Why Nigerian Fintechs, SMEs Should be Concerned About CBN's New Mobile Money Regulations

Earlier this month, the Central Bank of Nigeria (CBN) released its Framework and Guidelines on Mobile Money services in Nigeria following a recent wave of regulations in the payments systems sector targeted at enhancing financial inclusion.

The apex bank had in 2018 revised the National Financial Inclusion Strategy document to reflect its new goal of narrowing financial exclusion to 20% by 2020. It also disclosed a drastic shift in favour of mobile money and agent banking.

Interestingly, CBN last updated the mobile money regulations in 2015. With the target year of 2020, it is almost safe to expect several changes in these new guidelines.

In terms of operation, Nigeria does not run a telco-led mobile money model. Unlike other African countries like Ghana and Kenya, the government employs the bank-led and non-bank-led models.

Basically, only banks or licenced corporate organisations can be Mobile Money Operators (MMOs). Previously, only deposit money banks and telcos were excluded from the non- bank-led model. However, this exception now also covers national primary mortgage banks, national microfinance banks, and telecom subsidiaries.

Asides from that, these new regulations imply that MMOs can now operate savings wallets, issue e-money, recruit and manage agents, card acquiring, and any other activities permitted by the CBN.

These regulations, however, formalise and give more insights into the modalities of the wallet system, investment operations, and interest distribution. For example, we now know that all funds in the savings wallet are to be invested in Nigerian Treasury Bills. We also know that fees and charges for managing these investments can not be more than 10%.

Under these new regulations, MMOs cannot 

• Grant loans, advances or guarantees (directly or indirectly),
• Accept foreign currency deposits,
• Deal in the foreign exchange market,
• Carry out insurance underwriting,
• Accept any closed scheme electronic value (e.g. airtime) as a form of deposit or payment,
• Establish a subsidiary, or
• Any other activities not permitted by the guidelines.

Other introductions include:

• Customers can no longer escalate complaints to CBN if they are dissatisfied with dispute resolution.
• Audited annual returns must now be relayed within the first three months after the year-end or March 31st.
• Transaction and balance limits for wallets are already stated in a 2017 circular.

However, previous guidelines regarding know-your-customer (KYC), Unstructured Supplementary Service Data (USSD) codes, usage of Nigeria Inter-Bank Settlement System (NIBBS) for interoperability still apply.

What does this mean for fintechs and telcos?

For fintechs in the Mobile Money space, such as Paga and Opay, they can now offer savings wallets that accrue interest. Oddly, Paga and Opay already offer these services using their Transactions Savings Wallet and Owealth products, respectively.

However, with restrictions on their ability to accept foreign currency deposits, Paga’s international remittance model could be affected. Under these new regulations, they can only sell foreign currencies from inbound cross-border remittances to authorised forex dealers.

According to a report by Inclusion Times, CBN is expected to make MMOs key participants in the upcoming final open banking framework. Open banking will enable banks, particularly microfinance banks, to access their user records for lending purposes.

For telcos, CBN’s continuous insistence on excluding them from the mobile money space is a rather interesting move. 

In Nigeria, telcos can only acquire a PSB licence and face the same restrictions as MMOs. Currently, 9mobile and Glo are the only telecom companies granted the licence. 

Ironically, these restrictions appear counterproductive to the CBN’s financial inclusion strategy to bank the unbanked. With a handicap on the services these MMOs and PSBs can provide, the objective of becoming alternatives is only half accomplished.