Nigeria’s central bank has declared that it will grant more licenses for payment service banks but set a minimum capital base of $13 million- a development that could deter telecoms firms and some other potential new entrants to the digital financial services sector.
The central bank in a circular declared that telecom firms, banking agents, retail chains and postal services could apply for licenses to become payment banks. To aid this process, they must set up a separate company for it with a minimum capital of 5 billion naira ($13 million) and run it as an independent entity from their existing operations.
So far, the bank has granted three licenses to 9PSB, a unit of local telecom firm, 9mobile and two others.
As the country looks to open up its digital financial services sector, which will help millions of Nigerians who do not have bank accounts, regulation has been caught up with intense lobbying from lenders who seek to protect their turf in the wake of intense competition and weakening asset quality.
More than half of Nigeria’s population of 180 million do not have a bank account.
The success of mobile money in East Africa has convinced investors and the industry that financial services are the next growth area for the telecoms sector, where prices for basic services are falling.
But the licensing requirement in Nigeria risks putting off telecom companies. When the central bank issued preliminary guidelines for payment banks in 2018 for discussion, telecom companies argued that they are not banks and do not need a capital base.
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