Central Bank of Nigeria proposes new FX policies, bars fintechs from IMTO licenses. Nigeria’s currency has been struggling. The Naira has depreciated almost 70% since the beginning of 2023. This loss in value has occurred amidst falling USD inflows from crude oil sales and foreign investments, and increased supply of Naira into the local economy. Nigeria’s apex regulator has rapidly released a series of reforms and policies to tackle this free-fall: - Revised guidelines for the operations of International Money Transfer Operators (IMTOs).
- Removed the cap on the spread of inter-bank foreign exchange transactions, allowing prices to be driven by market forces.
- Implemented strict requirements on the net open position of banks, prompting a sell-off of foreign currency denominated assets.
These new policies are aimed at improving FX inflows and market transparency, and ultimately slowing the rate of currency depreciation. One key change in the revised IMTO guidelines is the exemption of fintechs from applying for an IMTO license. It's not immediately clear which types of fintechs the regulator is referring to (there is no “fintech” license category) but some experts have suggested this refers to licensed payment service providers. Last week, we wrote about fintechs obtaining new remittance licenses and cross-border payments emerging as an attractive business for fintechs that are seeking to increase and vary their revenue. These new IMTO regulations introduce immediate roadblocks to that strategy. Even if fintechs could circumvent this through partnerships with non-fintech IMTOs or by establishing separate entities, there are still legal and technical hurdles to climb. Ultimately, this feels like a missed opportunity for the CBN to work with fintechs towards driving remittances from the diaspora. Fintech-led remittance operators have proven popular with consumers due to speed, cost, and improved user experience compared to legacy providers. This was an opportunity to leverage that established brand equity to sustain end-user adoption while at the same time, ensuring that collected FX receipts are actually remitted into the FX market. It’ll be interesting to see how the remittance landscape changes (or reverts) with these new guidelines. As time has taught us, explicit bans are less effective than measured oversight of activities. CBN [Nigeria]
Mastercard finalizes acquisition of a minority stake in MTN’s fintech arm. Global payments giant Mastercard has completed the acquisition of a $200 million minority stake in MTN MoMo, MTN’s fintech subsidiary. The acquisition, which was announced 6 months ago, values MTN MoMo at $5.2 billion. When the transaction was first announced, we wrote: MTN is not the only telco looking to separate and sell portions of their fintech business. In recent years, telcos like Airtel and M-PESA have announced plans to create separate arms for their financial service businesses. As reported in Issue 116, Airtel has already gone ahead with this separation of Airtel Money and has received more than $500 million from investors including The Rise Fund, QPG, and Mastercard. These corporate restructurings have been driven by new regulatory requirements in some markets, and an opportunity to capture needed liquidity from fintech-focused investors. For most of these telcos, mobile money revenue has outstripped growth from core voice and data services. With these investments, telcos can cash in on that growth to pay off long-term debt or just generally improve cash flow. The stated benefits to telcos like MTN and Airtel still hold true. These transactions provide liquidity to service debt obligations but also invest in core infrastructure in a continent that is rapidly growing in demand for internet and data services. For Mastercard, this presents an opportunity to hedge against the shift from cards to alternative payment methods like wallets and mobile money for domestic payments. It also positions Mastercard as a preferred partner for international payments solutions. Guardian [Africa] |
