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Introduction

Nigeria stands on the precipice of a transformative shift in its financial landscape with the rollout of open banking, scheduled for August 2025. At its core, open banking represents a paradigm shift toward customer-centric finance, enabling the secure sharing of customer-permitted financial data, such as account balances, transaction histories, and payment initiation capabilities, between banks and accredited third-party providers. This model operates on the principle of consent-driven data portability, empowering customers to leverage their financial information for personalised services while retaining control over its usage. 

The innovative approach is primarily enabled by Application Programming Interfaces (APIs), which act as secure conduits for data exchange. The Central Bank of Nigeria (CBN), acting under its mandate to ensure financial system stability and deepen inclusion, spearheads this initiative through the CBN Regulatory Framework for Open Banking released in 2021 and the Operational Guidelines for Open Banking in Nigeria, issued in March 2023. This article delves into the intricacies of this pivotal development, exploring its foundational concepts, the framework guiding its implementation, and the profound implications for financial institutions, fintech companies, and consumers across Nigeria. 

Benefits 

Open banking in Nigeria hinges on two pillars: secure data sharing and standardised interoperability. Under the CBN’s framework, customers grant explicit consent for their data, such as biodata, account details, and transaction histories, to be shared via APIs between API providers (usually banks) and API consumers such as fintechs, retailers, or service bureaus. 

The implementation of open banking is poised to deliver a multitude of benefits across the financial sector. Some of the benefits are outlined below.

1.    Enhanced Financial Inclusion

By facilitating the secure sharing of financial data based on customer’s consent, open banking allows for a more comprehensive understanding of an individual's financial behaviour. This deeper insight enables financial service providers, including new fintech entrants, to create and offer more tailored products and services to previously underserved populations. For instance, individuals or small businesses with limited credit history can have their transaction data analysed to establish creditworthiness, thereby gaining access to loans, savings products, or other financial tools that were previously out of reach. This broadens access to essential financial services, helping to bring more people into the formal financial system.

2.    Boosts Innovation and Competition 

With standardised APIs, fintech companies can seamlessly integrate with banks and other financial institutions, accessing customer-permitted data to build a new generation of financial applications. This ease of data exchange lowers the barrier of entry for innovators, fostering a more dynamic and competitive market. Start-ups can focus on developing specialised solutions, such as advanced budgeting tools, personalised investment advice, or more efficient payment systems, rather than grappling with complex data integration challenges. The increased competition from this will drive existing financial institutions to innovate as well, leading to a richer array of choices and better services for consumers.

3.    Greater Consumer Control over Data

At the heart of the open banking framework is the principle of consent. Consumers are empowered to decide exactly which financial data they wish to share, with whom, and for what specific purpose. This shifts the ownership and control of financial data from the institutions to the individual, promoting transparency and trust. Consumers gain the ability to leverage their own data to secure better deals, access more suitable financial products, and manage their money more effectively across different providers, all while maintaining strict oversight of their personal information.

4.    Improved Customer Experience

By enabling seamless data flow between various financial platforms, open banking facilitates more integrated and intuitive user journeys. For example, a customer can view all their accounts from different banks in a single app, apply for a loan with pre-filled information, or make payments directly from their chosen account through a third-party application. This eliminates cumbersome manual processes, reduces friction, and allows for more personalised and convenient financial management, ultimately leading to a more satisfying and efficient experience for the end-user.

Key Rollout Pillars

This significant development is built on several key pillars designed to ensure a secure, interoperable, and customer-centric financial landscape. They include:

1.    Mandatory Data Sharing Requirements

From August 2025, all banks operating in Nigeria will be required to share customer-permitted financial data via APIs. This mandate extends beyond mere data transfer; it specifically emphasises the standardisation of APIs for interoperability. This ensures that various financial institutions and licensed third-party providers can seamlessly connect and exchange data, fostering a truly integrated open banking environment where data flows efficiently and securely across the ecosystem, thereby enabling a broader range of innovative services.

2.    Improved Regulatory and Security Standards

The CBN places significant emphasis on robust data protection, privacy, and cybersecurity protocols, with the effect that client trust is built. Financial institutions and third-party providers will be obligated to adhere to high-level security measures to safeguard sensitive customer information from unauthorised access, misuse, or breaches. Furthermore, the framework mandates the implementation of comprehensive consent management mechanisms for customer data sharing. This means that customers must provide explicit, informed consent before their financial data can be accessed or shared, giving them full control and transparency over how their information is used. 

