Knowledge

Author: Sadheshan Govender

Category: , ,

Date: 25 April 2019

The Central Bank of Nigeria’s New Policy Formulation on Customer Deposits Collection Currently Underway

 

Nigeria is currently formulating a new policy which will enable mobile network operators to transfer money, a measure targeted at softening the previous policy that protected the country’s commercial banks. The regulatory environment in Nigeria has generally been considered one of the least permissive in terms of mobile network operators participating in the financial services sector. The Central Bank of Nigeria (CBN) may have realised that a heavy reliance on financial institutions to extend their financial services to about 50 million adults out of total country population of about 200 million people would not achieve the best financially inclusive objectives.

This initiative comes at a time of renewed interest in the Nigerian market, following a period of relative stability in the FX rate, and peaceful conclusion of presidential elections earlier in the year.

Well established mobile network operators including South Africa’s MTN Group are considering applying for licences that will permit them, and even supermarket outlets, to collect deposits from the public and maintain savings accounts.

Mobile network operators were previously barred by the CBN from getting licences to allow them to collect deposits and open savings accounts and such activities could be done only through licenced financial institutions. With a large number of active network users of approx. 162 million between Nigeria’s four mobile network operators, this new policy will see Nigeria’s financial inclusion rate increased to 80% by 2020 according to the CBN’s target.

It should be noted that this new policy will not permit mobile network operators or wholesale outlets to carry out lending activities, pay interest or accept foreign-currency denominated deposits, but rather focus on collecting customer deposits and opening savings accounts, a measure which seeks to protect banks from full-blown competition. The CBN will also require that at least one quarter of access points be located in the rural areas where there is a large number of under-served population. However, this additional competition may stimulate banks to be more innovative to remain firm in the financial services sector. In addition, some banks are pushing ahead with their digital-banking roll-out, targeting unbanked areas nationwide by using agents.

This is seen as a first step towards bringing all players together with an objective of reaching out to all financially excluded populations nationwide boosting the country’s financial inclusion rate.

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