The Central Bank of Nigeria (CBN) is taking another bold step to ensure that Nigerian banks continue on the existing trajectory of growth and resilience, and improve their operations to meet global best standards.
On Tuesday, the CBN governor Godwin Emefiele announced during the 14th Annual Banking & Finance Conference, organized by the Chartered Institute of Bankers of Nigeria (CIBN), that the apex bank will establish the Nigerian International Financial Centre (NIFC) in the next 12 months, ThisDay reports.
During the conference which was entitled: “Recovery, Inclusion and Transformation: The role of Banking and Finance”, Emefiele said the NIFC will act as an international gateway for capital and investments, driven by technology and payment system infrastructure.
He said the NIFC will curate local and international banks to make them global champions, and will be a 24/7 financial centre that will complement London, New York and Singapore financial centers and enable an acceleration of home grown initiatives such as the Infracorp plc, the N15 Trillion infrastructure fund which would be launched in October.
In addition, the governor said the new financial hub would also complement initiatives on the Nigerian Commodity exchange and the National Theatre creative hubs for Nigerian youths as well as the E-naira project which will also debut in October.
Emefiele explained that the NIFC would take advantage of existing laws such as the BOFIA 2020, NEPZA and other CBN regulations to create a fully global investment and financial hub where monies, ideas, and technology will move freely without hindrance.
The apex bank head used the opportunity to reflect on the initiatives taken so far to ensure growth and stability in Nigeria’s banking industry. He said the CBN worked to protect the interest of depositors by ensuring that banks made adequate capital provisions to cover for unexpected losses.
“We also enabled banks to restructure loans granted to individuals and businesses significantly affected by the pandemic. Our banks also demonstrated exceptional resilience by putting in place business continuity plans, along with the deployment of digital channels, which ensured that the provision of financial services to customers was not disrupted by the COVID-19 pandemic.
“We are delighted that these measures have paid off. Indeed, key indicators in the banking sector continue to reflect that our banking sector remains strong, resilient, and healthy. Capital Adequacy Ratio and Liquidity Ratio in the banking sector have remained above the prudential limits at 15.5 and 41.3 percent, respectively.
“The Non-Performing Loan Ratio of the Banking Industry in July 2021 stood at 5.4 percent reflecting continued improvements from 6 percent in September 2020. Our banking sector remains well positioned to support the recovery efforts of the fiscal and monetary authorities,” he said, adding that Nigerian banks have become not only strong and resilient, but have also carved a good niche in the world.
Over the past 10 years, the Nigerian banking industry has undergone a series of policy changes geared toward consolidation. The result has been impressive with ills such as liquidation, which used to be a constant feature in the sector, fully eliminated.
However, while the industry has shown growth and resilience over the years, adapting to technology advancement remains a struggle. In the age of cryptocurrency and fintech boom, which is increasingly posing a threat to traditional banking, the central bank is working to bridge the technology gap with initiatives such as the NIFC.
Two weeks afterSouth Korea’s parliament enacted a law to checkmate monopolistic practices of Apple and Google, the country’s competition watchdog has fined Google 207.4 billion won ($176.8 million) for abuse of its market dominance.
The Korea Fair Trade Commission (KFTC) said Tuesday it handed Google the fine for abusing its dominant position in the smartphone market and forcing smartphone makers to use its Android operating system on their devices.
It is the latest in a number of antitrust actions taken against the tech giant in recent weeks, amidst growing calls to keep the big players in the tech industry in check.
Google was accused of using its dominant position to block smartphone makers like Samsung from using operating systems developed by rivals.
“We expect the latest measures will help set the stage for competition to revive in the mobile OS and app markets. This is also expected to help the launch of innovative goods and services in smart device market,” the KFTC said in a statement.
Investigation into Google’s anticompetitive activities started in 2016. The KFTC said the web search giant’s action stifled competition by demanding that smartphone makers accept an “anti-fragmentation agreement” (AFA) when they sign key contracts with Google over app store licenses and early access to OS, according to South Korea’s Yonhap news agency.
The AFA prohibits device makers from installing Android forks, modified versions of Android OS, and also from developing their own Android forks.
The KFTC said the practice has helped Google to dominate the mobile market and undermine innovation in the development of new OS for smart devices, it thus ordered Google to take corrective measures.
AP reported KFTC official Kim Min-jeong saying the fine is provisional and currently based on Google’s revenue in South Korea from 2011 to April 2021. The final fine, due to be announced later this year, could be higher on account of the revenue generated between April and then.
