CBN Issues Regulatory Guidelines For Payments Service Holding Companies

The Central Bank of Nigeria (CBN) issued guidelines on Tuesday for the licensing and regulation of Payments Service Holding Companies (PSHCs) in Nigeria.

The Publisher Nigeria learnt it was disclosed in a circular signed by Mr Musa Jimoh, Director of the CBN’s Payments System Management Department.

Jimoh directed that deposit money banks, payment service providers, and other financial institutions take note of the new licensing categorization for the Nigerian payments system.

“It requires companies desirous of offering switching and processing services, and mobile money services to set up a PSHC structure such that activities of the subsidiaries are clearly delineated.

The CBN hereby issues the guidelines to facilitate the understanding of regulatory requirements for operations of Payments Service Holding Companies PSHC in Nigeria, to facilitate the understanding of regulatory requirements.

All stakeholders are required to ensure strict compliance with Guidelines and all other regulations,“ he stated.

Key Takeaways

The affected regulated payment activities are Mobile Money Operations, switching and processing, payment Solution Services and any other activity as may be approved by the CBN.

For any PSHC structure to emerge, there shall be at the minimum, two subsidiaries, which include a Mobile Money Operator (MMO) and a Switching company.

The promoters of the PSHC shall be required to submit a formal application for the grant of a licence. The application shall be addressed to the Director, Payments System Management Department. The Licensing process shall be in two phases: Approval-in-Principle and Final Licence.

A non-refundable application fee of N1,000,000.00 (one million naira only) or such other amount that the CBN may specify from time to time; payable to the Central Bank of Nigeria, through electronic transfer.

A PSHC shall ensure that it has adequate free funds to support any acquisition of non-current assets (property, plant and equipment, IT infrastructure/ platforms, etc.).

A PSHC’s total exposure on contingent liabilities on behalf of its subsidiaries shall not exceed 20% of the payments service holding company’s shareholders’ funds unimpaired by losses.

In all cases, the consideration for the acquisition of subsidiaries shall be on a cash basis only or any other arrangement proposed by the PSHC and approved by the CBN.

What you need to know

In an earlier circular issued by the apex bank, the CBN had announced new licence categorizations for the Nigerian payments system requiring companies wishing to offer switching and processing services to set up a Payments Service Holding Company (PSHC) to clearly delineate the activities of subsidiaries.