Recently, the Central Bank of Nigeria (CBN) passed on the 9th of March,2023, a new set of guidelines governing agent banking in Nigeria (this was already the subject of a previous article written by me).
Agent Banking as previously explained is the use of 3rd parties via an agency contract to render banking and financial services. This article will thus be focused on the provisions of the new guidelines and their regulatory effects going forward.
What is the scope of the new CBN Guidelines on Agent Banking in Nigeria?
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The guidelines govern the licensing & operations of agent banking businesses in Nigeria.
What are the objectives of the guidelines?
The objectives of the CBN Guidelines on Agent Banking are :-
- To provide minimum standards and requirements for the operations of agent banking in Nigeria.
- Providing the roles and responsibilities for stakeholders involved in agent banking in Nigeria.
- The enhancement of financial inclusion as a core target of the Central Bank of Nigeria.
- The provision of a delivery channel for offering banking services in a cost-effective manner.
What is the minimum share capital requirement for banking agents in Nigeria?
Under the new guidelines, the minimum share capital for banking agents, specifically super-agents, remains 50 Million Naira.
Who is eligible to be a banking agent in Nigeria under the guidelines?
The following entities are eligible to be banking agents in Nigeria under the Guidelines :-
- Limited liability companies
- Sole proprietorship
- Partnerships
- Cooperative societies
- Public entities
- Trusts
- Educational Institutions
What are the categories of agent banking allowed under the Guidelines?
The agent banking structures allowed under the Guidelines are :-
- Super Agents – These are licensed by the CBN to establish a collection of outlets or franchises within its wide network of outlets that shall be under its supervision.
- Sub-Agents – These are networks of agents that are to be under the direct control of a super agent by virtue of an agent banking contract.
- Sole Agents – These are individuals that by themselves initiate agent banking relationships with banks and FIs (Financial Institutions).
What are the requirements for licensing as a banking agent under the new guidelines?
The requirements are :-
– An application forwarded to the CBN with the name of the applicant, its contact details, business address and company registration details.
– A board approval/resolution deciding to embark in Agent Banking services.
– A document that shall outline the strategy of the FI including current & potential engagement & geographical spread of the proposed agent.
– Documented qualifying criteria for engaging agents showing outreach, competence & integrity.
– Copies of SLA & Agent banking contracts(consult your lawyer on the mandatory requirements of a banking agency contract).
– Risk Management, KYC & AML/CFT/ CPF, internal control, operational procedures and any other policy & procedures relevant to the management of agent banking arrangements.
Also, a prospective banking agent must have been in legitimate commercial activity for at least 12 months before the date of application.
Can a banking agent have agent banking relationships with more than one FI or bank at a time?
No, this is no longer possible and presents a major shift from the position of the previous CBN Guidelines on Agent banking relationships.
Hence, a banking agent can only serve one bank or financial institution at a time.
What are the permissible and non-permissible activities for banking agents under the new CBN Guidelines?
Permissible Activities
– Cash deposit & withdrawal within permissible limits.
– Bills payments.
– Funds transfers.
– Balance enquiries.
– Mini-statement generation & issuance.
– Cash payments.
Non-Permissible Activities
– Giving guarantees.
– Banking services expressly not allowed in banking agency contracts.
– Engaging in foreign currency transactions.
– Cash advances.
– Being run or managed by an employee of a bank or FI.