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In a new circular, the Central Bank of Nigeria (CBN) has introduced guidelines intended to improve the country’s payment infrastructure.
The directives are part of an ongoing effort by the CBN to ensure the smooth and secure functioning of Nigeria’s payments ecosystem, and come into effect on October 11, 2024.
They will apply to all payment service providers (PSPs), acquirers, payment terminal service aggregators (PTSAs), processors and payment terminal service providers (PTSPs) licensed in the country.
The central bank has long been focused on enhancing the country’s digital payment framework, and has made clear that non-compliance with the rules will result in significant penalties for payments players.
Facilitating payments
A key aspect of the new directives is the requirement for acquirers to route all transactions from PoS terminals through either CBN-licensed PTSA.
The CBN issued actionable guidance on contactless payments and transaction limits for them in July 2023, and this latest move builds on the licensing of PTSAs in Nigeria.
The Nigeria Interbank Settlement System Plc (NIBSS) was granted a PTSA licence as long ago as 2011, and was followed by Unified Payment Services Ltd, which received its PTSA licence in April 2024.
These two entities play a critical role in ensuring that Nigeria’s payment terminals are connected and functional, allowing transactions from PoS terminals to flow smoothly through the national payment infrastructure.
Whether the PoS terminals are physical or electronic, the transactions must pass through these aggregators, which should ensure that all payments within the system are properly monitored and processed via authorised and certified channels, increasing security and efficiency.
Key responsibilities
The CBN’s circular also outlines the responsibilities of PTSAs, which will be required to ensure that they send PoS transactions only to processors that are certified by the relevant payment scheme, nominated by the acquirer and licensed by the central bank.
The directives state that all licensed processors must be integrated with both PTSAs, in a provision that grants acquirers the flexibility to select which processor and PTSA to use based on their operational needs.
This gives acquirers greater autonomy while maintaining regulatory oversight.
PTSPs are instructed to configure their PoS devices and applications in line with the new rules, and will need to ensure their devices are able to route transactions through any PTSA that the acquirer selects, tightening the framework for transaction processing in the country.
The aim is to create a seamless and secure transaction process from the PoS terminal at merchant and agent locations to the final payment processor, resulting in all entities involved adhering to the standards that are being set by the regulator.
Reporting obligations
In addition to the operational adjustments required, the circular imposes significant reporting requirements on both PTSPs and PTSAs.
PTSPs will need to comply with new reporting obligations, and are expected to submit monthly reports to the central bank, detailing the number of merchants and agents they manage, as well as the PTSA services they used to route the corresponding transactions.
This level of detail will provide the CBN with a clearer view of how the payment system is functioning and where improvements may be necessary.
Similarly, PTSAs are required to submit reports monthly to the CBN, detailing all transactions processed through their platforms.
This information must be submitted to the CBN’s director of the payments system management department no later than seven days after the end of each month.
Another key aspect of the new guidelines is the obligation for PSPs to commence regularisation with PTSAs within 30 days of the circular’s issuance.
PSPs are required to notify the CBN in writing to confirm their compliance with these directives.
