The relationship and interoperability between Nigerian banks and fintechs in Nigeria is about to deepen as Nigeria adopts Open Banking operations. This makes Nigeria the first African country to adopt Open Banking.
Open Banking is a system that allows third parties, e.g fintechs and mobile money operators, access to financial data through the use of Application Programming Interfaces (APIs) in order to leverage the data to create solutions that boost financial inclusion and innovation.
The move for Open Banking regulations in Nigeria began in 2017.
Industry experts led by Adedeji Olowe formed an open banking working group which would later morph and become known as OPEN BANKING NIGERIA.
IN 2021, The CBN released a regulatory framework for open banking. This led to the creation of a draft of the Open Banking Regulation in 2022 which was approved earlier this week and announced in a circular dated 7th of March 2023, signed by the Director, Payment Services Management Department, Mr. Musa Jimoh.
In the circular, the CBN said it is in furtherance of its mandate to ensure stability in the nation’s financial system that the document was approved, and (it) is aimed at enhancing efficiency, competition and access to financial services in Nigeria.
According to TechCabal, Olowe said that there are still some steps that need to be taken before the regulations take effect.
On its part, the CBN will need to build a registry while financial institutions need to leverage on the regulations to build new financial solutions. The apex bank in the circular mentioned that the regulation will allow for credit scoring and rating. Merchants will benefit from the solutions provided by financial institutions to better manage the flow of money.
The regulation will also mean availability of tailor made opportunities for credit and investments for customers.
Open Banking is based on the foundational pillar of Data privacy, so the regulations will be supported by the Nigerian Data Protection Regulation (N.D.P.R). The apex bank also enjoined all stakeholders to ensure strict compliance with the guidelines and other regulations.