CBN Regulations on Electronic Payments and Collections For Public & Private Sectors in Nigeria

The Central Bank of Nigeria (CBN) the Bank in exercise of its powers under the Central Bank of Nigeria Act, 2007, issued the Regulation on Electronic Payments and Collections for Public and Private Sectors in Nigeria (otherwise known as ‘the Regulation’ for the purpose of this write-up) which is actually a revision of the Guidelines on Electronic Payment of Salaries, 

Pensions, Suppliers and Taxes in Nigeria (2014),and is aimed at providing guidance for the end-to-end electronic payment of salaries, pensions and other remittances, suppliers and revenue collections in Nigeria.

This article will thus be looking at the provisions of this regulation in detail, from its objective and scope to the roles and responsibilities of relevant stakeholders in electronic payments and collections.

What is the objective of the CBN regulation on end-to-end electronic payments and collections?

The objective of the Regulation is to fully align with the core objectives of the National Payments System Vision 2020 (PSV2020) to ensure the availability of safe, effective and efficient mechanisms for conveniently making and receiving all types of payments from any location and at any time, through multiple electronic channels. 

This will reduce the time and costs of transactions, minimize leakages in revenue receipts and at the same time provide reliable audit trails, thereby ensuring that the Nigerian Payments System aligns with international best practices.

This Regulation is therefore set out to provide all stakeholders with the operational procedures that guide end-to-end electronic payment for the Public and Private Sector.

What is the scope & applicability of the CBN regulation?

This Regulation applies to all CBN regulated entities operating in Nigeria and mandates adoption, implementation and compliance with the directives on end-to-end electronic payments of all forms of salaries, pensions & other remittances, suppliers, revenue collections including but not limited to taxes,levies, penalties, recoveries, assessments,and the disbursement of funds for social programs, payment of bills, honorarium, scholarships, allowances, etc. herein referred to collectively as payments and collections.

What are the roles and responsibilities of relevant stakeholders in electronic payments and collections?

 –The Central Bank of Nigeria (CBN)

The CBN shall:-

• a) promote the adoption of end-to-end electronic payment by all Stakeholders;

• b) license end-to-end electronic payment solution, systems and service providers, regulate and supervise their operations;

• c) create and maintain a platform for constant interaction and engagement of all electronic payment industry stakeholders;

• d) ensure all statutory payments, remittances and collections of all revenues are undertaken only on a CBN approved end-to-end electronic payment platform;

• e) ensure constant review and update of this Regulation to reflect new developments that can support the long-term success of the initiative;

• f) adjudicate in the cases of disputes;

• g) maintain a Help Desk to provide enlightenment, receive complaints and monitor resolution of the reported cases and publish customer service/contact details via multiple platforms;

• h) collaborate with other statutory and regulatory agencies whose cooperation is required for the effective implementation of this Regulation.

– CBN Regulated Stakeholders

The CBN regulated stakeholders refer to all financial institutions, Payments Service Providers and other entities licensed and regulated by the CBN which includes, but not limited to the following:

–Deposit Money Banks (DMBs), Other Financial Institutions (OFIs) and Mobile Money Operators (MMOs).

DMBs, OFIs and MMOs shall –

• a) promote the adoption of end-to-end electronic payments by all stakeholders covered by this Regulation;
• b) provide payers and beneficiaries with appropriate accounts with DMBs, OFIs or any other approved channel for receiving payments such as mobile money/electronic wallet, subject to the CBN’s approved KYC limits.

• c) process electronic payment instructions in accordance with subsisting payments system and clearing system rules;

• d) publish customer service/ contact centers details via multiple media channels and maintain customer service contact centers, to promptly attend to all electronic payment enquiries and challenges within stipulated timelines; and report of customer complaints, indicating resolution status;

• e) make available any or combination of the following data sets, as may be applicable, along with the mandatory returns to the CBN, on a monthly basis or as may be otherwise specified:

I. Number of salary/pension/supplier/tax paying organizations.

II. Salaries/pension/supplier/tax payment transactions count.

III. Salaries/pension/supplier/tax payment transactions value per payment method given below;

-End-to-end;

-Bank Assist;

-Cheques;

-Manual;

• f) in the event of duplicated/excess payments, establish a recovery process engaging both payers and beneficiaries in line with subsisting CBN Regulation.

– Payment Solution Service Providers (PSSPs)

A PSSP shall –

• a) obtain a license from the CBN to operate as a PSSP;
• b) offer CBN approved end-to-end electronic payment solutions, systems and services to all stakeholders;
• c) publish customer service/contact details via multiple media and maintain customer service contact centers to promptly attend to all electronic payment enquiries and complaints;

• d) make available any or combination of the following data sets, as may be applicable, along with the mandatory returns to the CBN, on a monthly basis or as may be otherwise specified:

I.Number of salary/pension/tax paying client organizations;

II.Salaries/pension/tax payment transactions count;

III.Salaries/pension/suppliers/tax payment transactions value per 

payment method given below;

-End-to-end

-Bank Assist

-Cheques

-Manual 

1. e) comply with transaction completion and unapplied funds return timelines as stipulated by the CBN.

