No, the Central Bank of Nigeria (CBN) didn't completely blocked OPay, PalmPay, Kuda, Moniepoint and others in Nigeria. The apex bank partially banned these fintech companies from onboarding new customers.
According to CBN, the reason behind the ban is not limited to the fact that those fintech accounts are being used for Foreign Exchange transactions which by the CBN manipulate the FX market and cause the free fall of Naira against the US dollar.
Now, these fintechs directors are saying the CBN's directives might be misdirected. They cited that the majority of the implicated accounts that involves in the FX manipulations belong to commercial banks rather than fintech platforms.
I can confirm that 90% of the accounts implicated in the illicit forex transactions are with commercial banks, and only 10% are with fintechs. Why then has the CBN not extended this directive to the commercial banks? We face a widespread issue here, and targeting fintechs seems like an unfair focus on the more vulnerable targets,” one of the fintechs director explained.
According to recent report, Economic and Financial Crimes Commission (EFCC) has obtained a court order to freeze/ban at least 1,146 bank accounts belonging to various individuals and companies allegedly involved in the illegal foreign exchange transactions.
Why OPay, PalmPay, Kuda, Moniepoint and Others?
A fintech industry insider, who wished to remain anonymous, highlighted the stronger and more favorable relationship between commercial banks and the Central Bank of Nigeria (CBN) compared to that of fintech companies. This dynamic suggests a disparity in trust and collaboration levels, potentially influencing regulatory scrutiny and operational latitude.
"In terms of Know Your Customer (KYC) protocols, fintechs are outperforming traditional banks," the source noted. "However, despite their superior KYC processes, fintechs like OPay and PalmPay are under more intense scrutiny whenever KYC issues arise."
The source also addressed the perception of payment fraud, pointing out that fintech platforms are often unfairly targeted as the primary venues for fraudulent activities. "Payment fraud is an industry-wide issue, not confined to fintechs. The public perception disproportionately singles out fintechs as the main culprits."
The insider emphasized the financial impact of fraud on different sectors, noting that traditional banks experience significant losses due to fraudulent activities. "If you examine the amount of money banks lose to fraud, it is staggering. No fintech could sustain such losses and continue to operate," the source stated. This underscores the broader challenges within the financial industry and the resilience required to navigate them.
The Bottom Line
Does CBN Banned OPay and PalmPay in Nigeria?: No, CBN did not ban OPay and PalmPay in Nigeria. CBN instructed them to halt onboarding new customers in April 2024. This was due to concerns about their Know-Your-Customer (KYC) processes and potential for illegal activities.
There were allegations of these payment platforms being used for unauthorized foreign exchange transactions. However, in May 2024, CBN announced that OPay, PalmPay and others will be allowed to resume onboarding new customers "in a couple of months" with a "stronger regulatory framework".
In a nutshell, their existing operations continue, but new customer signups were on hold. There's an expectation they'll be back in business soon with stricter regulations.