The regulator is still investigating separately three more cases related to Google’s alleged anti-competitive activity, according to Yonhap.
The three cases being investigated is whether Google forced mobile game applications to be released only on its Play Store. The watchdog is also probing Google’s alleged unfair practice over the sale of digital rights, and whether Google’s new billing policy has harmed market competition, according Yonhap.
In addition to the fine, the KFTC ordered Google to stop implementing the anti-competitive contracts under AFA in the future and make corrections to the existing ones.
The fine is believed to be the largest in South Korea’s history. But a Google spokesperson told Forbes the company intends to appeal the decision and believes “Android’s compatibility program has spurred incredible hardware and software innovation.”
Last month, South Korea’s national assembly approved a legislation that will limit the monopolistic practices of Apple and Google in their app stores, making the Asian country the first nation in the world to take such a regulatory step.
The new law, which is an amendment to the Telecommunications Business Act, bars app market operators from abusing their market positions by forcing certain payment systems on mobile content businesses.
With the advent of the Nigerian Data Protection Regulation 2019, personal data and data privacy have become key issues in the digital economy. Though the regulation has been extant for over 2 years, there is a lack of knowledge on the part of most data subjects as to the extent of their data protection and what constitutes breach of data. While the NDPR has played a huge role in stimulating the digital economy, this has restricted the impact of the regulation.
In espousing its objective, the Nigerian Data Protection Regulation provides that it was made in recognition of the fact that many private and public bodies have migrated their respective businesses and other information systems online, and these information systems have thus become critical information infrastructure which must be safeguarded, regulated and protected against atrocious breaches.[1] The principle guiding the NDPR also stipulates that personal data shall be collected and processed in accordance with specific, legitimate and lawful purpose consented to by the Data Subject.
In recent times there has been a proliferation of digital retail lenders within the lending space in Nigeria, and this has helped to bridge the financial inclusion gap, as report from the Financial Inclusion Secretariat shows that formal sector credit penetration as a ratio of the adult population in Nigeria was below 5.3% in 2017[2]. The rise in digital lending can be linked to the widespread use of mobile phones, high demand for credit and a fragmented regulatory landscape for industry players. Traditionally banks have been averse to retail lending, because the risk appetite of banks do not extend to retail loans and also, the process of applying for a bank loan is rather complex, often involving lengthy paperwork and delays.
On the contrary, it is abstruse why banks/financial institutions that have held and processed data of customers for more than ‘10 years’ are unable to offer loan/overdraft facilities to such customers, based on the data they have alone, yet digital lending companies employ simpler processes and no paperwork to make this possible.
These companies are able to leverage payment data to determine lending risk more easily and utilize smartphones as a distribution channel. Some have gone ahead to leverage alternative credit-scoring algorithms to provide instant, unsecured, short-term loans to individuals. This sort of lending is attractive not only to existing customers, but also to first time borrowers who would otherwise be shut out due to lack of a credit history.
Consequently, the transfer of personal data and financial information through digital channels raises concerns of data privacy and there is strict responsibility on the part of digital lenders to process these data lawfully, as a result of the digital business model which they have adopted. It has become customary practice for some digital lending companies to use non financial data and mined phone data to engage in debt shaming of debtors/loanees by informing their family, friends and employers of the existing debt.
In a recent development, Sokoloan, a digital lending company was fined N10million by NITDA for alleged privacy invasion. Aside processing data of data subjects without their consent, NITDA further determined that the company embeds trackers that share data with third parties inside its mobile application without providing users information about it or using the appropriate lawful basis. The company was said to be in violation of the following: Use of non-conforming privacy notice, contrary to Article 2.5 and 3.1(7) of the NDPR; Insufficient lawful basis for processing personal data, contrary to Articles 2.2 and 2.3 of the NDPR; Illegal data sharing without appropriate lawful basis, contrary to Article 2.2 of the NDPR and Non-filing of NDPR Audit reports through a licensed Data Protection Compliance Organisation (DPCO), contrary to Article 4.1(7) of the NDPR amongst others.[3]
In processing the personal data of a data subject, and by requesting access to the contacts of the loan customer, digital lenders also have access to the personal data of the ‘contacts’ of the customer. It is worthy of note that consent to process personal data of the customer cannot include consent to process personal data of another data subject which forms part of the data that was collected from the customer.
