Why CBN is yet to grant MTN, Airtel, others PSB licence

More than two years after the Central Bank of Nigeria (CBN) gave an official node to telecom companies to apply for mobile banking licences to assist in deepening access to financial services, the country’s largest operators, MTN and Airtel are yet to receive the permit.

The telco players applied for the licence after the CBN invited them in October 2020. The permit would allow them to provide most banking functions except lending and taking foreign currency deposits

Inability to meet the payment service bank (PSB) licencing requirement set by the CBN is the reason why MTN Nigeria, Airtel and others are yet to have the permit, the CBN has said.

According to Olubukola Akinwunmi, head, payments system policy at the CBN, the industry regulator does not give preference to any particular player rather it follows due process and gives the licence to whoever meet the requirements.

“When you talk about some particular Telcos, we don’t think around this, we simply accept applications and we go through our normal process and as long as the applicants can meet the requirements they get the licence,” Akinwunmi said, adding that the licence approval is, however, “determined by the management of the bank.”

What requirements would 9mobile and Glo have met that a bigger telco company like MTN and Airtel cannot meet? an industry analyst who spoke off record to Businessday said, questioning the real reason why the apex bank is yet to grant the country’s biggest telecoms companies the mobile money licence.

An email inquiring about the current stage of the licensing process to both MTN Nigeria and Airtel were yet to be answered.

Yele Okeremi, CEO of Precise Financial System, a Lagos-based Fintech company recently told Bloomberg that the central bank has been “lethargic” when it comes to allowing telcos to become “very important players” in the payment system.

Hope PSB, a subsidiary of Unified Payment, Globacom’s Money Master and 9Mobile’s 9PSB are the companies that were granted the PSB licence in 2020.

“So we expect that once the applicants have met the requirements that have been issued by the bank to them they will also be treated along the line of the three that have been issued licences,” Akinwunmi said while responding to a question by Businessday at a virtual event by EY titled- Nigeria Fintech Census 2020 Launch.

Targeted at Nigeria’s over 40 million unbanked population who are mostly in the rural communities, the payment service bank by the apex bank would enable telcos and other non-financial institution to offer financial services that would help to deepen the country’s financial inclusion drive.

Before now, only banks and licensed financial institutions were allowed to provide financial services (bank-led financial inclusion model). Although telecom operators and other Fintech companies indicated interests to operate in the market, the CBN policy would not allow them.

The regulator eventually shifted because of the increasing rate of financially excluded people in Africa’s largest economy and the lack of progress in getting banks to provide financial services to people living in areas that lack access.

Financial inclusion means that people have access to basic financial services like a savings account, credit and insurance. A higher exclusion rate in Nigeria could lead to a poorer population as lack of access to credit and insurance puts them at an economic disadvantage.

The apex bank had a target to ensure that 80 percent of the country’s adult population are financially included in the financial cycle by 2020. But data by the Nigeria InterBank Settlement System Plc (NIBSS) shows that Nigeria has 47.66m registered BVN, an 11 digit number that is required to open a bank account, meaning that the country may have not met the CBN target as about half of Nigeria’s adult population are still without bank accounts.

“It is unlikely that we will have met the target of 80% of Nigerian adults being financially included,” Ashley Immanuel, CEO, EFINA said.

The CBN had in a circular on July 2018, lamented that Nigeria was not meeting any of the financial inclusion targets agreed and contained in the 2012 Financial Inclusion Strategy. It shifted the adult financial inclusion target in 2019 to 94 percent to be achieved by 2024.

Not only was the country not meeting its targets, but it was also declining in growth. For instance, while Nigeria achieved a 60.3 percent financial inclusion rate in 2012, it declined to 58.4 percent in 2016 against a target of 69.5 percent, translating to financial exclusion of about 41.6 percent.

The 2018 and most recent data by EFINA put Nigeria’s financial inclusion rate at 63.2percent, meaning that as much 36.8 percent or 36.6 million of Nigerian adults, as of two years ago lacked access.

EFINA believes the impact of COVID-19 may have exacerbated existing inequalities, and thus widened the financial exclusion rate.

Nigerians who were already in underserved groups, such as youth, Northern Nigerians and those living in rural areas, are likely to have been harder hit by the economic effects of the pandemic, and progress in expanding financial inclusion for those groups will likely have stagnated or regressed.

Even though the population of Africa’s largest economy is 2.6 percent of the total world population, the World Bank Global Findex Report 2017 estimates that 3.4 percent of Nigerians are among the global 1.7 billion adults who are unbanked and financially excluded.

“From a regulatory perspective, one basic requirement for mobile money to succeed is to create an open and level playing field that includes non-bank mobile money providers such as Mobile Network Operators (MNOS),” London-based Group Special Mobile Association (GSMA) said.

Telco led financial inclusion model has played a significant role in the level of progress reported in some African countries as the telecommunication companies in some of Nigeria’s peers leveraged their already established infrastructure to deepen access to finance.

Kenya has about 60 percent mobile money service penetration, while Ghana has about 40 percent service penetration, and Nigeria with a lot more population remains at 1 percent owing to its bank-led model.

Ghana’s decision to have a Telco-led financial inclusion model resulted in a 73 percent increase in registered mobile money customers in just one year, according to World Bank data, an initiative that lifted the financial inclusion rate in the West African country to 58 percent in 2017 from 41 percent in 2014.

Eight in ten adults in Kenya have access to formal financial services as the financial inclusion rate in the East Africa country jumped to 83 percent in 2020, thanks to its Telecoms operator, Safaricom. It pioneered its M-pesa service 12 years ago to cater for Kenyans without access to the formal banking network.

With a customer base of almost 200 million and a combined presence in the 774 local government areas in Nigeria, the Telco industry in Africa’s most populous country which has the largest subscription for any sector in the country shows it has the facility to take financial services to the hard to reach areas in the country.

In its quest to achieve the 20 percent financial exclusion target by the year 2020, Nigeria’s apex bank on 5th of October 2018, released an exposure draft guideline in which it proposed PSB, a payment service initiative that can allow Banking agents, Mobile Money Operators (MMOS), Retail chains (Supermarkets), Telecommunications companies to have a license to operate under the structures and guideline specified by the bank.

Among others, the CBN requires that companies- including mobile operators to meet the financial obligation of N5.35 billion to qualify for a PSB licence.

“Min i mum cap ita l N5,000,000,000.00, Non- refundable application Fee N500,000.00, Non- Refundable Licensing Fee N2,000,000.00 and change of name fee N1,000,000.00,” the apex bank said in its August circular,” the apex bank stated in the guidelines for licencing and regulation of PSB in Nigeria.