Banks Instructed to Disconnect Non-Deposit Financial Institutions from NIP Outward Transfer Channels

Nigerian banks have received a directive from the Nigeria Inter-Bank Settlement System (NIBSS) to sever connections with Switches, Payment Solution Service Providers (PSSPs), and Super Agents in the NIBSS Instant Payment Outwards System.

The circular, dated December 5, 2023, with Ref: NIBSS/BD/NI/PO/005/051223, highlights that the inclusion of non-deposit-taking financial institutions as beneficiaries contradicts the Central Bank of Nigeria’s guidelines on electronic payments. The national payment infrastructure company emphasized that such entities, including Switching Companies, PSSPs, and Super Agents, should not be listed as beneficiary institutions on banks’ NIP funds transfer channels.

The circular stated, “Listing non-deposit-taking financial institutions… contravenes the CBN Guidelines on Electronic Payment of Salaries, Pensions, Suppliers, and Taxes in Nigeria dated February 2014.”

NIBSS further clarified that while switches, PSSPs, and Super Agents may process outward transfers as inflows to banks, they are not authorized to receive inflows, as their licenses do not permit them to hold customers’ funds. The advisory also referred to a circular dated May 11, 2018, titled ‘Permissible Services and Products of PSSP Operation in Nigeria,’ with Ref: BPD/DIR/GEN/CIR/05/004.

In compliance with these directives, banks are instructed to delist all Switches, PSSPs, and Super Agents from their NIP Outward Transfer channels, emphasizing that the delisting applies only to outward transfers and not inward transactions.

To engage in Nigeria’s payment ecosystem, operators must obtain one of the following licenses from the Central Bank of Nigeria: Switching and Processing, Mobile Money Operations, Payment Solution Services, and Regulatory Sandbox. According to the CBN, only Mobile Money Operators (MMOs) are permitted to hold customer funds.