Nigeria is Africa’s open banking pioneer

In 2021, Nigeria’s banking sector witnessed the advent of Open Banking, aligning with a global shift towards sharing transaction data. This move holds promise for innovation and financial inclusion, particularly in credit access and streamlining KYC processes.

One of the predictions for Nigeria’s banking sector in 2021 was that Open Banking would finally make some headway. It was an important prediction when you consider that for years, quite a lot of global industry players have said that open banking is the future. 

Open banking is the idea that established banks should share the transaction data of customers with other financial service providers (FSPs), challenger banks and other third-parties recipients. For such a simple idea, its implications for banking are huge. 

One way to look at it is that some of Nigeria’s biggest banks have been around for years and have millions of customers. Despite their market dominance, they have often been criticised for not providing retail banking or innovative products. 

Most of that innovation has been left to the newer fintech players who have unbundled traditional banking services. PiggyVest and Cowrywise help you save money, Eversend helps you with cross-border transactions and over 30 digital lenders provide unsecured loans. Challenger banks like Sparkle, Kuda and Rubies also tout new ways of banking. 

While these startups have made significant progress, they still get smashed by banks. For instance, last year, Fairmoney, a digital lender in Nigeria, disbursed a total loan value of $93 million, a 128% increase compared to 2019. While that figure makes it one of the biggest digital lenders in Nigeria, when compared to traditional banks, it falls all the way to seventh place. 

Central Bank’s regulation on Open banking

One of the most important issues with the regulation of open banking is data and how the data of customers will be handled. According to the CBN, the open exchange of data and services through APIs will be divided into four categories. 

Each category contains a specific set of information with a particular risk level. For instance, Market Insight Transactions (moderate risk level), include statistical data aggregated on the basis of products, services and segments used by customers. But it will not be associated with any individual customer or account.

Access to these categories of information will be open to four participants as well; on one end are participants that do not need to have a regulatory licence. Participants like this will not be able to access information that is high risk.

The participants in CBN’s regulatory sandbox will have access to some low and high-risk data like Personal Information and Financial data (PIF). Only players with regulatory licences will have access to the most sensitive information like personal information and financial transactions or data. 

The participants that will access this kind of information are mostly deposit money banks. It is a sign that the CBN is aware of what the attendant risks are as it also goes on to state the requirements for every participant level. 

APIs and Common Standard 

One of the key issues in open banking is also the creation of a common standard for APIs and most of the work in this area has been led by private organizations like Open Banking Nigeria (OBN), which I founded with other stakeholders in June 2017

I founded OBN to drive the advocacy for open APIs, define an open set of APIs needed for a common API standard, as well as provide a sandbox and other testing tools for certification.

In 2018, we published our first set of API standards, and today it has members like Paystack, Interswitch, Flutterwave, Teamapt, Wallet Africa, among others. While this initiative is great, regulation is necessary for a space like this, and CBN’s regulations are a step in the right direction. 

What’s likely to happen next? The ball has been set in motion and the guidelines say that a common standard as well as an open banking registry will be created in the next 12 months.

Using Open banking to drive financial inclusion

By sharing customer data, fintechs can create products and services that work for financially underserved and excluded individuals. One of the areas where there’s a lot of promise is access to credit, which I’m extremely passionate about.

Although digital lenders are getting even more popular in Nigeria, only a handful of people have real access to credit. One limitation digital lenders face is access to data points that help them score credit risk for individuals. 

Many lenders use workarounds like giving small amounts to customers and gradually increasing the loan amounts. This strategy discourages people who want to afford bigger loan sums, and customer transaction data can solve this problem. 

There’s also the issue of how the need for extensive documentation excludes low-income customers from banking access. If open banking is expanded to telecoms for instance that registers customers for SIM cards, they can share these registration details with fintechs and eliminate the need for more KYC forms. 

When KYC is sorted, it will help the millions of gig workers in Nigeria. In Lagos for instance, it isn’t uncommon to meet carpenters and mechanics without bank accounts. Open banking can help workers like this access more personalised services and eliminate the obstacles to accessing financial services. 

It will get a mind-boggling level of integration to make this happen and this is where Application Programming Interfaces (API) come in. 

What have APIs Got To Do With It? 

