Introduction
Permissible and non-permissible activities
Introduction of savings wallets
Resolution of failed MMOs and settlement banks
Transaction balance limits
Removal of two-step authentication for account activation
Additional reporting and compliance obligations
Comment
On 9 July 2021 the Central Bank of Nigeria (CBN) issued a new regulatory framework on mobile money services in Nigeria (the 2021 guidelines), replacing the guidelines on mobile money services that were issued in 2015 (the 2015 guidelines).
The 2021 guidelines retain the existing models (bank and non-bank-led) that may be implemented by mobile money operators (MMOs) with respect to mobile money services and largely replicate the 2015 guidelines. However, they introduce a number of new features, which are outlined in this article.
Permissible and non-permissible activities
In addition to the permissible activities listed in the 2015 guidelines, MMOs may also engage in:
- wallet creation and management;
- e-money issuance;
- agent recruitment and management;
- pool account management;
- non-bank acquiring services (ie, the settlement of transactions on behalf of specified merchants); and
- card acquitting services.
MMOs are still precluded from:
- granting direct or indirect loans and guarantees;
- insurance underwriting;
- establishing subsidiaries;
- accepting foreign currency deposits; and
- otherwise dealing in the foreign exchange market, save for facilitating cross-border remittances to personal accounts in accordance with the relevant CBN guidelines.
Introduction of savings wallets
MMOs may now provide savings wallet services to their customers for the sole purpose of investment in government treasury bills. At present, these savings wallets cannot be used for any other purpose. It is anticipated that as attraction to savings wallets increases, other types of securities may be permitted. These wallets must be operated with settlement banks and the funds held therein will be insured with the Nigerian Deposit Insurance Corporation under a pass-through insurance arrangement (subject to specific requirements in relation to investment operations and interest distribution).
With a maximum management interest rate of 10% chargeable on the savings wallet funds investment, MMOs must ensure that account holders do not suffer any reduction on the principal sums held in wallets as a result of fees and charges. Deposit money banks serving as settlement banks are also prohibited from offsetting any other transactions of the MMO against the savings wallet accounts.
Resolution of failed MMOs and settlement banks
If a settlement bank fails (ie, it has its licence withdrawn), the Nigeria Deposit Insurance Corporation will give effect to the maximum deposit insurance coverage level (ie, N500,000) per subscriber (ie, for each party that subscribes to mobile money services). Similar to the concept of bridge banks under the Nigerian Deposit Insurance Corporation Act, where an MMO has its licence withdrawn, the CBN will ensure that the deposit liabilities of subscribers are assumed by another MMO or financial institution.
The 2021 guidelines have introduced transaction balance limits for each of the mobile money wallets. These limits range from:
- N50,000 to N5,000,000 for daily activities; and
- N300,000 to an unlimited amount, depending on the know-your-customer tier, for cumulative balances.
Removal of two-step authentication for account activation
While the requirement to ensure that all accounts are linked to a mobile phone number has been retained in the 2021 guidelines, there is no obligation to ensure that the linked mobile number is used for two-step authentication for the activation of accounts. It would appear that a one-time password will suffice to set up a mobile money account.
Additional reporting and compliance obligations
The 2021 guidelines stipulate that all risk mitigation techniques adopted by MMOs must be in line with the existing code of corporate governance. The guidelines are silent on the specific code to be adopted.
MMOs are not specifically listed in the Code of Corporate Governance for Finance Companies 2018 (which specifically applies to microfinance, development and primary mortgage banks as well as mortgage refinance companies, finance companies and bureau de change operators). However, is thought that it may be the intention of the CBN for these provisions to be applicable to MMOs due to MMOs having recently been classified as "other financial institutions" under the Banks and Other Financial Institutions Act 2020.
In addition, audited annual returns must be submitted to the CBN within the first three months of the subsequent year (following year end) or no later than 31 March of the subsequent year. The auditor's report on the mandatory business continuity plan (expected to be conducted in the preceding year) must be submitted to the CBN no later than 31 March of the following year.
The new introductions are laudable developments by the CBN aiming to strengthen financial inclusion in the sector. Noting the limits on the purpose of the savings wallet account, it is expected that the apex regulator will continue to expand the scope of permissible activities in line with current realities and the needs of the unbanked in Nigeria.
For further information on this topic please contact Temitope Sowunmi or Mimi Nkposong at Aluko & Oyebode by telephone (+234 1 462 8360 71) or email ([email protected] or [email protected]). The Aluko & Oyebode website can be accessed at www.aluko-oyebode.com.