In this exclusive interview with Aminu Gwadabe, the President of Association of Bureau de Change of Nigeria (ABCON), he spoke about the struggle of BDCs to meet the central bank recapitalisation demand and the effort to bring its members into compliance with the law. Excerpts:

Was the recent extension for BDC recapitalisation necessary?

First, it was very necessary considering the practice in the industry. We have seen the deadline given for capitalisation running off to, say, 18 months, 24 months. Banks were given 24 months to capitalise, macro finance banks were given 18 months to recapitalise. So, giving the BDC only six months to recapitalise does not show equality.

There is supposed to be fairness in terms of policy so that it won’t be like it is coming with a different intention, maybe to frustrate the players in other sectors. So, those are the arguments that we presented to the Central Bank of Nigeria and out of their magnanimity, they listened because the requirement is huge.

Considering the size of our operation, N500 million for Tier 2 and N2 billion for Tier 1 is not a mean feat.

We have done our jurisdiction comparative analysis; in the UK, you don’t need more than 20,000 pounds to have a licence to be able to change.  20,000 pounds is about 40 million naira.

In India, we are talking about 60,000 dollars, that’s about 90 million naira as capitalisation to have a licence.

In Kenya, it’s about 50,000 dollars, so just about 75 million naira to have a licence. So, why 500 million naira in Nigeria, why 2 billion naira in Nigeria?

The requirement is huge; it’s untenable for most of our members.

With the difficulties you have enumerated, are we going to see mergers and acquisitions?

One disadvantage we have discovered; companies that last in advanced countries like America and the UK, are a result of partnership. Even our neighbours here, the Middle East,  companies are progressing because of partnership.

However, back home, there is this mindset of many Nigerians that is only comfortable with one-man business.

The purpose of the whole new regulation is also about corporate governance. The central bank wants to ensure that it’s no longer a family business. It’s really challenging for people to relinquish their interest in partnership.

But we are educating them that the new capitalisation comes with new benefits, new sources of business. So yeah, the headwinds are there, but there are also a lot of bottom line benefits.

Presently, we are not agents of the IMTOs (International Money Transfer Operators), but after the capitalisation, we will become an agent of IMTOs, we can buy from a domiciliary account, and  we will start  buying from embassies as well.  So, we will be able to expand our sources of supply, which are limited. Right now, you can only buy from the central bank and the commercial bank.

You talked about many banks not complying. So, what is hindering this compliance on their part?

The banks are circumspect. They are cautious. You know, the central bank now is coming out with a lot of penalties, so, according to them, they are waiting for clarification from the Central Bank of Nigeria.

We told them, there is a circular. They say, yes, even with that circular, the central bank needs to communicate to us that you can do that. That was their response.

People were having difficulties accessing invisible travel allowance and school fees in the banking sector. But as soon as that circular came out, they knew there would be liquidity in the bureau de change sector. We have started seeing many of them writing emails, sending messages to their customers that they can now come and access fx.

Unfortunately, we are seen as competitors. In other climes, banks are not into the critical retail end sector. They concentrate on wholesale transactions.

The retail end, for God’s sake, should be given to the BDCs because they are more convenient, they are more accessible. 24-7 at the airport, you can come and do your transaction all over the country. I mean, over the world, not only limited to Nigeria.

The bank requires a lot of spread, unlike a bureau de change that has a simple office, few staff to coordinate its business. So, with little margin, a bureau de change can operate.

The naira has been hovering around N1600 to a dollar, has the naira found its through value?

It definitely looks that way, more especially for the real and productive sector. First, the major threat to our narrow stability is discretionary demand. Yeah, illicit demand. You see, the billions of dollars in people’s bedrooms are twice or thrice the foreign reserve of the country. What do you need dollars for? So, that is a big factor in putting disparity between the naira and other major foreign currencies.

That illicit demand is the elephant in the house, except there is a very concerted effort, there is renewed patriotism from the people, and then inflation, too. Many people have lost confidence to the extent that the dollar now is the store of value. Nobody wants to keep naira, even the private sector, not even the public sector; they prefer to keep their earnings, their wealth in dollars. So, these are the two critical demands, you know, frivolous, that are putting a lot of pressure on the exchange rate of naira.

So, there is the need, like they said, for intervention. The cost of not meeting liquidity in the market is higher than the cost of keeping foreign reserves, because this has a lot of spiral impact. Once the value of naira is depreciating, you ignite speculation, you ignite hoarding, you know, inflation. So, it’s good to have foreign reserve, but it’s also good to use that foreign reserve and ensure social buffers, whereby the citizens have a comfortable life, lower prices of goods and services, through intervention in the tail end of the market.

What’s the update on the recent clampdown on BDC operators for illicit financing?

Nigeria is under pressure. The central bank, the presidency, is under pressure from the Financial Action Tax Force. Don’t forget, Nigeria is being watched by that body setting standards for money laundering and terrorism financing. And all efforts since the last 2-3 years are in top gear to see that the country exits from that gray list, because the implication is, if we did not exit, then we are going to go into the red list. And, you know, far-reaching consequences of getting into that list.

Part of the recommendations or the complaint of the Financial Action Tax Force is trading forex on the streets. So, yes, the EFCC is using both organic and inorganic measures to at least curb the menace.

But after some time with a lot of consultations, we made the EFCC understand that street trading has become a kind of family trading for Nigerians. And it has existed even before the independence of Nigeria. So, let us not throw the baby and the bathwater away. Let us see how we can navigate, how we can integrate them even with simple registration.

So, there is a lot of effort and also results in that. There is the need to make licensing very simple. Because the more you make licensing very difficult, the more you push these operators to an unlicensed space.

So, we are urging the Central Bank of Nigeria that they should consider our self-regulatory status. Whereby we can monitor them, bring them into compliance by making them register, even with the association. By giving them a simple KYC form for their customers, so that we can be complying with the standard of the financial action tax work. And then, striking a balance between international obligations and national objectives.