Nigeria, Africa’s biggest economy, has become the first country in the continent to issue operational guidelines on open banking. The Central Bank of Nigeria (CBN) in a circular released earlier this week announced that it had developed the open banking regulation in partnership with industry stakeholders.

Open banking is a new practice that involves banks sharing financial information with third-party providers through application programming interfaces (APIs) to promote the development of innovative products targeted at meeting consumer needs. The concept is gaining significant traction across the world.

Nigeria’s CBN Outlines Open Banking Standards

The new guidelines on open banking were released via a circular signed by Musa Jimoh, the Director of the Payment System Management Department at the CBN. The circular was directed at deposit money banks, mobile money operators and payment service providers in the country. The guidelines state the principles for data sharing across Nigeria's banking and payment systems.

The document prescribes the minimum security standards that industry stakeholders should follow when accessing and storing customer data. In addition, it states the minimum privacy, operational, customer experience and risk management standards to be followed by banks and their third-party providers under the country’s open banking regime.

The Nigerian apex banking authority in the circular noted that the guidelines are targeted at “enhancing efficiency, competition and access to financial services in Nigeria.”

“The adoption of Open Banking in Nigeria will foster the sharing of customer-permissioned data between banks and third-party firms to enable the building of customer-focused products and services,” Jimoh explained in the circular.

The Road to Open Banking Regulations in Nigeria

Open banking regulations in Nigeria date back to 2017 when a group of industry stakeholders formed the Open Banking Nigeria group. However, the CBN first stated interest in an open banking system in 2018 when Jimoh noted that the banking authority was “looking at how to raise the standard for all banks and fintech to plug in.”

Three years later, the CBN released a regulatory framework for open banking in Nigeria. The framework was later developed into a draft of operational guidelines in May 2022.

Commenting on the new regulations, Open Banking Nigeria noted that the guidelines will be supported by the Nigeria Data Protection Regulation (NDPR) which was released in 2009. “Data privacy is a foundation pillar for open banking,” the group wrote in a blog post.