Central Bank of Nigeria Mandates Disclosure of Beneficial Ownership in Digital Payments
The Central Bank of Nigeria (CBN) has mandated that all financial institutions involved in digital payments operations must disclose the ultimate beneficial ownership (UBO) of their significant shareholders, adhering to existing legal and regulatory standards. This directive seeks to enhance transparency, mitigate market concentration risks, and bolster the resilience of the country’s payments ecosystem.
In a circular issued to depository banks, payment service providers, fintech firms, and other financial institutions, the CBN expressed its concerns regarding the accelerated growth of electronic payment platforms. The rise in digital transactions has sparked issues surrounding market concentration, operational dependency, and transparency of ownership. The bank indicated that increasing reliance on digital financial services and the emergence of dominant players in key payment activities have raised alarms about the localization of essential payment data.
The CBN emphasized that all impacted financial institutions are required to maintain accurate and current UBO records, ready to provide this information to the CBN upon request. This initiative is aligned with a broader effort to fortify the financial infrastructure and protect consumers within the digital payments landscape.
Compliance with Data Localization Requirements
Moreover, the CBN has mandated that all financial institutions and payment participants operating in Nigeria ensure that domestic payment transaction data is stored and managed locally, in accordance with relevant data protection laws. Full compliance with these data localization requirements is set to take effect on January 1, 2027.
In its pursuit to foster competition and curb undue market dominance, the CBN has introduced new market structure regulations that govern card issuance and merchant acquisition activities. Under this framework, any licensed financial institution controlling more than 25 percent of the card issuance market over a rolling 12-month period will be restricted to a maximum of 15 percent market share in merchant acquisition during the same timeframe.
New Market Structure Regulations
Additionally, institutions that maintain a market share of 25% or more in merchant acquisition are similarly limited to a 15% share in card issuance activities. The CBN has also directed all regulated entities to submit monthly market share reports adhering to a specified template and reporting schedule.
Specifically, the CBN outlines that a financial institution engaged in card issuance, whether individually or as part of a group, that commands more than 25 percent of the market within a 12-month rolling frame will not be allowed to have more than 15 percent market share in merchant acquisition. The same restriction applies conversely for institutions engaged in merchant acquisition activities.
The CBN has mandated that affected financial institutions take all necessary actions to comply with these market structure requirements by December 31. The apex bank will monitor adherence to these regulations, cautioning that it may impose supervisory sanctions on institutions that fail to comply with the provisions outlined in the circular.
