Nigeria prioritizes compliance for $24 billion in remittances

From humble beginnings, Nigeria’s fintech ecosystem has steadily matured. Its growth has been impressive. Forbes said that in 2019 the country ranked among Africa’s top 3 fintech markets. However financial growth was accompanied by challenges. The regulatory framework was less than equipped to deal with money laundering and other evils. Here is a look at how this is changing fast.

Crackdown

The Central Bank of Nigeria (CBN) is the country’s top financial regulator. In December 2020 the CBN temporarily revoked the licenses of some payments service providers. These operators had violated some of the regulatory terms and conditions. This is just one piece of a much bigger picture.

Nigeria’s payment services regulatory framework

Since its inception in 1958 the CBN has been the primary regulator in Nigeria’s economy. The significant growth of fintech ecosystems in recent years warranted some regulatory catching-up. The CBN instituted guidelines meant to sanitize the industry towards the attainment of macroeconomic objectives.

In 2007 the CBN introduced the Payments Systems Vision (PSV) 2020. The main objective of PSV is to make the systems “internationally recognized and nationally utilized”. In 2013 the CBN rolled out an updated version of the PSV, with similar objectives. The CBN claims that the implementation of PSV has partly contributed to the remarkable growth of e-payments platforms in the country. There has been a marked departure from over-reliance on cash-based transactions.

Since 2007 the CBN has frequently updated regulations. Its aim has been to align the payment services industry and the fintech ecosystem with the government’s macroeconomic objectives. Some of these guidelines are notable. These are the mobile money regulatory framework (2009), guidelines on international money transfer services in Nigeria (2014), and guidelines on international mobile money remittance service in Nigeria (2015).

There is another regulator in the form of the Nigerian Communications Commission. It is responsible for regulating the development of critical infrastructure for mobile money transactions.

The bigger picture

Among other objectives, Nigeria’s PSV 2020 seeks to further expand electronic payments and promote a cashless economy. This vision can only be realized with the adoption of global financial best practices. The CBN licensed Ria Money Transfer and other international money transfer operators (IMTOs) to bolster Nigeria’s evolving payments services ecosystem. This is important because overseas Nigerian workers send money online as remittances back to their country to the tune of $24 billion annually. Nigeria’s foreign exchange earnings from oil and gas are even larger. Facilitating cross-border payments is vital in a country plagued by perennial forex shortfalls.

CBN’s continuous efforts aim to create a level playing field for all stakeholders. The Nigerian government wants to provide a predictable regulatory environment. That would instill much-needed confidence among international fintech players and foreign investors.

Impact on remittances

A PwC study indicates that remittances from the US to Nigeria amounted to $6.19 billion in 2017. The 8 operators whose licenses were revoked by the CBN are not IMTOs. CBN’s action against them will not adversely affect remittance inflows. Other players in the market are well-equipped to provide the same services. These include POS terminal deployment, clearing and settlements, Pension Transitional Arrangement Directorate (PTAD), card processing, switching, and the like.

Long term strategy

The CBN seeks the support and partnership of the financial community to implement PSV 2020. The objectives of the vision are aggressive but achievable. It will help Nigeria gain international recognition while ensuring relevant financial services for the national economy. E-payments technologies will be better utilized nationwide. Nigeria’s leadership position in Africa as a fintech market is evidence of the success of PSV. The objectives articulated by the CBN more than a decade ago are paying off.

The CBN continues to develop measures to facilitate remittances. The aim is to make transfers faster and easier. Not long ago the apex bank modified and updated its remittance guidelines. The CBN wants to help the entire financial services sector develop. This is to bring more stability, depth, liquidity, and transparency to the country’s forex market. With a sparkling history of regulatory compliance in over 140 international markets, Ria continues to be a preferred channel for Nigerians in the US and elsewhere to send much-needed remittances to millions of their loved ones.

About the Author

Hemant G is a contributing writer at Sparkwebs LLC, a Digital and Content Marketing Agency. When he’s not writing, he loves to travel, scuba dive, and watch documentaries.