BDC’s: Entrenching transparency, forex stability through BVN validation

The  Nigeria   Interbank   Settlement System (NIBSS) recently launched Bank Verification number (BVN) Validation Portal. The portal introduced into the foreign exchange (forex) market, is being used by Bureaux De Change (BDC) operators to promote transparency in forex deals.

This initiative is an aftermath of the directive by the Central Bank of Nigeria (CBN) to licensed BDCs to ensure that all their transactions have the BVN of buying customers. The information must be included in the forex returns to the regulator it said. In the case of corporate customers, the BVN of a director of an authorized signatory of the entity must be provided to the BDC while the later has the mandate to verify its authenticity.

The CBN had directed BDCs to validate the authenticity of BVN that clients wanting to buy forex submit to them.

As a follow up, the Association of Bureaux De Change Operators of Nigeria (ABCON), in collaboration with the NIBSS, organized sensitization programmes for Bureaux De Changes (BDCs) on the use and deployment of the validation portal.

ABCON says the events, held across the six geopolitical zones, are its contribution to the Central Bank of Nigeria’s (CBN’s) policy implementation and confidence-building  in BDC operations.

It is in line with ABCON’s   goal   of ensuring that its members operate within set rules even as it wants the CBN to introduce measures that will help reduce rising bank charges depleting operators’ capital and profitability.

The BVN has become a veritable tool for fighting fraud in the foreign exchange (forex) market. It has also been deployed by the Central Bank of Nigeria to achieve transparency in forex  deals  and sustain exchange rate stability.  The impact has been the swift recovery of the naira from over N520/$1 in February to N361/$1 at the parallel market, a development that has continued to marvel financial pundits.  But those  that  understood  the  role  played by BDCs in achieving this milestone were not surprised.

ABCON President, Alhaji Aminu Gwadabe, said the world is going digital, and BDCs under his leadership must stay ahead of the competition by deploying time-tested technology   to   deliver   effective   services   to   their   numerous customers. He   said   the   NIBSS   BVN   Validation   Portal   helps   BDCs   to   ascertain   the genuineness of BVNs of customers wanting to buy forex.

The ABCON boss said the sensitization programme held in  the  six geopolitical zones – namely Kano, Lagos, Awka and Abuja, among others is the association’s input to CBN’s policy implementation.

“It was an opportunity to take confidence-building in BDCs’ operations to greater heights. ABCON

leadership   has   zero   tolerance   for   its   members   that   breach   operational guidelines,” he said.

However, while calling on the CBN to help BDCs reduce rising bank charges associated with their transactions, Gwadabe said, “BDCs are charged N1,000 per N1 million transaction. This means that each operator will be paying as much as N67,000 for the N67million monthly transactions. These charges are too high, and I urge the CBN to prevail on the banks to   reduce   the   charges   which   are   becoming   huge   burden   on   BDC operators,” he said.

Findings revealed that each of the 3,500 BDCs carries out transactions worth N16.8   million   weekly,   which   comes   to   N67   million   turnover   and   N67,000 maintenance fee monthly. Based on this, he disclosed that this fee has made it difficult for many BDCs to stay profitable in the business. There is rising operating costs.

“I appeal to the CBN to address this challenge so that the market will continue to enjoy ongoing stability,” he said.

Gwadabe explained that to ensure a hitch-free implementation of the directive, the CBN has continuously provided list of all licensed BDCs to the NIBSS to enable the firm make available the necessary hardware token that would be used by the BDC in accessing the NIBSS portal to confirm such information. The   NIBSS   has   subsequently   made   the   portal   available   on   its   website   to facilitate access for the confirmation/validation of the BVN number of the BDCs’ customers.

He disclosed that all forex-buying customers’ BVNs must be validated by the   CBN   authorized   forex   dealer   through   the   NIBSS   portal   before   all transactions   are   consummated.   He   said   that   ABCON   carried   out   the sensitization to ensure that BDCs effectively comply with the directive. The CBN’s rule requires that a token transaction fee of N100 would be paid for each access on the portal. The NIBSS will also provide the necessary training manual for an “easy to use” operation of the system,” the CBN said.

