New Guidelines for Mobile Money Operators Issued by CBN

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Image sourced from the Digital Frontiers Institute.

The Central Bank of Nigeria (CBN), the country’s top regulator of banking activities, has released new guidelines to further regulate the services provided by mobile money operators (MMOs) in Nigeria.

Changes in regulations mostly focus on streamlining and increasing the scope of MMO business, but also the protection of customers using these services.

These new regulations update the previous round of regulatory changes issued in 2015. Since then, mobile money operators have evolved to some extent with the surge in financial solutions driven by technology and the COVID-19 pandemic.

The new guidelines released on 9 July 2021 have made some additions to the 2015 framework and now seek to provide robust coverage of the MMO value chain from service providers to subscribers and agents.

CNB’s guidelines target two distinct financial services operators, including:

  • 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.

Above and beyond, the new regulations for 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.

Changes to Permissible and Non-Permissible Activities

The new Guidelines have made additions to the permissible activities that were listed out under the old guidelines.

New activities now permissible for MMOs include: being operational, wallet creation, e-money issuance, agent recruitment and management, pool account management, non-bank acquiring services and card-acquiring services.

Despite the new changes, MMOs are still prohibited from carrying on the following types of businesses in the country: 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.

Savings Wallets Now Allowed

CBN will now 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.

Note that customers can use the funds in these wallets to invest only in government treasury bills.

New Changes for 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, the settlement bank will have its licence withdraw. In such an event, the NDIC’s maximum deposit coverage level kicks in at N500,000 ($1212) for each subscriber.

Where an MMO has its license withdrawn or activities banned, the CBN ensures that the deposit liabilities of the subscribers are to be assumed by another MMO, or some other financial institution as defined under the Banking and Other Financial Institutions Act (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.

Increases in Limits for Transactions

The balance limits for wallet holders have been increased from N50,000 ($121) to N5,000,000 ($121,126) for daily activities.

For cumulative balance, the N300,000 ($727) 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.

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” by 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.

By Ibrahim Moshood, Associate, Centurion Law Group.

Edited by Luis Monzon
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