According to the NDPR, prior to collecting personal data from a data subject, the Controller shall provide the data subject – through a privacy policy – with the following information;
Purpose of the processing for which the personal data are intended as well as the legal basis for processing
Period for which personal data will be stored
Existence of right of data subject to withdraw consent anytime
Existence of the right to request access to, rectification or erasure of the personal data
How the data will be processed
Type of data collected etc
Therefore digital lenders are not at liberty to process data from a customer’s phone, unless they have informed the customer. Also lenders ought to specify all the data that they intend to collect and how they want to use it. The use should be in line with what is reasonably expected by the data subject. For instance, it is reasonable expected that a lender would obtain the customer’s name and phone number for purposes of records, and possibly collect data relating to call records, browsing history, phone model, GPS data and communication pattern for purpose of credit scoring. However it is unreasonable for a lender to obtain contacts of ‘data subjects’ from a customer’s phone for the purpose of calling them and engaging them to recover outstanding debts.
The NDPR defines personal data as any information relating to an identified or identifiable natural person (data subject); an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or tone or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person. It can be anything from a name, address, a photo, email address, bank details, posts on social networking sites, medical information, and other unique identifier such as but not limited to MAC address, IP address, IMEI number, IMSI number, SIM, Personal Identifiable Information (PII) and others.[4]
For data controllers/digital lenders, one way of complying with NDPR means sending an email to every single person in a customer’s contact list to either get consent for you to hold and process their data, and to explain how they exercise their rights under NDPR.
Furthermore, if a digital lender were found to be processing “personal data” belonging to a data subject on a loanee’s contact list (or any other person whose information is uploaded to their server through the action of another person) they would find it difficult to contend that the processing was lawful, because the activity doesn’t prima facie satisfy any of the criteria for lawfulness in Article 2.2 (a – e) of the NDPR.
It is interesting to note that the ‘loanee’s’ contact has not given consent for the lending app to process her personal data for any purpose. She has merely given the loanee consent to process her personal data to the extent that the loanee has stored it in his phone, but that consent presumably does not extend to the lending app uploading that data to its server and calling or texting such person when the loanee is in default.
In Kenya, the Data Protection Act is set to revolutionize digital lending privacy and put an end to debtor shaming and collection of data from undisclosed sources[5]. In essence, digital lending companies need to be aware of the far reaching implications of the provisions of the Nigerian Data Protection Regulation, while we await a substantive legislation for data protection. As data protection becomes more rooted in the fabric of the digital economy, there is bound to be a rise in reports and fines/awards against erring data controllers. Therefore digital lenders need to fully grasp compliance obligations under the NDPR including conducting regular data audits and appointing a DPCO, and come up with an appropriate compliance policy framework.
Sample such letters
References
[1] Preamble to Nigerian Data Protection Regulation 2019
A very simple logic: demand is high, why not work to provide more supply? That is business and economics 101. So, the postulation by John Mc Keown that Nigeria could go into microfabrication business to take advantage of the broad high prices of chips, while a good call at superficial level, will certainly struggle at a deeper level.
First, the condition precedent for Nigeria for a chip factory is not there. Yes, we cannot run a foundry with generators. Secondly, our universities are not there to produce the knowledge workforce to design chips and fabricate them. Thirdly, the comparative advantages are against Nigeria with silica, etc (be at least as good as TSMC to have opportunities in markets). You can add more challenges.
This is what Nigeria needs now in the semiconductor business: a clone of MOSIS. MOSIS is a service funded by the US military research unit which connects all universities and small chip design companies together, making it easier for people to create prototypes at largely zero cost. So, magically, a Stanford student can design a chip and send it to MOSIS and within 3 months will get five samples. Through MOSIS, the US government took out the burden of schools needing to build $1 billion factories, and got them to focus on designs.
What is happening to GTBank (yes, GTCO)? It is losing steam across the board. Begin with the cost-to-income ratio which used to be industry leading at sub-40%. Now, it has jacked it up to 47% (I guess the holdco setup could have caused that). From gross earnings to profitability, Access and Zenith are there. Access is becoming a critical banking institution; look at the interest income.
There is a pattern I am seeing: improved marginal cost is a solid competitive advantage and being big will work for these relatively big and geographically positioned institutions, as the new era of African commerce begins. Nigerian banking will be totally different in 5 years.
Access and Zenith are on to something; GTBank has to watch itself well.
