Nigeria Greenlights Open Banking to Deepen Financial Inclusion, Boost Innovation

Open banking is now live in Nigeria, the first country to adopt open banking regulations in the Africa region.

The operational guidelines to kickstart the scheme were released by the Central Bank of Nigeria (CBN) this week, outlining the rules governing how traditional banks and other financial services providers will access and manage customer data in the country.

“The adoption of Open Banking in Nigeria will foster the sharing of customer-permissioned data between banks and third-party firms to enable the building of customer-focused products and services,” Musa Jimoh, the director of the CBN’s Payments System Management Department, said in a March 7 circular addressed to deposit money banks, mobile money operators and payment service providers (PSPs).

The release of the final guideline marks the end of a long journey towards open banking adoption in Nigeria, one which dates back to June 2017, when a group of industry veterans formed a working group to drive the development and adoption of standards governing the system’s use in the West African nation.

In Europe, the concept has had many years to develop and find its place in the financial services landscape. In fact, January marked five years since open banking became a regulatory requirement under the European Union’s Revised Payment Services Directive (PSD2), compelling retail banks on the continent to allow non-bank third party access to financial data through the use of application programming interfaces (APIs).

The U.K., open banking leader in its own right, also announced crossing the 7 million mark of active open banking users — about 10% of the country’s population — earlier this year.

For Nigeria, which is home to a large unbanked population much like the rest of sub-Saharan Africa, the PSD2-style legislation is expected to enhance access to local financial services and deepen financial inclusion for millions of people.

Prior to this announcement, the CBN published a Regulatory Framework for Open Banking to define how Nigerian banks should approach data sharing with third parties, PYMNTS previously reported.

Regulatory Oversight and Enforcement

Although the adoption of traditional banking services is lagging in emerging markets like Nigeria,  mobile money is hugely popular and used by millions to send money to peers, make purchases, apply for loans and pay bills, all from money stored in a bank-style account linked to their mobile phone.

Against this backdrop, open banking takes on a different flavor in these markets, where a greater emphasis is placed on access to open APIs that allow the integration of mobile money networks and financial institutions.

It’s a task the CBN will be closely involved in, and per the operational guidelines “the OBR [Open Banking Registry] shall maintain an API interface, defined within these guidelines, which shall serve as the primary means by which API providers manage the registration of their API Consumers.”

The CBN will also make public an industry-wide OBR to provide regulatory oversight on participants as well as ensure that only registered institutions are operating within the open banking ecosystem.

The guidelines also state that participants, including API providers and API consumers, will be identified across the OBR system by the business registration number and are required to publicly disclose their transaction fees on their websites and applications.

When it comes to the handling of data, CBN said all entities participating in open banking must ensure that the information provided through explicit consent of the customer or data owner is “accurate, up-to-date and complete in data exchanges,” the report further noted.

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