Downtown Africa
On July 9, 2021, the Central Bank of Nigeria (CBN) released new guidelines to regulate mobile money operators (MMOs) in the country. The new guidelines became necessary as a result of the technology-driven surge that has occurred in the country’s financial solutions industry since 2015. Under the new guidelines, MMOs are grouped into two major types: (1) Bank MMOs – deposit money banks offering MMO services alone or with other banks; and (2) Non-Bank MMOs – non-bank organizations that are licensed to offer MMO services.
The guidelines now permit MMOs to engage in additional activities including wallet creation, e-money issuance, agent recruitment and management, pool account management, non-bank acquiring services and card-acquiring services. However, MMOs are prohibited from certain services including 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.
MMOs are also permitted to offer savings wallets in collaboration with settlement banks. The funds held in these savings wallets must be insured with the Nigerian Deposit Insurance Corporation (NDIC) under a pass-through arrangement that are subject to specific requirements. The maximum management rate allowed for the funds in the savings wallets is 10%. However, the principal amount in the wallets must remain unaffected by charges and fees. Further, the savings wallets are protected from offsets that may be initiated by the settlement banks in which the MMOs have accounts. Moreover, savings wallets’ funds can be used by customers to invest only in government treasury bills.
Under the new guidelines, MMOs have 48 hours to resolve customer complaints. And apart from being required to provide protections against risks of loss of service, the MMOs are also required to provide good customer communications, adequate disclosures to customers as well as make sure that customers understand the transactions they are undertaking.
The guidelines also mandated new consequences for capitalization issues. In this regard, withdrawal of license could result if a settlement bank is unable to comply with the CBN’s new capitalization requirement. If a license is withdrawn, each subscriber will be entitled to N500,000 maximum deposit coverage from the Nigeria Deposit Insurance Corporation. And another MMO, or some other financial institution will be brought in to assume the deposit liabilities of the subscribers of an MMO whose license was withdrawn (or whose activities were banned). And apart from withholding of corporate approval and license suspension or revocation, the CBN may also sanction an MMO, the MMO’s board of directors, officers or agents.
With regard to balance limits, the guidelines now allow up to N5,000,000.00 (Five Million Naira) for daily activities. This reflects an increment from the previous amount of N50,000.00 (Fifty Thousand Naira). And depending on the Know-Your-Customer (KYC), the new guidelines do not mandate a cap for cumulative balance. The previous cap for cumulative balance was N300,000.00 (Three Hundred Thousand Naira).
Finally, MMOs are now required to adopt risk mitigation techniques that are within the scope of relevant code of corporate governance. One such code is the 2018 Code of Corporate Governance for Finance Companies. In other words, the new guidelines have effectively expanded the definition of financial institutions under the Code of Corporate Governance for Finance Companies to include MMOs. Moreover, MMOs must now file annual audited reports and mandatory continuity business plans with the CBN no later than 31 March of the following year.
This article was adapted by our contributor, Attorney Jay Menes, based on Ibrahim Moshood’s article distributed by APO Group. You can start earning money by becoming our Independent Reporter or Contributor. Contact us at IR@downtownafrica.com
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