Nigeria Implements Stricter Regulations on BDCs and Cryptocurrency Trading

Key Takeaway

• Nigeria bans street trading of foreign currency and raises capital requirements for BDCs to stabilize the naira, which weakened to 1,515 per dollar.
• The Central Bank of Nigeria increased capital requirements for tier one BDCs to 2 billion naira from 35 million naira.
• Nigeria intensifies its crackdown on cryptocurrency trading, detaining Binance executives and targeting the platform for tax evasion and money laundering.

New Regulations for BDCs

Nigeria has intensified its efforts to stabilize the naira by imposing stringent new regulations on bureau de change (BDC) operators and banning street trading in foreign currency. The Central Bank of Nigeria (CBN) has significantly raised capital requirements for BDCs, aiming to regulate the sector and prevent it from undermining the local currency's value.

"Street trading of foreign currencies is not allowed," stated Blaise Ijebor, CBN's director for risk management, during a conference in Lagos on Thursday. "We don’t want BDCs under the trees. They should be in offices, you walk into their office, change your currency and walk away."

The naira weakened by 1.6% to 1,486 per dollar on Thursday, according to data from the FMDQ, which tracks the trade. On Friday, it traded at 1,515 naira per dollar in street trading, as reported by Abubakar Muhammed, chief executive of Forward Marketing Bureau de Change Ltd.

The CBN has increased capital requirements for tier one BDCs operating nationally to 2 billion naira ($1.4 million) from 35 million naira, and for tier two BDCs operating in only one of the country’s 36 states to 500 million naira. The industry has been given six months to comply with these new thresholds. The BDC’s umbrella organization has requested the authorities to lower the new thresholds and extend the compliance period.

Cryptocurrency Clampdown

In addition to the new BDC regulations, Nigeria is also cracking down on cryptocurrency trading, which authorities blame for exacerbating the naira's volatility. The naira has depreciated by approximately 68% against the dollar since foreign exchange rules were eased last year. The government has specifically targeted Binance Holdings Ltd., the world’s largest cryptocurrency exchange, detaining two of its executives during a visit to the country in February. One executive escaped, while the other has been in jail since April, facing charges of aiding customers in tax evasion via the platform.

A Nigerian court on Thursday adjourned the money laundering trial against Binance and its executives to June 20 due to the illness of Tigran Gambaryan, Binance’s head of financial crimes compliance. Gambaryan, a U.S. citizen, was charged with both tax evasion and money laundering. His lawyer informed the court that Gambaryan is "very ill and requires comprehensive medical attention," as stated in a letter to trial judge Emeka Nwite. Gambaryan received intravenous treatment for malaria after collapsing in court.

Legal Proceedings and Health Implications

Gambaryan, who turned 40 in prison last week, has been held in Kuje prison since February. This facility is notorious for housing members of the Boko Haram terrorist group. His wife, Yuki Gambaryan, expressed grave concerns about his health, stating, "The conditions in the notorious Kuje prison are, in a word, devastating. My husband is a strong, healthy person, but he is facing an environment that would bring even the strongest among us to our knees."

Gambaryan was also scheduled to appear for his arraignment on tax evasion charges on June 14, but this was postponed due to his health. Last week, he was denied bail on the grounds that he might attempt to escape. His lawyer, Mark Mordi, urged the court to transfer Gambaryan to Mizamiye Hospital in Abuja for treatment and requested a medical report from the Nigerian Correctional Service.

"In the circumstance of the ill health of the second defendant, it is clear that he cannot stand for trial today…We beseech for the defendant to be transferred to Mizamiye Hospital Abuja for treatment, and for the court to mandate the Nigerian Correctional Service to issue us a medical report on the examination they conducted on him in their facility," Mordi stated.

Street Views

• Blaise Ijebor, Central Bank of Nigeria (Bearish on street trading of foreign currencies):

  "Street trading of foreign currencies is not allowed. We don’t want BDCs under the trees. They should be in offices, you walk into their office, change your currency and walk away."

• Abubakar Muhammed, Forward Marketing Bureau de Change Ltd. (Neutral on naira exchange rate):

  "It changed hands at 1,515 naira per dollar in street trading Friday."