It is over seven months now since the Central Bank of Nigeria (CBN) released an exposure draft in October 2018 in which it proposed Payment Service Banks (PSB) aimed at deepening financial inclusion in a Nigeria, a country that has one of the highest exclusion rate in Africa.
At least 30 business names have since applied for registration as payment service banks with the expected functions to: maintain savings accounts and accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme; carry out payments and remittance (including cross-border personal remittance) services through various channels within Nigeria; issue debit and pre-paid cards; and operate electronic purse.
In less than five months, the PSB licensing period will be one year and the regulator of the financial institution is yet to give an official statement on the current state of the registration process.
A call to the technical department of CBN’s Financial Inclusion Secretarial and the licensing unit confirmed to BusinessDay that as at Monday, no PSB license has been issued to any of the applicants.
“The head of licensing department is on leave but to the best of my knowledge no company has been given the PSB license,” the official from the central bank said on the condition of anonymity.
The apex bank has a target to ensure that 80 percent of the country’s adult population are financially included into the financial cycle by the year 2020.
Nigeria currently has 36.8 percent of its adult population excluded from the financial cycle, this translates to a population of 36.6 million adult Nigerians who at the moment are not included in the financial net.
This leaves the apex bank with an exclusion gap of 16.8 percent, estimated to be bridged in less than two years for it to meet its 20 percent exclusion target.
Checks by BusinessDay revealed that the Telco-led model in driving financial inclusion in African countries reported tremendous progress owing to the already existing large customer base of the Telcos.
Kenya has about 60 percent mobile money service penetration, while Ghana has about 40 percent service penetration, and Nigeria with a lot more higher population, remains at 1 percent owing to its bank-led model.
Ghana’s decision to have a Telco-led model resulted in a 73 percent increase in registered mobile money customers in just one year, according to World bank data, and has helped lift financial inclusion rates in Ghana to 58 percent in 2017 from 41 percent in 2014.
This was not different for Ivory Coast who has experienced a mobile money revolution. As a result, there are now more adults with mobile money accounts of 24.3 percent than with bank accounts of 15 percent.
Nigeria has a bank-led financial inclusion model, industry sources say is one of the reasons for the lag in the country’s inclusion rate.
The proposed PSB by the apex bank was therefore a welcome development considering it will avail other businesses, especially the Telcos, the opportunity to partake in providing payment services.
The international Monetary Fund (IMF) applauded the CBN in April for its plans to plan to give Telcos and other businesses mobile money operators’ licenses.
“The roll-out of Payment Service Banks guidelines that allows licensing of telco subsidiaries is welcome and should be implemented,” IMF said.
The Washington-based organisation said in its recently published Article IV Consultation that the CBN should leverage the potential for mobile payments to include a wider range of the population into the financial sector.
IMF also mentioned that reforms to increase the use of mobile payments system could substitute for a potentially more difficult build-up in traditional financial infrastructure and therefore help accelerate the provision of financial access to a wider part of the population.
This is important because according to IMF “closing gaps in financial development and inclusion in Nigeria could yield additional real per capita GDP growth of more than 0.8 percentage points per year.”
The Gross Domestic Product (GDP) figures by the state-funded NBS, for the year 2018 suggest that Nigeria had a negative real economic growth considering the annual growth rate at 1.9 percent is less that the population growth rate of about 3 percent.
This means there was no growth on per capital income basis, and the country’s annual GDP growth rate has remained below its annual population growth rate for more than 3 years, NBS data analysed by BusinessDay show.
IMF therefore cited the range of further reforms that could help leverage the potential of the mobile payment system in Nigeria to include a wider range of the population into the financial sector.
Some of the reforms as suggested by IMF include the need for routine cash payments to be digitised, particularly from and to the government.
Enforcing consumer protection, such as by safeguarding client funds, mistaken and unauthorised payments, by requiring fee disclosure, and ensuring data protection and privacy, will be also important, the Fund said in its Article IV report.
The international organisation also suggested that that Nigeria’s apex bank should consider reviewing, revisiting, and enforcing tiered know-your-customer (KYC) regulations.
Endurance Okafor
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