to N1,595.11 it closed on Thursday.