CBN Issues Regulatory Framework for Open Banking in Nigeria

The Central Bank of Nigeria (CBN) in line with its mandate to promote financial system stability, has issued the Regulatory Framework for Open Banking in Nigeria.

The is contained in a circular dated February 17 and addressed to all deposit money banks (DMBs) and payment service providers(PSPs) in the country.

According to the Central Bank, “the Open Banking framework establishes principles for data sharing across the banking and payments ecosystem, which will promote innovation, broaden the range of financial products and services, and deepen financial inclusion”.

Open banking is also known as “open bank data.” Open banking is a banking practice that provides third-party financial service providers open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions through the use of application programming interfaces (APIs). Open banking will allow the networking of accounts and data across institutions for use by consumers, financial institutions, and third-party service providers. Open banking is becoming a major source of innovation that is poised to reshape the banking industry.

The regulatory framework from the CBN stipulates, amongst others, data and Application Programming Interface (API) access requirements, principles for API, data, technical design and information security specifications .

The Central Bank further stated that “having observed the growing integration of banks and other financial institutions with innovators in the financial services space and the increasing adoption of Application Programming Interface (API) based integrations in the industry, it has become expedient for the Bank to provide the appropriate framework to regulate the practice”.

“The opportunities presented by Open Banking for enhancing financial inclusion, improving competition in the financial services space and promoting efficient services are compelling cases for the implementation of Open Banking in Nigeria. The Bank is committed to adopting the beneficial international standard practice in the Nigerian Banking Industry with due cognisance given to risk management and applicability in the Nigerian environment”.

“Therefore, the Bank hereby issues the Regulatory Framework for Open Banking in Nigeria to foster the sharing and leveraging of customer-permissioned data by banks with third-party firms to build solutions and services that provide efficiency, greater financial transparency and options for account holders and to enhance access to financial services in Nigeria”

The framework for open banking in Nigeria is specifically for banking and other related financial services as follows:

• Payments and remittance services
• Collection and Disbursement services
• Deposit-taking
• Credit
• Personal finance advisory and management
• Treasury Management
• Credit ratings/scoring
• Mortgage
• Leasing/Hire purchase
• Other services as may be determined by the Bank

The framework classifies Participants in open banking into 4 categories and each may assume the following roles:

• Provider: A provider is a participant that uses API to avail data or service to another participant;
• Consumer: A consumer is a participant that uses API released by the providers to access data or service;
• Fintechs: Companies that provide innovative financial solutions, products and services;
• Developer Community: individuals and entities that develop APIs for participants based on requirements.

It is envisaged that the open banking framework will provide efficiency, greater financial transparency and options for account holders and to enhance access to financial services in Nigeria.