The Central Bank of Nigeria (CBN) recently released the exposure draft of the operational guidelines of Open Banking in Nigeria which clearly stipulates the roles, responsibilities and expectations for each participant in the open banking system. The draft focuses on ensuring that open banking in Nigeria starts on a foundation of solid operational efficiency.
The guideline released now forms the final part of the triumvirate of regulation for a successful implementation of open banking within any jurisdiction. In 2021, the CBN released the Regulatory Framework for Open Banking in Nigeria; while the Nigeria Data Protection Regulation (NDPR) was released by the National Information Technology Development Agency (NITDA) in 2019.
Starting in March 2018, Open Banking Nigeria (OBN) was launched as a non-profit organization by local and international stakeholders to drive the advocacy for open application programming interface (APIs) within the Nigeria ecosystem and to draft the initial open banking standards.
Key components of the operational guidelines
The exposure draft contains details of the expectations regarding the classification, management, monitoring, ethics and communication necessary for acceptable standards of interoperability. Some of the key components to guide data sharing contained in the exposure draft are:
API standards
The operational guidelines prescribe a standard for the identification and categorization of APIs, as well as a clear outline of the voluntary and involuntary API implementations for participants.
Open Banking Registry
The CBN will provide regulatory oversight on the operations through an Open Banking Registry (OBR). The OBR will be a public repository containing the details of registered participants which will be identified by their CAC business registration number.
Customer experience standards
At the firm center of these guidelines are consent management and dispute resolution. All consent must be explicit before any action is authorized. Participants are also to ensure that customers are always equipped with the right tools and clear information to make decisions.
Data protection and privacy
All data collected can only be used for the purposes provided in the Regulatory Framework for Open Banking in Nigeria; in consistency with the Nigeria Data Protection Regulation.
Risk management
Participants are to properly identify these risks within their systems and properly manage them as stipulated in the operational guidelines. This is vital to protect all participants and the financial system’s integrity.
Next steps for Open Banking in Nigeria
Following this release, it’s only natural to ask “what next?”
Open Banking Nigeria, being one of the industry-led committees that wrote the draft guidelines, is able to provide some perspective about possible next steps.
However, this information does not represent an official roadmap from the CBN but is based on the understanding of how regulations generally work and how the open banking roadmap has played out in other countries.
Review of industry feedback on the exposure draft
We expect the CBN will take feedback from the industry committees on the exposure draft, while a conclusion may happen by July 2022. Depending on the CBN’s internal schedule, a final conclusion on the exposure draft by the CBN can range between a few weeks and a year. This gives participants a chance to react to the release and highlight possible gaps and areas for improvements in the guidelines.
Open Banking Nigeria releases draft of extended API standards
Open Banking Nigeria will follow with a release of its draft of extended API standards that were not included within the CBN guidelines by August 31, 2022. Upon release of this draft, OBN would expect feedback from the industry on features improvements, opinions to be included or omissions to be made going forward.
CBN releases the final guidelines and standards
Subsequently, the CBN will be expected to issue the final guidelines, which historically, may not be too far from what has been released as the exposure draft. All API providers and consumers in the financial sector will be bound by these final guidelines and must ensure utmost compliance in their operations.
Open Banking Nigeria releases a final version of extended API standards
Subsequent to the release of the final guidelines by the CBN, Open Banking Nigeria will finalize the extended API standards, taking in the changes made by the CBN on the exposure draft.
CBN releases the implementation plan and timeline for open banking in Nigeria
Finally, the CBN will provide the industry with an implementation timeline for banks and fintechs. This could range from six months to nine months, depending on how much extension is given for the implementation timeline. During this period, all banks and fintechs are expected to implement the standard. The operational readiness checklist is included in Appendix V of the CBN guidelines.
Given how these steps are expected to unfold, Open Banking Nigeria will be providing industry support, training, and other guidance required to promote the adoption and seamless implementation of the open banking standards for participants.
Require additional insights? You can contact the Open Banking Nigeria team at [email protected].
