Nigeria Mandates Multi-Factor Authentication for Foreign Card Transactions to Enhance Security and User Experience
The Central Bank of Nigeria (CBN) has introduced a significant new directive aimed at bolstering the security and usability of foreign-issued payment cards within the country. Effective immediately, banks and other financial institutions are mandated to implement multi-factor authentication (MFA) for all foreign card transactions exceeding $200 per day. This initiative is part of a broader strategy to ensure a more seamless and secure payment environment for both international visitors and returning Nigerian citizens.
Multi-factor authentication is a robust security protocol that requires users to provide at least two different verification factors to confirm their identity before gaining access to an account. This layered approach significantly complicates the efforts of cybercriminals, even if they manage to compromise a user’s password.
The directive, issued on December 18th, was communicated through a circular from the CBN’s Financial Policy and Regulation Department, signed by its Director, Dr. Rita I. Sike. Titled “Facilitation of Seamless Use of Foreign Cards,” the circular applies universally to all financial entities operating within Nigeria, including banks and non-bank financial institutions.
According to the apex bank, the MFA requirement specifically targets withdrawals and online transactions that surpass daily thresholds of $200, weekly limits of $500, and monthly caps of $1,000, or their equivalent in Nigerian Naira. The primary objective is to fortify transaction security while simultaneously improving the payment experience for tourists and Nigerians returning from abroad.
The CBN articulated that this policy is a component of its ongoing commitment to enhance convenience, security, and the overall user experience associated with foreign card usage throughout Nigeria.
Enhanced Infrastructure and Global Standards
Under the new regulations, financial institutions are tasked with ensuring that local currency withdrawals, payments, and transfers for foreign cardholders are both uninterrupted and efficient across the nation. This includes a crucial requirement for banks and non-bank acquirers to maintain high levels of system availability to guarantee the smooth processing of transactions.
Furthermore, all automated teller machines (ATMs), point-of-sale (PoS) terminals, and virtual or web-based payment platforms must be adequately configured to accept international cards processed through Nigerian acquirers. The CBN has also stipulated that these terminals must adhere strictly to global card association standards and possess current or renewed certifications.
Transparency in Exchange Rates and Settlements
A key focus of the CBN’s directive is promoting transparency in exchange rate pricing and settlement processes. Banks and acquirers are now obligated to clearly communicate the applicable exchange rates and any associated charges to customers before the finalization of any transaction.
The circular mandates that exchange rates for foreign card transactions must be market-driven, aligning with prevailing official rates. Transactions will only proceed after users have provided explicit consent to the stated terms, and evidence of this acceptance must be meticulously retained.
Crucially, all merchant settlements stemming from foreign card transactions must be conducted exclusively in Nigerian Naira. Financial institutions are also required to maintain sufficient liquidity to meet these settlement obligations promptly.
Robust Fraud Monitoring and Consumer Protection Measures
To effectively combat fraud, the CBN has instructed financial institutions to implement sophisticated transaction-monitoring systems. These systems should be adept at identifying unusual usage patterns associated with foreign cards across all transaction terminals.
Merchants involved in processing foreign card payments will be subject to enhanced Know Your Customer (KYC) and Anti-Money Laundering (AML) controls. In instances where transactions raise suspicion, merchants are empowered to request valid identification documents and ensure that receipts for card-present transactions are properly signed.
Any suspicious transactions identified must be reported without delay to the Nigeria Financial Intelligence Unit (NFIU), in strict accordance with existing regulatory frameworks. The CBN has also directed institutions to fine-tune their fraud-monitoring systems to minimize the occurrence of false declines on legitimate transactions, with a particular emphasis on safeguarding the experience of visitors and returning Nigerians. For low-value transactions, card acceptance devices are required to support contactless payment functionalities.
Streamlined Chargeback Processes and Sanctions
The new circular introduces more stringent responsibilities for acquirers concerning dispute resolution and chargebacks. Acquirers must establish and maintain comprehensive, auditable chargeback management processes that are fully compliant with card-scheme rules and CBN guidelines. This includes efficient intake of cases, meticulous collation of evidence, timely refunds, and thorough post-incident analysis.
All transaction records, such as terminal approval slips, signed merchant receipts, and detailed descriptions of items or services, must be preserved for a minimum of 12 months. These records must also be retrievable within 24 hours upon request. Acquirers are further mandated to provide quarterly training to merchants and agent networks on best practices for dispute handling and chargeback procedures.
The CBN has issued a stern warning regarding consumer complaints related to foreign card transactions, emphasizing that they must be resolved within stipulated timelines. The central bank has indicated that escalations of unresolved issues to its attention will result in sanctions. Tourists and returning Nigerians experiencing difficulties with their foreign-issued cards are encouraged to report these incidents directly to the CBN’s Consumer Protection and Financial Inclusion Department.
The regulator has affirmed its commitment to closely monitoring compliance and will enforce appropriate sanctions against any institution found to be in violation of this directive, in line with established regulations.
