Nigeria issues guidelines for open banking

The Central Bank of Nigeria has recently announced operational guidelines for open banking in the country in response to the ongoing new Naira notes cash crunch. These guidelines aim to establish principles for data sharing across banking and payment systems, a move that has sparked conversations about the potential pros and cons of this initiative. To delve deeper into this topic, Carlos Figueredo, the CEO of Open Vector, joined CNBC Africa for an insightful discussion. Figueredo expressed his excitement about Nigeria embracing open banking, highlighting the significant benefits it could bring to financial and social inclusion in the country. He emphasized that open banking creates opportunities for collaboration between fintech companies and traditional banks, enabling the development of innovative products and services that cater to the needs of both banked and unbanked consumers. One key aspect of open banking is data sharing, which may raise concerns among customers regarding data security and privacy. Figueredo reassured that the guidelines incorporate robust security measures and consent mechanisms to protect consumers, fintechs, and banks. By leveraging best practices and international standards, Nigeria aims to build a secure and transparent open banking ecosystem. The implementation of the open banking regulations is expected to catalyze innovation in the financial sector. While fintechs are poised to drive market advancements, traditional financial institutions may initially show reluctance due to the paradigm shift required. However, Figueredo noted that Nigerian fintechs and banks have shown a willingness to collaborate, indicating a positive outlook for the adoption of open banking in the country. A significant advantage of open banking is the ability to create customized financial products such as loans and credit scoring systems. Figueredo emphasized the need for tailoring these solutions to the Nigerian market's unique requirements. By addressing the needs of both banked and unbanked individuals, open banking in Nigeria has the potential to significantly expand financial inclusion and reach underserved populations. Furthermore, Nigeria can draw valuable lessons from other economies that have implemented open banking successfully. Figueredo pointed to examples in Latin America, such as Mexico, Colombia, and Brazil, where open finance initiatives have been effective. By learning from past experiences and embracing best practices, Nigeria can accelerate its progress towards open finance and enhance cross-border data exchange in the future. In conclusion, Figueredo's insights shed light on the transformative impact of open banking in Nigeria and the opportunities it presents for driving financial inclusion and fostering innovation in the financial sector. As the country navigates the implementation of these guidelines, collaboration between stakeholders, consumer protection, and customization of financial services will be vital aspects to ensure the success of open banking in Nigeria.