CBN’s new payments framework: Is Nigeria introducing functional separation into the payments ecosystem? Part 2

The first part of this article (published on 2 July, 2026) examines the conceptual underpinnings of the Central Bank of Nigeria’s (“CBN”) new payments framework, focusing on its potential introduction of a form of functional separation within the payments ecosystem. It explores the rationale behind the circular’s restrictions on cross-participation between consumer issuing and merchant acquiring activities, highlighting the CBN’s growing emphasis on market structure and concentration across the value chain. The discussion also addresses key interpretative challenges, including how “consumer issuing” and “merchant acquiring” should be defined in functional terms, and raises the critical issue of market definition, noting that the absence of clear guidance in this area could significantly influence how market share thresholds are understood and applied in practice.

Having examined the conceptual and interpretative issues, the discussion now turns to the operational challenges that may arise in applying the framework in practice, including the measurement of market share, the treatment of related entities, and the realities of ongoing compliance within a dynamic payments ecosystem.

The Market Share Methodology Challenge
Even if the relevant market can be identified, a second challenge arises.

How exactly will market share be measured?

Several methodologies are conceivable. Market share could be based on transaction value, transaction volume, number of active customers, number of active merchants, number of payment instruments issued, or some combination of these metrics.

The choice of methodology may significantly affect the outcome. An institution may process relatively few transactions but account for a large share of transaction value. Another may have millions of customers but comparatively modest transaction volumes. Each metric tells a different story about market presence and competitive significance.

Accordingly, the methodology ultimately adopted by the CBN may prove as important as the thresholds themselves.

The absence of detailed guidance is particularly noteworthy given the implementation timeline. Institutions are expected to achieve compliance by 31 December 2026, leaving a relatively short period for participants to assess their position, develop internal monitoring frameworks and, where necessary, implement structural or operational changes. If further guidance is contemplated, there may be value in issuing it as soon as practicable to provide participants with sufficient time to evaluate the implications of the framework.

Related Entities: A Potentially Significant Expansion of the Framework

An aspect of the circular that may warrant closer attention is its application to related entities.

At first glance, the market share restrictions appear to apply to individual licensed institutions. However, the circular’s reference to related entities suggests that the CBN may be concerned not only with the activities of a particular regulated entity, but also with concentration that exists across a broader corporate group.

This raises a number of important questions.

For example, if one member of a group undertakes consumer-facing payment activities while another undertakes merchant-facing activities, will market shares be assessed separately or on a consolidated basis? Similarly, how will the framework apply to holding company structures, joint ventures, minority investments or businesses operating through multiple regulated subsidiaries?

These questions are particularly relevant in a sector where corporate groups often operate across several segments of the payments value chain. In some cases, different functions may be housed in separate entities for regulatory, commercial or operational reasons, even though they ultimately form part of the same economic enterprise.

The treatment of related entities may therefore prove critical to the effectiveness of the framework. A narrow interpretation could permit market participants to achieve indirectly what the circular seeks to prevent directly. Conversely, an expansive interpretation could capture a broad range of corporate relationships and require groups to assess market share at a consolidated level.

The issue also has implications for investment and transaction activity. Investors, acquirers and strategic partners may increasingly need to consider whether interests held across multiple payment businesses could be aggregated for purposes of the market share thresholds. This may become particularly relevant in private equity structures, platform investments and group reorganisations involving regulated payment businesses.

Further guidance from the CBN on the treatment of related entities would therefore assist market participants in evaluating both current compliance obligations and future strategic transactions.

The Practical Reality of a Rolling Twelve-Month Measurement Period

The circular applies the thresholds by reference to a rolling twelve-month period.

From a regulatory perspective, this approach has obvious attractions. It reduces the risk of distortions associated with fixed reporting periods and allows concentration levels to be assessed on a more continuous basis.

The practical implementation of such an approach, however, may present challenges.

Market share is inherently dynamic. A successful product launch, major merchant acquisition, strategic partnership or seasonal increase in transaction volumes could materially alter an institution’s position within a relatively short period. Institutions may therefore find themselves moving above or below relevant thresholds over time, even where there has been no deliberate change in strategy.

The challenge is not unique to Nigeria. Even in jurisdictions with mature competition and financial regulatory frameworks, market shares are typically assessed using periodic industry data rather than continuously updated market-wide measurements. While a rolling twelve-month methodology may reduce distortions associated with annual reporting periods, its effectiveness will depend on the availability of reliable and sufficiently current market-wide data.

This raises a practical question. To what extent will regulated entities have visibility into the market-wide information required to assess compliance on an ongoing basis? Participants will generally have access to their own data. Determining relative market position is considerably more difficult.

The circular’s introduction of monthly reporting obligations suggests that the CBN intends to collect and monitor such information directly. However, the extent to which market-wide information will be made available to participants remains unclear.

Implications for Transactions and Investment Activity
The circular may also influence transaction planning within the sector.

Historically, acquisitions, strategic investments and partnerships have often been driven by the desire to expand capabilities across different segments of the payments value chain.

The new framework introduces an additional consideration: whether a proposed transaction could contribute to market share accumulation across both consumer-facing and merchant-facing activities.

As a result, market structure considerations may become increasingly relevant in investment decisions, acquisition strategies, group structuring exercises and merger control assessments involving payment businesses.

Looking Ahead
The circular represents an important evolution in the regulation of Nigeria’s payments ecosystem.

It signals an increasing regulatory focus on the structure of the payments ecosystem and the distribution of market power within it. The framework suggests a willingness by the CBN to intervene directly where it considers concentration across different layers of the payments value chain to present regulatory concerns.

Whether the framework ultimately achieves its objectives will depend largely on how the CBN addresses several foundational issues, including the scope of consumer issuing and merchant acquiring activities, the methodology for calculating market share, the treatment of related entities and the availability of reliable market-wide data.

Until further guidance emerges, the industry’s focus is likely to shift from the thresholds themselves to the more fundamental question of how those thresholds will operate in practice.

 

Tiwalola Osazuwa and Peretimi Akinmodun are Partner and Senior Associate, respectively, in AELEX’s Technology, Media, and Telecommunications (TMT) Practice. Tiwalola Osazuwa leads the TMT Practice.

 

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