One of the easiest ways to understand APIs according to one writer is that “it helps let companies leverage years of other companies’ work in seconds.” APIs let programs talk to each other and most times, we see them used extensively for internal purposes. 

Internal APIs are used to do complex things within a company while public APIs open up datasets so that other people can build on top of them. Consider the amount of integration that will be required for all of Nigeria’s banks to share information and you’ll start to see why APIs are the easiest way to make it happen.

Using Open APIs To Drive Financial Inclusion via Credit Scoring Built on Telecoms Data

Financial exclusion remains a significant hurdle in developing economies, where access to credit facilities is key. Discover our proposed model for a more inclusive financial future.

Financial exclusion remains a significant challenge in developing economies. It has been shown that access to credit facilities is a strong predictor of financial inclusion. Credit reporting and scoring remain effective tools for both traditional and alternative lenders, however, access to credible credit data and scoring mechanisms is one of the biggest roadblocks that alternative lenders in developing economies face. While some lenders have developed systems that leverage social media analytics and data harvested from smartphones in order to create a scoring system, the poor and vulnerable are still excluded from such scoring systems. There have been significant advances in the use of telecoms data for credit scoring, making it a promising alternative to credit bureau data. However, readily available data is still an issue. With the increase in the development and use of open APIs, telecoms data could be made readily available for credit scoring, while addressing privacy and other issues. This paper is a conceptual paper that proposes a model for the use of Open APIs from telco data for credit scoring that will ultimately increase access to credit, and ultimately financial inclusion in Africa.

Read and download the full paper here.

Interesting bits on Nigerian governors

If you take a look at the current lineup of governors (those staying and new ones) you would say that education in Nigeria is about to be rescued from doldrums. That’s only if you look at the lineup. Whether education would be granted a lifeline is a waiting game. And by the way, patience is a dangerous virtue.

Some dude put up an interesting data about these folks on Nairaland of recent. 31 (86%) of the governors have university degree and it’s not that the rest skipped school; of the 3 (8%) who had HND from polytechnics, 2 topped it with additional Masters. 2 (6%) are ex-military top guns and someone did a railway course. Only one governor doesn’t have a record but I can bet he must have had some school. And believe me, these guys are exposed: 8 (22%) have studied abroad, and 2 (6%) have PhDs. Of course Kayode Fayemi is the most educated, he had PhD from King’s College London. He’s my man any day.

What most did after school is entirely another kettle of fish: 9 (25%) learned politics from careers in civil service (now that sounds scary), of the 7 (19%) lawyers, 5 (14%) setup their private legal practice (fine-tuning election tribunal skills I guess). And talk is cheap in the south and lawyers do talk a lot, of the 7 lawyers; only 2 (6%) are from the north.

The two 2 (6%) ex-medicos had private hospitals. What became of their patients when they vied into politics is a question I would love to get an answer to. Apart from Peter Obi of Anambra who was chairman of Fidelity Bank Plc. all the other 3 (8%) ex-bankers are northern governors (I guess my chance of becoming a governor one day is next to nothing).

But like some people will tell you, facts are sometimes not reality. All these interesting bits could mean absolutely nothing. Notwithstanding, you can crank out your own insights using the data below or visit the Nairaland forum to vent your frustration.

