Financial data is as powerful as it is sensitive. Without guardrails, it could lead to chaos—think data breaches, unauthorized access, or financial exclusion.
The Central Bank of Nigeria (CBN) recognizes that a secure, standardized framework is not a luxury. It’s an absolute necessity to protect consumers and stabilize the financial ecosystem. A study by PwC found that 88% of users would be willing to share their data if they trusted a company that much.
Without stringent regulations, the entire promise of open banking would collapse under the weight of consumer mistrust and institutional risk. Plus, open banking introduces new players into the financial ecosystem—third-party providers, tech companies, and fintech startups. Of course, they need clear enforceable rules to operate safely and efficiently.
The regulations help make sure these players adhere to the same standards, leveling the playing field and preventing abuse. They also lay the foundation for innovation, competition, and ultimately, consumer empowerment.
Let’s walk you through the specific open banking regulations in place, their implications, and how they ensure a secure environment for all stakeholders.
Core regulations governing open banking in Nigeria
There are currently three major regulations that govern open banking in Nigeria: the Nigerian Data Protection Regulation (NDPR), the Open Banking Regulations, and the Open Banking Operational Guidelines. Let’s analyze each of these regulations in detail.
1. Nigerian Data Protection Regulation (NDPR)
The Nigerian Data Protection Regulation (NDPR) is a cornerstone of data privacy for open banking in Nigeria. It lays out the responsibilities for handling personal data, focusing on consent, lawful processing, and data security. Here’s a closer look at how it affects open banking:
Obtaining consent
The NDPR makes it mandatory for organizations to obtain clear and explicit consent from individuals before collecting or using their personal data. This specifies that individuals must be informed about why their data is being collected and how it will be used, and they should have the ability to withdraw their consent at any time.
Most importantly, consent must be given freely, without coercion or undue influence, and the purpose of data collection must be communicated upfront. This is critical in open banking, where sensitive financial data is being shared across multiple players (banks, fintechs, etc.).
Lawful processing
For processing to be lawful, NDPR outlines that at least one of several conditions must be met, such as the data subject giving consent, the data processing being necessary for a contract, or the processing being in the public interest.
So, if data is being shared for open banking purposes, it has to be for a legitimate reason, which is either clearly explained to the customer or necessary for the operation of the services being provided
Data security and due diligence
Under NDPR, organizations must ensure data is protected against future hazards and breaches, including theft, cyberattacks, and unauthorized manipulation. This means banks and fintechs participating in open banking need to use encryption, firewalls, and other technologies to safeguard customer data.
The NDPR also requires data controllers and processors to be accountable for their actions, meaning that if they misuse customer data or fail to protect it, they are liable for any resulting damages.
2. Open Banking Regulations
These regulations set the standards for security, licensing, and the responsibilities of the various participants—including banks, Payment Service Providers (PSPs), and third-party fintechs. Here’s a detailed look at the core components:
Data sharing and access control
The CBN’s Open Banking Regulations specify that data sharing must be conducted securely through standardized APIs. These APIs make sure that data flows between banks, fintechs, and third-party service providers smoothly and with minimal risk.
Each participant is required to build and maintain APIs according to CBN-defined security requirements, which often include the use of encryption and secure authentication methods.
In Nigeria, this means that customer data like account balances, transaction histories, and payment details can be accessed—but only when specific security protocols are followed and with explicit customer consent.
Licensing requirements
Only licensed institutions are permitted to participate in open banking. This includes banks, financial institutions, and third-party providers that have undergone a vetting process by the CBN.
This vetting process includes evaluating the organization’s technical capabilities, financial stability, and adherence to regulatory standards.
Participants need to prove they have the necessary expertise, infrastructure, and a track record of compliance. For customers, this means the entities handling their financial data are properly scrutinized and regularly monitored to avoid any lapses in security.
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Customer consent and data protection
This is in line with the Nigerian Data Protection Regulation (NDPR), reinforcing that customers should always have control over their data. Consent must be clear, informed, and documented, and customers should be able to revoke it at any time.
The CBN also requires that participants maintain a record of all consent provided to allow for transparency and future audits.
Risk management and incident reporting
In the event of a data breach or incident, all participants must report the issue to the CBN promptly.
There are specific timelines within which breaches must be reported—typically within 72 hours—for swift action and to minimize damage. Participants must not only be prepared to handle issues but must also ensure they report and rectify incidents transparently.
3. Open Banking Operational Guidelines
The Open Banking Operational Guidelines are essentially the “how-to” manual for implementing open banking in Nigeria. They help translate the broader Open Banking Regulations into specific, practical steps that participants—banks, Payment Service Providers (PSPs), and fintechs—need to follow.
Customer onboarding and consent management
The guidelines mandate a standardized process for obtaining and recording customer consent before accessing or sharing data.
This means that banks and other financial institutions need to clearly explain to customers what kind of data they will be accessing, why, and for how long. The consent must be documented in a way that is auditable and easy for customers to withdraw whenever they wish.
Data categorization and secure access
Data categorization is done in tiers and grouped by sensitivity—for instance, basic information such as product offerings may be more freely accessible, while sensitive information like transaction history requires higher levels of consent and access control. The idea here is to apply appropriate levels of security based on how sensitive the data is.
For data sharing, the CBN has specific security standards that these APIs must comply with, including data encryption and token-based authentication.
Incidence reporting and management
If a bank or fintech experiences a breach, they cannot simply keep it quiet and hope no one notices.
The guidelines require that any data breach or other operational incident be reported to the CBN within a specific timeframe—typically 72 hours. Participants must also have a clearly defined incident response plan in place to contain and mitigate the impact of any data breaches.
This ensures that, in case something goes wrong, swift corrective actions can be taken to minimize harm to customers and maintain trust in the system.
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Upcoming regulations
Two additional regulations are expected soon that will further enhance open banking in Nigeria:
Open Banking Registry (OBR): This will be a public registry listing all authorized open banking participants. Managed by the CBN, it will enhance transparency and ensure that only verified entities are involved in open banking.
Open Banking Consent Management: This regulation will standardize how customer consent is managed across the ecosystem, giving customers more control over who has access to their data and for how long.
All for a secure and transparent open banking ecosystem
These aren’t just hoops to jump through—they’re the building blocks of a more inclusive, competitive financial system that works for everyone.
The three core regulations—the NDPR, Open Banking Regulations, and Open Banking Operational Guidelines—are designed to create a secure and transparent environment for open banking in Nigeria.
For open banking to truly thrive, participants must stay committed to these principles—not just because the rules say so, but because consumer trust is the foundation of everything we’re building.
