Nigeria’s central bank to launch open banking in August

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Nigeria’s central bank is set to launch an open banking system in August, four years after it approved a new regulatory framework to govern the system.

Under the new system, regulated financial institutions can now access customer data held by commercial banks, from account balances and transaction history to spending and saving habits. The Central Bank of Nigeria (CBN) will make available a new API that any financial firm can plug into to access this data.

CBN has assured Nigerians that they will still be in control of their data and they get to decide who can access it, to what extent and for what purpose.

The new system will be overseen by the Open Technology Foundation, a non-profit led by industry experts in the local finance sector. The Foundation is charged with developing a unified standard that makes integration for all stakeholders fast and easy. Its members include local fintechs such as Carma, OPay, and Palmpay, as well as global players like Ernst & Young and KPMG.

“This ambitious initiative aims to revolutionize the way financial services are delivered and consumed, moving away from a siloed, bank-centric model towards a more interconnected, data-driven ecosystem,” says local business development expert Adeyemi Kayode.

Open banking is geared toward boosting financial inclusion. Under this interconnected system, institutions can access their client’s financial data, including accounts held in other banks or fintechs. This allows for a better credit rating and, consequently, enables Nigerians to have better access to credit.

In Nigeria, bank loans have traditionally been skewed against the informal sector, which makes up the overwhelming majority of the workforce. Fintechs have sprung up to serve this market, but they are largely hampered by a lack of customer data, which is siloed by the banks.

According to the latest data, 74% of Nigerians were financially included last year. However, the disparity is high in rural areas and regions with conflicts. Mobile money and agent banking have closed the gap in the past five years, but the West African nation still has a long way to go.

Beyond the overall financial inclusion, open banking enables personalized financial services. With a holistic view of a client’s financial history across multiple channels, financial institutions can be better placed to offer the right products that would best suit the client.

The ultimate goal “is a more competitive, customer-centric financial ecosystem where innovation is spurred by collaboration and data sharing, ultimately leading to greater efficiency and affordability of financial services,” says Kayode.

Digital payments provide a lifeline for Nigeria’s youth

As Nigeria awaits the era of open banking, another financial segment has been growing exponentially: digital payments. While they have boosted financial inclusion, especially in the rural areas, they are now becoming a livelihood source for millions of young Nigerians.

Nigeria’s banking sector has faced a myriad of challenges, with scarcity of cash at the ATM terminals among its most pressing. This has sparked the growth of Point of Sales (PoS) terminals across the country where clients can withdraw cash, pay bills, make transfers, make airtime and data top-ups and more.

These terminals now provide a source of income for Nigerian youth who make a living through transaction charges.

According to the Nigeria Inter-Bank Settlement System, there were over 5.5 million PoS terminals at the end of 2024, more than double the 2023 figure. These terminals transacted N18 trillion ($11.2 billion), an all-time record.

“We have numerous stories of individuals and families that have benefited from the PoS business through the income made from charges on transactions,” says Femi Hanson, the head of marketing at PalmPay, a local fintech startup that claims to have 700,000 PoS agents in the country.

Hussein Olarewaju, whose HAQ Technology Management Services is one of the biggest players in the sector, reveals that most PoS operators are educated youth who have struck out in the formal employment sector. However, the business has enabled them to make money and create new jobs.

“Each agent point typically employs at least one to two staff, translating into hundreds of thousands of youth gaining reliable incomes in a country where youth unemployment stood at over 50% in 2023,” he stated.

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