All payment transaction data created in Nigeria must be kept on local servers by banks, fintechs, mobile money operators and other payment service providers, the Central Bank of Nigeria (CBN) has mandated.
It established Jan. 1, 2027 as the deadline for compliance. The mandate is part of a broader regulatory effort to increase control, transparency and to prevent concentration risks in the country’s rapidly growing digital payments ecosystem, The Nation writes.
The apex bank also yesterday inaugurated the Nigerian Overnight Financing Rate (NOFR) in Abuja, a fundamental reform of the financial sector aimed at increasing monetary policy transmission, deepening financial markets, promoting transparency in loan pricing and boosting investor confidence.
According to a circular yesterday by the Director, Payments System Supervision Department, Rakiya O. Yusuf, all financial institutions and operators of payment systems carrying out payment transactions in Nigeria must ensure that data of payment transactions generated in Nigeria are stored and processed in Nigeria.
The move is also in accordance with Nigerian data protection laws and regulations.
The change is expected to have major repercussions for banks, fintech firms, payment processors and other digital finance operators who now rely on foreign data infrastructure for elements of their operations.
All Financial Institutions and all other third parties involved in facilitating payments within Nigeria should ensure that all payments transaction data created in Nigeria shall be maintained and managed in Nigeria in compliance with data protection laws and regulations applicable in Nigeria. All Financial Institutions impacted shall completely comply with this obligation as of January 1, 2027.”
The CBN said the new measures were introduced following significant structural changes in Nigeria’s payments landscape, driven by rapid growth in electronic transactions, increased adoption of digital financial services and emergence of dominant operators across key payment segments.
The CBN said that while these innovations had led to enhanced financial inclusion and innovation, they had also raised issues concerning market concentration, operational dependence on external infrastructure, ownership transparency and location of essential payment data.
“The CBN has noticed remarkable structural changes in the Nigerian Payments ecosystem as demonstrated by the rapid growth in electronic payments, growing adoption of digital financial services, and the emergence of players with significant market presence across key payment activities,” the circular read.
The regulator also said localising payment data would secure the integrity of the financial system and ensure essential transaction records remain within Nigeria’s jurisdiction.
Deposit money banks, payment service providers and other financial institutions with digital payment operations have been directed by the regulator to disclose the Ultimate Beneficial Ownership (UBO) of significant shareholders in line with existing anti-money laundering and counter-terrorism financing regulations.
They are also required to keep accurate and up-to-date records of UBOs, and make them available to the apex bank on request.
The measure is intended to promote transparency in the financial system, and strengthen efforts to prevent illicit flows of money, money laundering and the use of complex ownership structures to disguise control of regulated firms.
The circular, the CBN stated, was intended to enhance openness via beneficial ownership declaration and to foster a more resilient payments environment.
The apex bank also took steps to prevent excessive concentration in critical parts of the payments business.
Under the new system, a financial institution that controls more than 25 per cent of the card issuing market in any rolling 12-month period would be prevented from controlling more than 15 per cent of the merchant acquiring market during that same period.
Speaking in Abuja during the inauguration of NOFR, Mr. Olayemi Cardoso, Governor, CBN, hailed the new benchmark as a foundational reform that would assist construct a more robust, efficient and credible financial sector that could support sustainable economic growth.
One of the main objectives of the project, says Cardoso, is to make the transmission of monetary policy choices more effective through the economy so that decisions taken by the central bank are better reflected in the cost of borrowing and in the circumstances of financial markets.
In practical terms, the NOFR is meant to fill the gap between the benchmark interest rate established by the Monetary Policy Committee (MPC) of the CBN and the real interest rates charged by banks for loans to businesses and households.
Under the current system, deficiencies in the transmission mechanism and the absence of a strong market benchmark mean changes in the Monetary Policy Rate (MPR) do not always transmit swiftly or fully to lending rates across the banking sector.
The introduction of NOFR is expected to lead to better links between monetary policy choices, money market conditions, banks’ funding costs and lending rates, so making monetary policy more effective.
“What we are trying to do here is to ensure that we have a more effective monetary policy transmission mechanism to support the delivery of the price stability mandate of the CBN. This is really, really important. “It is very important to emphasise this,” Cardoso stated.
An effective transmission mechanism is crucial to the CBN’s ability to control inflation and to preserve price stability, he said.
Without an adequate transmission channel, the governor said, measures of monetary policy may not realise their aims in the economy.
When the present CBN administration came on board, one of the greatest challeges to policies implementation was the inadequate transmission channels of monetary policy’, Cardoso said.
“I remember that when we first came into office, one of the issues that we were faced with at that time was the hosting of the MPC,” he added.
He said that holding Monetary Policy Committee meetings without addressing deep structural vulnerabilities in the financial system would not have yielded intended results.
At the core of today’s financial systems are benchmark interest rates said the governor because they are the true price of money at a certain point in time and they provide reference points for the pricing of financial instruments, for the management of liquidity and risk and for the transmission of monetary policy decisions.
“A benchmark can only become widely accepted if it is based on a transparent, trusted and well-governed framework that is immune to manipulation,” he said.