What are the operational standards for other stakeholders in electronic payments and collections?

This refers to all other stakeholders which are not regulated by the CBN. 

They include the following: 

– Payers

Payers shall –

• a) adopt end-to-end electronic payment of salaries for employee staff strength of 20 and above;
• b) maintain appropriate account with DMBs or OFIs;
• c) adopt a CBN approved end-to-end electronic payment platform and use for all forms of payment and collections;
• d) provide basic infrastructure for making and receiving electronic payments;
• e) ensure employees are given basic training to use adopted platform;
• f)use only validated account details to ensure payments are made to intended beneficiaries;
• g) remit taxes and other statutory payments along with associated electronic schedules on a CBN approved end-to-end e-payment platform;
• h) remit contributory pension funds into the bank accounts of Pension Fund Administrators maintained with Pension Fund Custodians, with associated electronic schedules, only on a CBN approved platform;
• i)bear the cost of electronic payments and electronic schedules transmission while ensuring beneficiaries receive actual amounts due to them. Where other arrangement exists, it must be mutually agreed between the payer and beneficiary; 
• j)provide evidence of payment to beneficiaries;
• k) indicate adherence with this Regulation in annual reports;
• l)report all unresolved e-payment challenges to approved CBN contact centers .

–Beneficiaries

In this Regulation, beneficiaries  include the following:

–Employees and Pensioners

All employees and pensioners shall (as applicable) –

• a) maintain appropriate bank accounts with Deposit Money Banks, Other Financial Institutions or any other approved channel for receiving payments such as mobile money/electronic wallet, subject to the CBN’s approved KYC limits;

• b) provide valid account and contact details to the Payer;

• c) report cases of non-payment, delayed payment or wrong payment of salaries/contributory pension remittances carried out on a CBN  approved e-payment platform, to the Payer;

• d) register and maintain a Retirement Savings Account (RSA) with a licensed Pension Fund Administrator (PFA);

–Suppliers

All suppliers shall –

• a) maintain appropriate bank account with DMBs, OFIs or any other channel for receiving payments, such as mobile money/electronic wallet, approved by the CBN;
• b) provide correct account and contact details to the payers;
• c) obtain and provide details of Tax Identification Number (TIN) to the payers;
• d) report cases of non-payment, delayed payment or wrong payment carried out on the CBN approved e-payment platform to the payers;

• e) report all wrongfully received funds or excess payments to his financial institution customer service desk and make same available for refund to the payer.

-Taxes, Levies, Dues (& other revenue) Collecting Organizations  All Taxes, statutory levies, receipts, assessments, penalties and dues collecting organizations shall:

• a) maintain appropriate collection accounts with the CBN or DMB/OFIs;

• b) publicly make available details of electronic payments processes for collections;
• c) provide clear details of the nature and amount of taxes, statutory levies and dues expected from payers;
• d) adopt a CBN approved electronic collection solution [List of approved PSSPs] for the collection of all forms of taxes, duties, levies, other collections and the associated electronic schedules of such payments;

–Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs)

All PFAs and PFCs shall:

• a) maintain appropriate accounts with CBN approved Financial Institutions to facilitate the provisions of ‘Part XI’ of the PENCOM Act;

• b) provide details of the accounts to Pension Remitting Organisations;

• c) adopt a CBN approved platform [List of approved PSSPs] for the receipt of all contributory pension fund remittances and associated electronic schedules;
• d) provide basic infrastructure for confirming receipt of electronic payments and associated electronic schedules.

What are the provisions of the regulation on dispute resolution?

The regulation provides that any dispute, controversy or claim arising out of or relating to this Regulation or the breach, termination or invalidity thereof shall be settled in accordance with the CBN’s dispute resolution mechanism and if unresolved may be referred for arbitration in accordance with the rules for arbitration of the Regional Centre for International Commercial Arbitration, Lagos, Nigeria.

What are the provisions of the regulation on compliance?

The regulation provides that further to the implementation of the Guideline on end- to-end electronic payment of salaries, pensions, suppliers and taxes by all public and private sector organizations as directed in the CBN Guidelines referenced[CBN/BPS/PSV/GEN/014/05], DMBs are to dishonor payment instructions for all forms of salaries, pensions, suppliers and taxes not transmitted on a CBN-approved straight through electronic payment and collection platform issued by organizations with more than 20 employees. 

This means payment instructions and associated schedules are no longer to be transmitted to DMBs through unsecured channels, such as paper-based mandates, flash drives, compact discs (CDs), email attachments, etc. by qualifying public and private sector organizations.

What are the possible infractions and sanctions under the CBN regulation?

Under the regulation, any DMB, OFI or MMO that fails to discharge its responsibilities shall be penalized .

This also applies to PSSPs that fail to discharge their responsibilities as detailed under the CBN regulation.