Nigerian Fintechs Allowed e-Money Issuance But Remain Prohibited From Issuing Loans

The Central Bank of Nigeria (CBN) has updated guidelines for mobile money operators (MMOs) in the country in an attempt to boost financial inclusion, with a recent report indicating that 55% of Nigerians remain unbanked.

The bank has identified two categories of mobile money operators:

  • The Bank Led Model: These are deposit money banks offering MMO services alone or with other banks
  • The Non-Bank Led Models: These are non-banking organisations that have obtained a license from the CBN to carry on MMO services. These bring together fintechs such as Kuda and Paga, as well as Telco-led solutions like Airtel Money and MTN’s MoMo


SEE ALSOThe Central Bank of Nigeria Reportedly Plans to Launch the CBDC ‘GIANT’ Pilot by October 2021 on Hyper-Ledger Fabric Blockchain


CBN has moved to recognize more features of mobile money services. The bank now explicitly permits MMOs to create wallets, e-money issuance, and to recruit agents. Furthermore, MMOs are allowed to offer pool account management, to issue payment cards, and engage in payments processing.

MMOs are still prohibited from carrying on the following types of businesses:

  • Direct or indirect loans or guarantees
  • Insurance underwriting
  • Subsidiaries’ establishment
  • Foreign currency deposit services

. . . and other forex activities that save the facilitation of cross-border remittances to personal accounts subject to the applicable regulatory framework.

Savings Wallets

The new guidelines allow MMOs to offer savings wallets to be operated with settlement banks and the funds held in these wallets are insured with the Nigerian Deposit Insurance Corporation (NDIC) using a pass-through insurance arrangement. This is subject to specific requirements in relation to investment operations and interest distribution.

The savings wallets funds are subject to a maximum management rate of 10% but must also ensure that the principal sum is not affected by charges and fees. The wallets are also insulated from offsets by the settlement banks with whom the MMOs operate the accounts.

Note that customers can only use the funds in these wallets to invest in government treasury bills only.  

Consumer Protection and Sanctions

MMOs are now required to resolve customer complaints within 48 hours. In addition, they must ensure that customers understand the transactions being concluded, provide robust frameworks against loss of service, proper communication channels and offer adequate disclosures to customers.

Where, for instance, there is a new capitalisation requirement by the CBN and a settlement bank is unable to meet up, such could have its license withdrawn.

In such an event, the NDIC’s maximum deposit coverage level kicks in at N500,000 (Five Hundred Thousand Naira Only) for each subscriber.

Where an MMO has its license withdrawn or activities banned, the CBN ensures that the deposit liabilities of the subscribers are assumed by another MMO, or some other financial institution as defined under the Banking and Other Financial Institutions Act (“the BOFIA”).

The CBN also reserves the right to take sanctions against an MMO, its board of directors, officers or agents, withhold corporate approvals as well as suspend or revoke licenses.

Limits for Transactions

The balance limits for wallet holders have been increased from N50,000.00 (Fifty Thousand Naira Only) to N5,000,000.00 (Five Million Naira Only) for daily activities.

For cumulative balance, the N300,000.00 (Three Hundred Thousand Naira Only) cap has been removed and is now unlimited, depending on the Know-Your-Customer (KYC) tier.

Reporting and Compliance

The new guidelines stipulate that all risk mitigation techniques adopted by the MMOs must be within the scope of the relevant code of corporate governance, for example, the Code of Corporate Governance for Finance Companies 2018 (the Code).

While MMOs have not been listed as financial institutions as such in the Code, it appears that the CBN has expanded the definition in the Code to cover MMOs by virtue of the fact that MMOs are listed as “other financial institutions” in the BOFIA.

Furthermore, all MMOs are to file annual audited reports and mandatory continuity business plans to the CBN within the first three months of the following year or no later than 31 March of the following year


Read / Download the full report here.


RECOMMENDED READING: 47% of Deals Closed in the First Half of 2021 are in the Fintech Sector – Inside the 2021 Africa Investment Report


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