CBN announces fresh requirements for PSPs, boosts market liquidity with N4.1trn bills

Isola Moses | ConsumerConnect

The Central Bank of Nigeria (CBN) has announced a new capital requirement and licence categorisation for payment service providers (PSPs) in the country.

Mr. Musa Jimoh, Director of Payment System Management Department at CBN, in a circular dated December 9, 2020, on the Bank’s Web site, put the fresh capital requirement for mobile money operations as well as switching and processing companies at N2 billion respectively.

ConsumerConnect reports the CBN disclosed the minimum capital requirement Payment Solution Services (PSS) was pegged at N250 million while that of super-agents is now N50 million.

Similarly, Payment Terminal Service Providers (PTSP) and Payment Solutions Service Providers (PSSP) are required to have N100 million minimum capital requirement respectively.

According to the apex bank, the move is in line with its commitment to promoting a strong and credible payment system.

The document explained: “The new licensing framework offers clarity for new and existing market participants given the significant evolution and innovation in the Nigerian payment system.”

Payment system licensing has been streamlined into four broad categories. The CBN listed these to include switching and processing; Mobile Money Operations (MMOs); PSS and Regulatory Sandbox respectively.

“Only MMOs are permitted to hold customer funds. Companies with licences within any of the other categories are not permitted to hold customers’ fund. Companies seeking to combine activities under switching and MMO categories are strongly permitted to operate under a holding company structure with the subsidiary entities delineated to prevent co-mingling.

“Payment system companies in the PSS category may hold any of PSSP, PTSP and super-agent licence or a combination of the licences thereof.

“All licensed payment service providers in any of the categories covered by this framework holding or seeking any other CBN issued licences are required to obtain a no-objection from the Payment System Management Department.”

According to the CBN, “the object clauses in the Memorandum and Articles of Association of Payment Service Providers shall be limited to the permissible activities under their licensing authorisations.

“Collaboration between licensed payment companies, banks and other financial institutions in respect of products and services are subject to CBN’s prior approval.”

The apex bank said: “All new licensing requests including those with approval-in-principle are to comply with the new requirements immediately.

“Existing licensed payment companies are to comply with the new licensing requirements where applicable not later than the end of June 2021.”

Meanwhile, sequel to its introduction of 90-day special bills, the Central Bank of Nigeria sold N4.1 trillion worth of the instrument in the country’s money market Thursday, December 10, 2020.

The instrument is expected to avail the monetary authority additional liquidity management tool, support the country’s economic recovery efforts and deepen the financial market.

The sale of the 90-day special bills into the money market came just as Mr. Godwin Emefiele, Governor of CBN, outlined the impact of the Anchor Borrowers’ Programme (ABP), set up to finance smallholder farmers in the country.

Emefiele disclosed that the programme has revolutionised agricultural credit financing and remained the fulcrum of transformation initiatives in the sector.

Features of the special bills, introduced by the CBN, include zero-coupon, applicable yield at issuance to be determined by the CBN; the instrument will be tradable among banks, retail and institutional investors.

Also, the CBN stated that the instrument shall not be accepted for repurchase agreement transactions with the CBN and shall not be discountable at the CBN window.

In addition, the instrument will qualify as liquid assets in the computation of liquidity ratio for deposit money banks (DMBs).

Mr. Wale Olusi, Head of Research at United Capital, while speaking on Arise Television programme, confirmed the development.

The expert said: “With this instrument, there is a new outlet for non-bank financial institutions who can go ahead and buy the bills from the banks.

“Technically, it is another form of Nigerian Treasury Bill or Open Market Operations (OMO).

“But regardless of what name they call it, as long as it is a zero-coupon instrument, it means that it is discounted at a particular rate, which is almost like treasury bills.”

According to Olusi, in terms of pricing, the special bills are not different from OMO or treasury.

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