Fintech Nigeria; Analysis of CBN Latest Regulations on Mobile Money.
The Central Bank of Nigeria has released new guidelines to further regulate the services provided by mobile money operators (MMOs) in Nigeria (“the new guidelines”). Since 2015, when the last regulatory changes were made using the old guidelines, mobile money operators have evolved to some extent with the surge in financial solutions driven by technology.
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Ibrahim Moshood of Centurion Law Group summarily analysis the pros and cons of this updated regulations. The new guidelines released on 9 July 2021 have made some additions to the 2015 framework which are highlighted below:
The new guidelines provide a robust coverage of the MMO value chain from service providers to subscribers and agents. Two major types of operations governed by these guidelines include:
- The Bank Led Model: These are deposit money banks offering MMO services alone or with other banks, essentially commercial banks operating disruptively in the MMO space.
- The Non-Bank Led Models: These are non-banking organisations that have obtained a license from the CBN to carry on MMO services. Note that they also use deposit money banks and settlement banks.
Permissible and Non-Permissible Activities
The new Guidelines have made additions to the permissible activities that were listed out under the old guidelines. The additions include MMOs being operational, wallet creation, e-money issuance, agent recruitment and management, pool account management, non-bank acquiring services and card-acquiring services.
However, even with the additions made, MMOs are still prohibited from carrying on the following types of businesses; direct or indirect loans or guarantees, insurance underwriting, subsidiaries’ establishment, foreign currency deposit services and other forex activities that save the facilitation of cross-border remittances to personal accounts subject to the applicable regulatory framework.
The new guidelines allow MMOs to offer savings wallets to be operated with settlement banks and the funds held in these wallets are insured with the Nigerian Deposit Insurance Corporation (NDIC) using a pass-through insurance arrangement subject to specific requirements in relation to investment operations and interest distribution.
The savings wallets funds are subject to a maximum management rate of 10% but must also ensure that the principal sum is not affected by charges and fees. The wallets are also insulated from offsets by the settlement banks with whom the MMOs operate the accounts. Note that customers can use the funds in these wallets to invest ONLY in government treasury bills.
Consumer Protection and Sanctions
MMOs are now required to resolve customer complaints within 48 hours. In addition, they must ensure that customers understand the transactions being concluded, provide robust frameworks against loss of service, proper communication channels and offer adequate disclosures to customers.
Where for instance, there is a new capitalisation requirement by the CBN and a settlement bank is unable to meet up, such could have its license withdrawn. In such an event, the NDIC’s maximum deposit coverage level kicks in at N500,000.00 (Five Hundred Thousand Naira Only) for each subscriber.
Where an MMO has its license withdrawn or activities banned, the CBN ensures that the deposit liabilities of the subscribers are assumed by another MMO, or some other financial institution as defined under the Banking and Other Financial Institutions Act (“the BOFIA”). The CBN also reserves the right to take sanctions against an MMO, its board of directors, officers or agents, withhold corporate approvals as well as suspend or revoke licenses.
Limits for Transactions
The balance limits for wallet holders have been increased from N50,000.00 (Fifty Thousand Naira Only) to N5,000,000.00 (Five Million Naira Only) for daily activities. For cumulative balance, the N300,000.00 (Three Hundred Thousand Naira Only) cap has been removed and is now unlimited, depending on the Know-Your-Customer (KYC) tier.
Reporting and Compliance
The new guidelines also stipulate that all risk mitigation techniques adopted by the MMOs must be within the scope of the relevant code of corporate governance, for example, the Code of Corporate Governance for Finance Companies 2018 (the Code). While MMOs have not been listed as financial institutions as such in the Code, it appears that the CBN has expanded the definition in the Code to cover MMOs by virtue of the fact that MMOs are listed as “other financial institutions” in the BOFIA.
Furthermore, all MMOs are to file annual audited reports and mandatory continuity business plans to the CBN within the first three months of the following year or no later than 31 March of the following year.
MMOs have definitely simplified financial transactions and services in Nigeria by increasing the number of banked individuals. Banks no longer need to have physical presences to provide financial services to residents of rural areas. This further promotes the CBN’s “cash-lite” agenda and has also made commercial transactions easier.
While the guidelines are a commendable development, we hope that in the editions to come, the CBN can involve Telco-Led models as they appear to be more common and easily accessible to the average Nigerian.