3.    Oversight and Governance

In terms of oversight and governance, the CBN will assume a central and active role in regulating the entire open banking ecosystem. Its responsibilities will include monitoring compliance with the established framework, issuing further directives as needed, and resolving disputes. Beyond direct regulation, the framework also anticipates the establishment of independent oversight committees to ensure transparency, fairness, and accountability within the open banking environment. This will provide an additional layer of governance and consumer protection as the system matures and expands.

4.    Scope of Services and Participants
 
Open banking will cover a wide array of financial products and services, ranging from basic account information and payment initiation to more sophisticated financial management tools, credit assessments, and investment services. The ecosystem will be inclusive, involving not only traditional financial institutions, such as commercial banks and microfinance banks, but also a diverse range of fintech companies and other duly licensed third-party providers. This broad participation is key to unleashing the full potential of open banking, fostering a collaborative and competitive environment that ultimately benefits the Nigerian economy and consumers through a richer, more accessible, and innovative financial services landscape.

Implications for Financial Institutions and Businesses

The rollout of open banking in Nigeria promises significant and multifaceted implications for both established financial institutions and fintech businesses, necessitating strategic adjustments and a keen focus on compliance across the board. These implications extend beyond mere technical and regulatory adjustments to encompass broader operational, strategic, and societal engagement. They are highlighted below.

•    Increased Operational Costs for Banks: A significant implication for traditional banks is the potential increase in costs due to mandatory API integration, IT infrastructure upgrades, and enhanced cybersecurity measures required for open banking compliance. 
•    Streamlined Data Access for Fintechs: Fintech companies will significantly benefit from easier and faster access to customer-permitted financial data via standardised APIs, fostering rapid innovation in new products and services. 
•    Increased Focus on Compliance and Risk Management: All participants must ensure strict adherence to data privacy laws and robust cybersecurity protocols, meticulously implementing CBN's framework and guidelines to prevent breaches and avoid penalties. 
•    Extensive Operational Adjustments: Both banks and fintechs will need to re-evaluate and adapt their business models, processes, and organisational structures to effectively leverage open banking opportunities and ensure seamless integration and service delivery. 
•    Requirement for Multi-Channel Accessibility: Businesses must ensure services are accessible across diverse gadgets, exploring solutions like USSD and agent-assisted models to serve citizens without advanced internet-enabled devices. 
•    Consideration for Data Affordability: Operators need to minimise data consumption for open banking applications and explore options like zero-rated access to address the cost of mobile data for low-income individuals. 
•    Priority on User-Friendly Design: There is an imperative to create intuitively designed applications with clear navigation, simple language, and robust error handling to ensure ease of use for all citizens. 
•    Development of Robust Customer Support: Financial institutions and fintechs must ensure accessible and comprehensive customer support and grievance redressal mechanisms across multiple channels, including in local languages, to assist users effectively.

Outlook and Recommendations

The impending rollout of open banking in Nigeria represents a transformative moment for the nation's financial sector. This strategic move by the CBN is not merely a regulatory update but a fundamental shift designed to create a more dynamic, efficient, and inclusive financial ecosystem. By enabling secure and consented data sharing, open banking is poised to unlock unprecedented opportunities for innovation, foster healthy competition among financial services providers, and significantly advance the goals of financial inclusion across the country. It promises a future where financial services are more personalised, accessible, and responsive to the evolving needs of consumers and businesses.

Given this prospective profound transformation, it is imperative for all participants in the financial sector to ensure strict adherence to the CBN's guidelines and security standards. Compliance is not just a regulatory obligation; it is foundational to building trust within the open banking framework and ensuring the integrity and security of financial data. Financial institutions and fintech companies must prioritise investments in robust cybersecurity measures, data protection protocols, and transparent consent management systems to safeguard sensitive customer information. 

Proactive engagement with these standards will be crucial for sustainable success and for contributing to a secure open banking environment.

Detail Commercial Solicitors is distinct as Nigeria’s first commercial solicitor firm to specialise exclusively in non-courtroom practice. Based in Lagos, Nigeria’s business capital, DETAIL is totally committed to its clients’ business objectives and reputed for dealing with the minutiae. Email: info@detailsolicitors.com.