Market News

The Central Bank of Nigeria (CBN) has introduced new measures aimed at curbing market concentration in the country’s payments ecosystem, including limits on the market share operators can hold across card issuing and merchant acquiring services.

Card issuing refers to the provision of payment cards to customers, while merchant acquiring involves processing card payments on behalf of businesses.

In a circular signed by Rakiya Yusuf, director of the payments system supervision department, on Monday, the apex bank said the measures are aimed at addressing concerns over market concentration, operational dependence, systemic importance and the localisation of payment transaction data.

The CBN said rapid growth in electronic payments and digital financial services has increased the market presence of some operators, raising concerns about competition and resilience in the sector.

“Accordingly, the CBN hereby issues this Circular to improve transparency through beneficial ownership disclosure, address concentration risk, promote a fair, competitive, and resilient payments ecosystem,” CBN said.

“The Circular further aims to safeguard the integrity of the Nigerian payments system and ensure the localisation of payments transaction data within Nigeria.”

Under the new framework, the regulator said any financial institution controlling more than 25 percent of the card issuing market would be restricted in its participation in merchant acquiring services

“Any licensed financial institution engaged in card issuing activities, whether individually or part of a group of related entities, that holds more than twenty-five percent (25%) market share in card issuing within any rolling twelve-month period shall not hold more than fifteen percent (15%) market share in merchant acquiring activities during the same period,” the regulator said.

“Any licensed Financial Institution engaged in merchant acquiring activities, whether individually or as part of group of related entities, that holds more than twenty-five percent (25%) market share in merchants acquiring activities within any rolling twelve-month period shall not hold more than fifteen percent (15%) market share in card issuing activities during the same period.”

This is one of many changes the regulator has been implementing in the financial industry, as the CBN released an exposure draft of the revised guidelines for the licensing and regulation of financial holding companies (FHCs/HoldCos) in Nigeria on June 10.

In the draft, the CBN proposed the HoldCos of banks hold shares in subsidiaries instead of the lender’s and also capped the stake at 51 percent.