The reliance on and importance of PMS – gas and diesel in Nigeria cannot be overplayed. The deplorable state of our electricity ensures at the very least that oil companies like Total plc stay in business. Afterall, what business or household can thrive without power?

2020 has been shocking. The sort of year wherein businesses suffer shortages in the shadow of plenty and the oil sector is no exception. The performance of oil particularly, in 2020 was dreadful, to say the least. Total plc as a case in point suffered severe cutbacks in revenue from all of its operating heads. The general consensus is that this poor return is clearly product of the instabilities experienced through the course of the year. Covid-19 did wreak havoc on lives and livelihood necessitating various restrictions within the country. The restrictions meant decreasing activities which as a consequence upset travels, the operations of businesses and individuals. For Total Plc it meant just one thing – DWINDLING TURNOVER.

Total plc has hitherto been a leader in its sector. They generate revenue from three major expenditure heads namely Network, General Trade and Aviation.

Sales from Network refers to the turnover total generates from sales to service stations. General Trade refers to revenue obtained from its sales to corporate customers excluding aviation. Aviation, as the name implies refers directly to revenue obtained from its business with customers in the aviation industry.

Revenue generated from these segments coupled with proper cost monitoring has hitherto placed Total Plc at the summit as industry leaders. However, this year tells a different tale.

Total Plc’s revenue plummeted by 30% in 2020 compared to 2019. The company made N292billion in 2019 and N204billion in 2020 FY. The respective operating segments each suffered some responsibility on this. Sales from Network (its most fruitful revenue source) made only N143billion in FY 2020 whereas it made 205billion in 2019, that’s 30% reduction. Aviation and General Trade weren’t spared. Aviation dropped 54% from N26billion to N12billion while General Trade was only able to generate N49billion against N61billion in 2019.

These poor records were always going to reflect in closing figures at FY and pile further misery on investors who have endured what seems a horrid year. Total Plc finished with a position 1.5% worse off than they did in 2019 at N2.2billion. But to their credit, the extent of reduction was pleasantly a far-cry from what the differences in revenue had suggested. This is due to proper handling of expenditure heads particular finance costs.

Total Plc recorded N2.9billion as finance expenditure in repaying interest on loans and overdraft, compared to the N7.9billion it made in interest payments for year 2019. This singular factor amongst some others made for a more presentable finish to this year’s campaign. The slow but steady restart of activities offers the inclination that improvements are at the very least an expectation this year. We will see from first quarter results.

The Central Bank of Nigeria (CBN) continues to enhance the payments and financial markets infrastructure in Nigeria by facilitating innovations which produce exciting and world-leading payment services and solutions.

What exactly is Open Banking?

In its simplest forms, the objective of Open Banking is to have a payments and markets infrastructure which provides end-users with the ability to review ALL their banking and financial information in a CENTRAL location.

This is regardless of how many bank accounts they use, and which financial institution is used.

As an example, almost everyone in Nigeria has two or more accounts. You receive funds in multiple accounts and make expenditure across the same multiple accounts. When you need to track inflows, outflows, check your balances, reconcile customer payments etc., you must log into the separate banking products just to perform mundane clerical tasks.

READ: CBN approves new license categorizations for payment systems

Consequently, from an end-user perspective (think MSMEs, entrepreneurs, HNWI etc.), keeping track of your various inflows, outflows, balances, and due liabilities across all your suite of banking products is simply time-consuming.

Now imagine a product/service that allows you click on one simple dashboard and you see ALL your inflows, outflows, balances, and liabilities ACROSS ALL BANKS.

That is the aim of open banking. The implementation of Open Banking requires adoption of common standards for technology use, agreements on data sharing and regulatory guidelines.

READ: CBN orders banks to accept travel documents, refugee ID for transactions

PWC has more on the case for open banking

Who else has open banking?

Most advanced countries already have a form of open banking in place (UK, UK, Europe, Japan, Singapore, China). However, in Africa Nigeria continues to pioneer innovative payments infrastructure solutions.