“Recent reforms have led financial markets around the world to shift from judgment-based rates to transaction-based benchmarks that reflect actual market activity,” Cardoso says.
He said the CBN established the NOFR in partnership with the Financial Markets Dealers Association (FMDA), with technical assistance from the European Bank for Reconstruction and Development (EBRD).
The governor said NOFR is a transaction-based overnight secured interbank financing rate that reflected the real cost of overnight funding in Nigeria’s money market.
“NOFR, he said, is based on actual market transactions rather than estimates or submissions and this will enhance the integrity and credibility of the market, reduce the risk of manipulation, improve price discovery and enhance transparency.
“This is a fundamental shift that brings Nigeria in line with global best practice in benchmark rate reform and reinforces confidence in our financial markets,” Cardoso added.
Such a framework could improve customer understanding of how borrowing prices are set, while allowing monetary policy decisions to flow through the financial system more smoothly.
“The longer-term outcome of getting better, more credible benchmarks is deeper financial markets,” the governor stated.
“All of that results in a deepening of our financial markets. Markets deepen when they are trusted and they are credible,” he said.
NOFR forms are part of a bigger reform strategy to provide a better framework for financial innovation in the future, Cardoso said.
He said that the financial markets are going digital, inter-connected and technology driven, hence requiring continuous modernisation of the market infrastructure in Nigeria.
“The institutions we build today are going to determine our ability to compete tomorrow,” he remarked.
He said NOFR was not just about meeting the present day market needs but also about preparing Nigeria for the future.
“There is nobody who wants to be left behind and certainly we in Nigeria are not going to be caught napping,” he said.
“The benchmark will assist treasury and liquidity management operations, improve pricing of financial contracts and securities, encourage the development of derivatives and structured products and strengthen risk management practices,” Cardoso added.
He also said that the NOFR is the basis for the future creation of term benchmark rates and more complex financial products needed for a deep and active financial market.
“The adoption and continued development of NOFR will lead to greater transparency in the pricing of loans in the banking system for businesses and bank customers,” the Governor added.
“The benchmark will also be a reference point for pricing wholesale and institutional deposits,” he said.
The successful implementation of the NOFR, he said, will enhance the confidence of domestic and international investors and help promote sustainable economic growth.
He noted that the future of the country’s financial markets will not only depend on reforms but also on the collaborative commitment of all stakeholders to make them a success.
“The opportunities ahead are great and the responsibilities are equally great. But if our journey thus far has proven anything, it is that revolutionary achievements are achievable when we work together with purpose and conviction,” he said.
“The progress we have made to date is the result of collaboration between regulators, financial institutions, market infrastructure providers, industry associations and other stakeholders,” the governor said.
Cardoso argued that sustained market development cannot happen through regulation alone but requires strong cooperation across the financial sector.
“The success of NOFR will depend not only on its design, but also on its wide acceptance and consistent use across the financial system,” he stated.
He called on all stakeholders to actively embrace and integrate NOFR into their operations.
The governor reminded market players that the apex bank is dedicated to providing the guidance, governance monitoring and stakeholder engagement required to guarantee a seamless transition and continued implementation of the new benchmark.
Also at the ceremony, the Deputy Governor, Economic Policy, Mr Philip Ikeazor, lauded the opening of NOFR as a key milestone in the evolution of Nigeria’s financial markets.
“The introduction of a credible market reference point represents not only market reform, but progress, modernisation and a commitment to building a stronger financial system for the future,” he said.
As Ikeazor notes, Nigeria’s financial sector has shown resilience throughout time by building market infrastructure and regulatory systems even in the face of periods of global and domestic turmoil.
He said as global markets moved towards reference rates based on transactions, Nigeria must position itself to not only follow change but help define it.
The Deputy Governor said the launch of NOFR marked the beginning of another phase of market growth that will require ongoing collaboration, market discipline and commitment from all stakeholders.
He called on market participants to be active and help to maintain the growth of Nigeria’s financial markets.
Managing Director of Access Bank, Mr Roosevelt Ogbonna, who was represented by the bank’s Treasurer, Mr David Enilolobo, said in a goodwill message that the country’s financial markets have long relied on benchmark systems established on contributions rather than actual transactions.
‘NOFR is that something extra,’ he said, characterising the benchmark as a transaction-based, overnight, government-collateralised borrowing rate based on what the market actually did, not what participants thought it should have done.
The difference, he said, is fundamental because it offers the market a standard that can be supported by real transactions.
He argued that better market mechanisms attract capital, decrease cross-currency risks and provide offshore investors with benchmarks they can trust.
Without a solid market infrastructure, such as the NOFR, Nigeria’s hope to deepen its financial markets and improve its position in global capital flows will not be realised, Ogbonna said.
He thanked the CBN for pioneering the reform, lauded the FMDA technical committee for their effort in building the framework and praised the EBRD for bringing global expertise to hasten the process.
Market analysts said that while NOFR may not translate into an immediate reduction in lending rates, it is projected to boost transparency in loan pricing and enhance policy effectiveness, while forging a closer link between CBN policy actions and borrowing costs in the long run.
“The reform also puts Nigeria in the league of major global financial markets that have adopted transaction-based benchmark rates as part of efforts to enhance market integrity and financial stability.
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