The   CBN   also   directed   that   any   BDC   that   fails   to   provide   the   required information in its returns, or provide a wrong BVN would be penalized. First offenders will be required to pay a fine of N1 million while any subsequent violation of requirement may lead to the revocation of the operating license of the BDC.

Benefits to BDCs

Analysts have said that BDCs’ compliance with the NIBSS’s BVN Validation mandate is positive for their business and economy. It is expected that more customers, seeing the level of transparency and data integrity in the BDC’s operation, will be motivated to give them more businesses.

“Even local and international investors, including Diaspora agencies are more likely to commit their funds to BDCs as the sector becomes more transparent,” Gwadabe said. He  explained that in  many advanced  countries,  BDCs  are direct agents of International Money Transfer Operators (IMTOs)  because of  the established transparency and infrastructure in those .

The ABCON leader said the BVN validation portal is one of the infrastructure now available for BDCs to compete favourably and take over the retail-end of the forex market that rightly belongs to them.

According to him, the platform is also expected to promote financial inclusion, and   get   more   people   into   the   financial   services   net.   “People   who   are   not connected to the financial system but want forex will have no option than to open account with commercial banks and obtain their BVNs.

“It is our own contribution to CBN’s financial inclusion project and determination to take financial services to the grassroots,” Gwadabe said.

BVN validation on NIBSS’ portal

NIBSS   Managing   Director,  Ade   Shonubi,   confirmed   that   the   portal   was developed   to   enable   BDCs   comply   with   the   CBN’s   directive   that   BDCs customers provide their BVN before buying forex. He also agreed that such exercise brings transparency in the market and prevents multiple supply of forex to single individual. The BVN captures customers’ biometric data, such as fingerprints, provides unique identification number for the customers and protects their accounts from unauthorized access, identity theft and fraud.

The CBN is poised to discipline dealers for wrong BVN. This may include the termination of the forex dealership authorization. Shonubi said NIBSS had deployed two services on the web and phone numbers that would   make   BVN   verification   for   BDCs   customers   and   others   as   easy   as possible.

Shonubi said customers are charged N10 for phone transaction and N20 for the web portal which the customer would be required to pay either with credit card or internet banking.

According   to   him,   the   essence   of   the   verification   is   to   checkmate   sharp practices among BDCs operators and customers. He, however, noted that once a customer carries out the verification either on phone or the web portal, such customer does  not  need   to   verify   again when dealing with the same  BDC operator.

These, according to Gwadabe, were some of the issues addressed and the BDCs that participated in the sensitization programme were taught.

Exchange rate stability

The ABCON boss, Gwadabe, praised the CBN’s drive  to   stabilize  the  forex market, stem the rampant cases of forex leakages and illicit money transfer from the country. He   said   that   ABCON   aligns   with   the   CBN’s   vision   of   providing   a   stable framework for the economic development of Nigeria through effective, efficient and transparent implementation of monetary and exchange rate policies.

Speaking   at   the   2017   Chartered   Institute   of   Bankers   of   Nigeria   (CIBN) Investiture held in Lagos, CBN Deputy Governor, Financial System Stability, Joseph Nnanna, said the regulator never forced the naira-dollar exchange rates down to current position. He insisted that the recovery of the naira happened naturally and based on market   forces.   The   support   of   BDCs   to   this   milestone   has   also   been commended. Gwadabe said ABCON will continue to work closely with the CBN to ensure BDC operators abide by regulatory rules. The ABCON under Gwadabe has also pledged to ensure that forex purchased by BDCs are disbursed to end users and for eligible transactions only.

The BDCs, he said, will continue to render returns on forex purchases from the CBN   to   Trade   and   Exchange   Department   of   the   apex   bank.     He   further promised   to   ensure   strict   compliance   to   the   provisions   of   the   anti-money laundering   laws   observance   of   appropriate   Know-Your-Customer   (KYC) principles in the handling of forex transactions.