Imperva has more on where else Open Banking is already in place

Benefits and Opportunities

The ability for end-users to view consolidated information about ALL their financial products across ALL authorized providers in a single location will yield productivity benefits for end-users whilst creating new opportunities for service providers.

Specifically, MSMEs; Sole-Entrepreneurs who leverage the output/solutions from Open banking will benefit from the convenience of having a consolidated view of their banking activities (i.e., balances, inflows, outflows etc.). Furthermore, the reduction of time-consuming manual and administrative efforts required during reconciliations will be a productivity benefit.

For Service providers, financial institutions will be able to sell more products (including cross-sell opportunities) as they gain more insights into their customers and worry less about overwhelming their customers with new accounts.

READ: Investment banking fees earned in Sub-Saharan Africa hits a six-year low of $523.7 million in 2020

Think about platforms being able to suggest what insurance products or type of savings accounts your customers qualify for given the consolidated view of customer net worth.

One interesting opportunity is the potential for credit growth. A consolidated view of a customer’s net worth should allow Financial Institutions better analyze the creditworthiness of potential clients. Thus, align CBN’s financial inclusion objectives with its desire to increase credit to the real sector.

What happens next?

For those excitedly asking what happens next, i.e. when do these products start becoming widely available and easily accessible? The answer appears to be soon, especially as the CBN has finally published a regulatory framework.

Successful implementation of Open Banking is wholly dependent on collaboration between Technology providers (FinTech), Financial Institutions and the Regulator (CBN).

• From a Technology perspective, as mentioned before the capability already exists globally. Also from a Nigerian perspective the Open Banking Foundation of Nigeria has been a strong advocate.
• From the Financial Institutions perspective, SOME banks already have shown willingness to partner with FinTech to deliver a “LITE” version of Open banking.

READ: US moves against misuse of cryptocurrencies, to employ new financial technologies

As an example, Banks currently send SMS text messages which applications such as REACH APP can analyze and transform for insightful expense tracking.

• Finally, from the Banking Regulator perspective, the CBN release of a regulatory framework outlines how the CBN intends to supervise participants in this sector.

Specifically, the highlights of the open banking regulatory framework, the CBN aims to

a) Provide standards for the safe utilization and exchange of data and services. ,

b) Define data access levels (i.e. what bank data can be shared and who can get it)

• There are four data categories of what can be shared (PIST, MIT, PIFT, PAST)
• Each category of data is assigned a risk rating (Low risk, moderate-risk, high and sensitive-risk data)
• There are also four (4) groups of participants who can get your data (Tier 0, 1, 2 and Tier 3)

READ: $945 million worth of BTCs options expiring this week

c) Establish scope of financial services

• In scope, for now, are Payments/remittance services; Collections and disbursement services; Deposit-taking; Credit; Personal Finance advisory and management; Treasury management; Credit ratings/scoring; Mortgages; Leasing/Hire-Purchase at this time.

In other words, the key stakeholders are now ready, and we simply await the collaboration necessary to deliver the desired outcome.

Why this matters

As part of its financial inclusion goals, as well as, payments system vision strategy (PSV 2020; PSV2030), CBN continues to welcome financial technology providers (FinTech) as key participants into the payments infrastructure in Nigeria.

• Recent entrants into this Payments infrastructure include Mobile Money Operators (MMOs such as PagaTech, eTranzact), as well as Payment Solutions Service Providers (PSSPs such as Paystack, Flutterwave).
• Each category of participants within the Payments infrastructure is preceded by the CBN releasing a regulatory framework. (as examples since 2010, we have seen Agent Banking Framework, Super Agents framework, Regulatory Framework for Mobile payments services in Nigeria amongst others).
• So, the recent announcement of an Open Banking Regulatory Framework created a buzz as it signals new entrants and new services are in the pipeline for the average consumer of banking services.