OpenBanking in Nigeria Set for Release by Central Bank, Scheduled for August 2025
Nigeria Embraces Open Banking, Revolutionizing Lending and Financial Services
Nigeria is set to transform its financial services sector with the implementation of open banking, a groundbreaking initiative that will enable secure, customer-consented sharing of financial data via standardized APIs. This move is expected to bring significant benefits and implications to lending and other financial sectors, fostering innovation, competition, and inclusion.
The key benefits and implications of open banking include:
- Improved Access to Credit and Faster Lending Decisions: By allowing lenders to access richer, real-time financial data, open banking broadens credit assessment capabilities. This leads to faster and more accurate credit scoring and loan approvals, particularly benefiting underserved and unbanked populations.
- Increased Financial Inclusion: Open banking extends credit and financial services to individuals and small businesses previously excluded due to lack of formal credit history or documentation.
- More Competitive Lending Market: Standardized APIs break down data silos held by incumbent banks, fostering competition among banks and fintech lenders. This can lead to more diverse lending products and better pricing for consumers.
- Innovation in Lending Products and Services: Fintechs can leverage shared data to develop personalized, data-driven lending solutions tailored to customers' real financial behavior, increasing relevancy and borrower satisfaction.
- Enhanced Customer Control and Data Privacy: Customers explicitly consent to data sharing under strict regulatory frameworks and security protocols, ensuring transparency and trust in how their data is used for lending and other financial services.
- Operational Transformation in Financial Services: Banks and fintechs will need to adapt to the new interoperability standards and regulatory compliance requirements, modernizing infrastructure and risk management practices that could improve overall sector stability and efficiency.
Nigeria's proactive and phased regulatory approach, led by the Central Bank of Nigeria since 2021, sets a strong foundation for these benefits while prioritizing data security, governance, and customer consent. The experience of other countries like Brazil and the UK suggests that if implemented well, open banking can accelerate credit access and promote a more inclusive financial ecosystem.
Starting August 2025, Nigeria will become the first African country to implement open banking. Banks and fintechs are expected to integrate with the open banking API before the rollout. A central registry will verify participants in open banking, and a consent system linked to Bank Verification Numbers (BVNs) will ensure customers control who sees their data.
The potential outcome of open banking in Nigeria is the launch of a reliable credit scoring system. Fintechs, which historically offered credit using limited data, can now access more accurate customer data to build proper credit profiles. This shift in how financial data is accessed and shared could transform financial services, especially lending, for Nigeria's 120 million account holders.
The Central Bank of Nigeria (CBN) has established independent oversight committees composed of financial sector professionals to oversee the implementation of open banking. These committees were established to ensure the smooth and secure rollout of open banking in Nigeria, independent of direct CBN control. The banking sector's resistance to centralising open banking under the Nigerian Interbank Settlement System (NIBSS) was addressed by the CBN through the establishment of these independent oversight committees.
In summary, Nigeria's open banking initiative promises to revolutionize lending by enabling data-driven credit decisions, improving access for underserved borrowers, stimulating competition, and fostering innovative financial products within a secure and regulated framework. Consumers can anticipate more tailored financial products and increased access to credit in the coming years as a result of open banking.
- The adoption of open banking in Nigeria may lead to a surge in fintech innovations, as technology companies can now leverage data from multiple sources to create personalized lending solutions that cater to the unique financial behaviors of customers.
- The integration of data and cloud computing technologies will play a crucial role in the success of Nigeria's open banking initiative, as they will enable the secure, real-time sharing of financial data across various banking and finance sectors.
- The banking-and-insurance industry in Nigeria stands to benefit significantly from the finance sector's transition to open banking, as it will foster increased competition, spur innovation, and drive overall efficiency within the sector, with potential implications for both traditional banking institutions and fintech startups.
