How CBN regulates Fintech’s digital playing field in Nigeria – The Sun Nigeria

On tThe 31st seminar for financial correspondents (FICAN) and business editors held in Enugu, the CBN Governor, Mr. Godwin Emefiele, talked about the new trends in Nigeria’s payment system and how CBN regulates the digital playing field for financial technology. The CBN Governor’s speech focused on the progress made by the CBN in advancing the boundaries of the payment system; the areas of rapid progress and plan for the future of the payment system in Nigeria, which he envisioned soon to be the hub of payments in Africa.

It was also at the conference that the CBN Governor announced the CBN’s plan to unveil the Central Bank Digital Currency (CBDC), the e-naira, making Nigeria one of the first countries in Africa, and indeed the globe, to adopt the digitalisation of its national currency. No one can tell a story better than the owner of the story. The purpose of this article is not to retell Emefiele’s speech, but to bring the problems that were raised back to the burner by using his own words with very small editorials. The title of this article may as well be cast as ‘How CBN Regulates Fintech’s Digital Playgrounds’, by Godwin Emefiele.

His words: “The payment system in any country plays a key role in its economy, and is the channel through which financial resources flow from one segment of the economy to another. This represents the main basis of the modern market economy.

“In line with our mandate, as enshrined in the Central Bank of Nigeria Act, 2007, the CBN regulates the payment system, while banks, the Nigeria Inter-Bank Settlement System (NIBSS), the Nigerian Exchange Group, payment service providers and exchange companies are the other major players in the system. CBN, supplemented by Nigeria Deposit Insurance Corporation (NDIC), provides the necessary oversight function to ensure the efficiency and effectiveness of the payment system.

“The year 2007 marked a turning point in the country’s payment system terrain with the launch of CBN’s payment system vision 2020 (PSV 2020), which identified a number of recommendations to increase the resilience of the payment system’s infrastructure and workflows to encourage the use of electronic payment methods. initiatives that will help simplify payments and deepen financial inclusion.

“Over the last 14 years, the Nigerian payment system has developed significantly with extensive technological developments supported by the deliberate enabling of regulation by the CBN. This has undoubtedly accelerated the development of new financial products, services and channels that have all placed Nigeria at the forefront of the economic innovation race.

“Due to shutdowns associated with the handling of the Corona Virus (COVID-19) pandemic, economic traffic to digital platforms increased significantly in 2020. The spread of the virus at that time actually accelerated the pace of digitalisation in many sectors of the economy. Expectedly, discussions have increased around the issue of the digital economy, just as more opportunities have emerged for financial institutions and other players in the payment ecosystem to innovate and provide more efficient alternatives for payments and settlements. The post-COVID economy is predicted to be dominated by certain trends, including a radically changing financial industry landscape as the accelerated shift towards digital financial services will attract more fintech investment and encourage competition from traditional financial institutions. This requires an increased and intensive regulatory investigation by regulators to proactively monitor developments and ensure continuous security and solvency of the financial ecosystem. It is therefore crucial that regulators must keep pace with this exponential development and utilize new knowledge and technology tools such as Regtech and Suptech to increase the efficiency and effectiveness of their mandate.

“Studies have already shown that only one percent of FinTechs have been critically affected by COVID-19 and two percent severely affected. In comparison, around 17 percent of other high-growth companies fall into these categories. It is therefore not surprising that many FinTechs have experienced an increase. as a country with one of the largest millennial populations in the world – (approximately 62% of the Nigerian population) under 25 years), rapid smartphone growth driven by increasing affordability, increasing mobile penetration and rapid transition to 5G technology, Nigeria remains ready to be an active playground for digital transformation and cannot afford to ignore the Fintech challenge.

The ‘COVID-19 pandemic’s is one of the greatest crises that has befallen humanity in recent history. The pandemic stretched health systems and affected economies, with most jurisdictions heading into recession. The crisis also disrupted social and business activities globally, affecting life and livelihoods. As expected, Nigeria, like most commodity-dependent countries, was not spared the damaging effects of the pandemic, given our dependence on crude oil exports as an important source of revenue and currency.

‘In addition, the pandemic tested the operational resilience and business continuity strategies of our banks. Operational risk increased due to increased dependence on technology and third-party service providers during the period. In addition, the risk of money laundering and cybercrime has increased. There is also an increased risk of unauthorized access to the banks’ networks and breaches of data security.

“It is noteworthy that the International Monetary Fund (IMF) estimated the global economic cost of the COVID-19 pandemic at $ 28 trillion in lost production. In an effort to address the consequences of the pandemic, governments around the world have taken extraordinary policy measures to mitigate financial stability risk, and we were no exception.

In response to the crisis, CBN introduced and implemented a number of measures aimed at reducing the risk of financial stability, increasing demand and economic growth, and mitigating the impact of the pandemic on certain sectors and commitments, such as oil and gas, manufacturing, agriculture, pharmaceutical and hospitality. .

«Key among the measures taken was the approval of regulatory tolerance towards banks to restructure their loans to severely affected sectors; providing liquidity support to banks; the provision of Covid19 Targeted Credit Facilities (TCF) paid to individuals and households through NIRSAL Microfinance Bank, several real-world CBN intervention funds, and the mobilization of the private sector to contribute to the national response under the CACOVID initiative.

“These measures have yielded the desired results, as we begin to see the first sketches of an encouraging improvement given the recent data released by the National Bureau of Statistics with GDP growth set at 5% for the second quarter of 2021.”

“Despite the headwinds associated with the pandemic, however, the banking industry has been relatively resilient. This is confirmed by our financial indicators with the industry’s capital adequacy ratio (CAR) and liquidity ratio (LR) of 15.2% and 41.7%, respectively, at the end of July 2021.

“Our robust payment system continues to evolve to meet the needs of households and businesses in Nigeria. The high level of confidence in our payment system, between 2015 and 2020, has attracted investments of around $ 500 million in companies run by Nigerian founders.

“Despite these gains, about 36 percent of adult Nigerians still do not have access to financial services. Improving access to finance for individuals and businesses through digital channels can help improve financial inclusion, lower transaction costs and increase the flow of credit to businesses. The Central Bank of Nigeria decided to introduce a digital central bank currency, eNaira, which would help achieve our goal of promoting greater inclusion through the use of digital channels, supporting cross-border payments for businesses and firms, and providing a reliable money transfer channel. . inland. “With the deployment of eNaira, Nigerians in remote areas can carry out economic activities using their digital as well as features on telephone devices. In collaboration with our stakeholders in the financial industry, I believe that more Nigerians will be included financially. ‘