StateGovernorDegreeCareer heightParty
AbiaTheodore OrjiBA English (University of Ibadan)Career civil servantPDP
AdamawaMurtala NyarkoNavy Training (Britannia Royal Naval College)Vice Admiral (Nigerian Navy)PDP
Akwa IbomGodswill Akpabio LLB Law (University of Calabar)Director, Corporate Affairs/Legal Services (EMIS Telecoms)PDP
AnambraPeter ObiBA Philosophy (University of Nigeria)Chairman (Fidelity Bank)APGA
BauchiIsa YugudaBSc Economics (ABU), MBA (University of Jos), Chief Executives Programme (Lagos Business School)CEO (NAL Merchant Bank), CEO (Inland Bank)PDP
BayelsaTimipre SylvaBA English Studies/Linguistics (University of Port Harcourt)Career politicianPDP
BenueGabriel SuswamLLB Law (University of Lagos), LLM Law (University of Jos), MA Public Administration (University of Abuja)Owner (Private legal practice)PDP
BornoKashim ShettimaBSc Agric Economics (University of Maiduguri), MSc Agric Economics (University of Ibadan)GM (Zenith Bank)ANPP
Cross RiverLiyel ImokeBA International Relations and Economics (University of Maryland, College Park), LLB Law (University of Buckingham), LLM Law (American University, Washington, D. C)Private businessPDP
DeltaEmmanuel UduaghanMBBS Medicine, Diploma Anaesthesia (University of Benin)Owner (Private medical practice)PDP
EbonyiMartin ElechiBSc Economics (Lovanium University of Congo)Career politicianPDP
EdoAdams OshiomholeEconomics and Industrial relations (Ruskin College), Candidate (National Institute for Policy and Strategic Studies)President (NLC)ACN
EkitiDr Kayode FayemiBA History(University of Lagos), MA International Relations (Obafemi Awolowo University), PhD War Studies (King’s College, London)Director (Centre for Democracy & Development), Visiting Professor in African Studies (Northwestern University)ACN
EnuguSullivan ChimeLLB Law (University of Nigeria)Owner (Private legal practice)PDP
GombeIbrahim DankwamboBSc Accounting (Ahmadu Bello University), MSc Economics (University of Lagos), Chartered Accountancy (ICAN)Accountant General of the Federation (Nigeria), FCA (ICAN)PDP
ImoIkedi OhakimBSc Business Administration and MSc Management (University of Lagos) CEO (Alucon)PDP
JigawaSule LamidoCourse in Railway Engineering (Permanent Way Training School, Zaria)Career civil servantPDP
KadunaPatrick YakowaBSc Social Sciences (Ahmadu Bello University)Career civil servantPDP
KanoRabiu KwankwasoHND Civil Engineering (Kaduna Polytechnic), PgD Water Engineering (Middlesex University), MSc Water Engineering (Lagborough University)Career civil servantPDP
KastinaIbrahim ShemaLLB Law & MBA (Ahmadu Bello University)Owner (Private legal practice)PDP
KebbiUsman DakingariBA Geography (Ahmadu Bello University)Career civil servantPDP
KogiIbrahim IdrisLLB Law (University of Abuja)Private businessPDP
KwaraAbdulfattah AhmedBSc Chemistry (University of Ilorin)Senior Manager, Banking (GTB)PDP
LagosBabatunde FasholaLLB Law (University of Benin)Managing Partner (K.O. Tinubu & Company), SANCAN
NasarawaUmaru Al-MakuraBA Education (Ahmadu Bello University)Assistant Producer, News and Current Affairs (NTA Kaduna)CPC
NigerDr Mu’azu AliyuBA Education (Bayero University) PhD Public Policy and Strategic Studies (University of Pittsburgh)Career civil servantPDP
OgunIbikunle Amosun HND Accountancy (Ogun State Polytechnic), MA International Finance (University of Westminster), Chartered Accountancy (ICANOwner (Private accountancy practice), FCA (ICAN)ACN
OndoDr Olusegun MimikoBSc Health Sciences Degree, MB & CH.B Medicine (Obafemi Awolowo University)Owner (Private medical practice)Labor
OsunRauf AregbesolaHND Mechanical Engineering (Ibadan Polytechnic)Owner (Private engineering firm), Commissioner (Lagos State Ministry of Works and Infrastructure)ACN
OyoAbiola AjimobiBSc in Business Administration and Finance (State University of New York, Buffalo), MBA Operations Research and Marketing (Governor’s State University)CEO (National Oil and Chemical Marketing Company)ACN
PlateauJonah JangAir Force Training (Military Training Schools, Nigeria/Abroad), B.Div Divinity (Theological College of Northern Nigeria)Air Commodore (Nigerian Air Force)PDP
RiversRotimi AmaechiBA & MA English (University of Port-Harcourt)Career politicianPDP
SokotoAliyu WamakkoBSc Education (University of Pittsburgh)Career civil servantPDP
TarabaDanbaba SuntaiBPharm Pharmacy (Ahmadu Bello University)Career civil servantPDP
YobeIbrahim GaidamBSc Accountancy (Ahmadu Bello University)Career civil servantANPP
ZamfaraYari Abubakar Career politicianANPP

Disclaimer: Kindly take the validity of this data with a pinch of salt and don’t use it to decide on your political career. And don’t use it to tackle your governor either.