Nigeria’s banking and financial technology sectors may face an additional regulatory layer following a proposal by the House of Representatives to establish a National Payment Data Protection and Sovereignty Commission.
The proposed legislation seeks to strengthen the protection of financial information, ensure greater control over payment data within Nigeria and reduce dependence on foreign data storage and processing facilities.
The bill, sponsored by Lanre Okunlola, representing Surulere II Federal Constituency of Lagos State, is titled A Bill for an Act to Establish the National Payment Data Protection and Sovereignty Commission.
If passed into law, the proposed commission would oversee the protection, storage and processing of payment data across Nigeria’s financial system.
Its responsibilities could introduce another regulatory institution alongside the Central Bank of Nigeria (CBN), which currently plays a major role in regulating the country’s banking and payment services industry.
Proposed N1bn Fine for Financial Institutions
One of the major provisions of the proposed legislation is a minimum fine of N1bn for financial institutions that fail to maintain their primary payment data infrastructure within Nigeria.
The proposal also seeks to introduce strict penalties for individuals who transfer sensitive payment information outside the country without the required approval.
Under the proposed provisions, offenders could face imprisonment of up to 10 years, a minimum fine of N500m, or both.
These proposed sanctions indicate the seriousness with which the bill seeks to address the handling and protection of financial information.
However, the penalties remain proposals and would only become enforceable if the bill successfully passes through the legislative process and becomes law.
Banks and Fintech Companies May Be Affected
The proposed commission could have significant implications for several categories of operators in Nigeria’s financial services industry.
Banks, fintech companies, payment service providers, switching companies and other financial technology operators may be required to comply with additional rules concerning how payment information is stored, processed and transferred.
For financial institutions that currently depend on international data centres or foreign-based technology infrastructure, the proposed local storage requirement could require operational adjustments.
Companies may also need to review their existing data management arrangements, technology partnerships and cybersecurity systems to ensure compliance if the legislation is enacted.
The proposal could therefore increase the importance of investment in domestic data infrastructure and financial technology security.
Strengthening Nigeria’s Payment System Security
The bill comes amid growing concerns about cybersecurity risks and the increasing dependence of financial services on digital infrastructure.
Nigeria’s payment ecosystem has expanded significantly with the growth of electronic transfers, mobile banking, digital wallets and fintech platforms.
While these developments have improved access to financial services and made transactions more convenient, they have also increased the volume of sensitive financial information being generated and processed.
Protecting such information is important for maintaining public confidence in digital payments and reducing the risks associated with data breaches, cyberattacks and unauthorised access.
The proposed commission is intended to strengthen Nigeria’s control over payment information and improve the country’s ability to protect critical financial infrastructure.
Potential Implications for the CBN
The proposed legislation could also raise questions about the relationship between the new commission and existing financial regulators, particularly the CBN.
The central bank already has responsibilities relating to the regulation and oversight of banks, payment systems and other financial institutions.
Establishing another commission with responsibilities involving payment data could require clear coordination between regulatory authorities to prevent overlapping responsibilities and conflicting compliance requirements.
For financial institutions, clarity about the respective powers of regulators would be important in ensuring effective supervision without creating unnecessary operational difficulties.
The proposed legislation will therefore attract attention from banking operators, fintech companies, technology providers and other stakeholders within the financial services industry.
Legislative Process Remains Important
Although the proposed bill outlines significant regulatory changes and financial penalties, it is important to distinguish between a legislative proposal and an enacted law.
The proposal must go through the required legislative stages before it can become legally binding.
Stakeholders will be watching its progress, particularly the final provisions concerning the commission’s powers, the responsibilities of existing regulators and the requirements for storing and processing payment data.
If passed, the legislation could reshape aspects of Nigeria’s financial data governance framework and create new compliance obligations for financial institutions.
Ultimately, the proposal reflects growing attention to data sovereignty and cybersecurity as Nigeria’s financial system becomes increasingly digital.
