CBN ends offshore payment processing as banks, fintechs face 2027 data localisation deadline

The Central Bank of Nigeria (CBN) has effectively drawn the curtain on the era of offshore payment processing, directing banks, fintech companies and other payment service providers to store all payment transaction data generated within Nigeria on local servers from January 1, 2027.

The directive, contained in a circular issued by the apex bank’s Payments System Supervision Department, marks one of the most significant regulatory interventions in Nigeria’s digital finance ecosystem in recent years and is expected to reshape how financial institutions manage payment infrastructure, cloud services and data operations.

The circular, signed by Rakiya Yusuf, the director of the payments system supervision department, was addressed to deposit money banks, microfinance banks, mobile money operators, switching companies, payment terminal service providers, payment solution service providers, super agents and other licensed payment operators.

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Under the new rule, all institutions facilitating payments within Nigeria must ensure that payment transaction data generated in the country are stored and managed locally in accordance with Nigerian data protection laws and regulations.

The CBN said the move became necessary following the rapid expansion of electronic payments and digital financial services, which have transformed Nigeria into one of Africa’s largest digital payment markets.

According to the regulator, the growth of the sector has improved innovation, efficiency and financial inclusion but has also raised concerns about market concentration, operational dependence, ownership transparency and the storage of critical financial data outside the country’s jurisdiction.

“All Financial Institutions and participants facilitating payments within Nigeria shall ensure that payments transaction data generated within Nigeria are stored and managed in Nigeria,” the circular stated.

The directive is expected to have far-reaching implications for banks, fintech firms and payment processors that rely on foreign cloud infrastructure or offshore data centres for parts of their operations.

The policy aligns Nigeria with a growing global trend in which regulators seek greater control over critical financial data, citing concerns about cybersecurity, national security, regulatory oversight and operational resilience.

The new requirement is also likely to create fresh demand for local data centre infrastructure and cloud services as financial institutions prepare for compliance before the January 2027 deadline.

Nigeria has witnessed significant investment in data centre capacity over the past few years, with operators expanding facilities to support growing demand from banks, telecom operators, fintech companies and government agencies. The CBN’s latest directive could further accelerate these investments as institutions seek compliant local alternatives for data storage and processing.

Beyond data localisation, the apex bank introduced a series of measures aimed at strengthening oversight of the payments industry.

The regulator directed banks, fintech firms and payment operators to maintain accurate and up-to-date records of their ultimate beneficial owners and make such information available to the CBN whenever requested.

The disclosure requirement forms part of broader efforts to improve transparency and strengthen anti-money laundering, counter-terrorism financing and counter-proliferation financing controls within the financial system.

The central bank also unveiled new competition rules designed to curb excessive market dominance in the fast-growing payments sector.

Under the framework, any institution controlling more than 25 per cent of the card-issuing market over a rolling 12-month period will not be permitted to hold more than 15 per cent of the merchant-acquiring market during the same period.

Likewise, operators controlling more than 25 per cent of the merchant-acquiring segment will be restricted to a maximum of 15 per cent market share in card issuing activities.

The measures are intended to prevent excessive concentration of power within the payments ecosystem and promote a more competitive market structure.

To strengthen oversight, the CBN directed all regulated entities to submit monthly market share reports using prescribed templates and timelines.

Affected institutions are expected to comply fully with the market structure requirements by December 31, 2026.

The regulator said the reforms are aimed at improving transparency, reducing concentration risks and safeguarding the integrity of Nigeria’s payment ecosystem.

The combined effect of the new rules could trigger strategic adjustments across the industry, particularly among large payment operators with dominant market positions and firms that depend heavily on foreign infrastructure.

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The directive comes at a time when Nigeria’s digital payments industry is experiencing record growth, driven by increasing smartphone adoption, expanding financial inclusion, rising fintech activity and the growing use of electronic channels for everyday transactions.

As transaction volumes continue to surge, the CBN appears determined to ensure that the infrastructure supporting the country’s digital economy remains within its regulatory reach.

With less than two years before implementation, banks, fintech firms and payment service providers now face a race against time to localise critical payment data, review ownership structures and align their operations with what could become a defining regulatory shift in Nigeria’s digital finance landscape.