This article provides an insight into the provisions of the Guidelines.

What is Contactless Payment?

According to the Guidelines, contactless payment is a payment system that involves the use of contactless technology that enables an alternative payments method whereby payment instruments such as pre-paid, debit and credit cards, stickers, fobs, wearable devices, tokens and mobile electronic devices are used without physical contact with devices.

Aims of the Guidelines

The guidelines aim to provide the minimum standards and requirements for the operations of contactless  payments in Nigeria, and also specify the roles and responsibilities of the stakeholders involved in contactless payments in Nigeria.

Who are the Participating Stakeholders?

The participating stakeholders in contactless payments in Nigeria are:

1. Acquirers
2. Issuers
3. Payment Schemes
4. Card Schemes
5. Switching Companies
6. Payments Terminal Service Providers (PTSPs)
7. Payments Terminal Service Aggregator (PTSA)
8. Merchants
9. Terminal Owners
10. Customers
11. Any other stakeholder/participant(s) as may be designated by the CBN.

The stakeholders are required to obtain CBN’s approval for contactless payments products and for innovative use cases and value-added services.

Minimum Standards for Contactless Payments in Nigeria

The participating stakeholders that process and/or store customers’ information are obliged to ensure that their terminals, applications and processing systems comply with the below standards at the minimum:

1. PA DSS – Payment Application Data Security Standard
2. PCI PED – Payment Card Industry Pin Entry Device
3. PCI DSS – Payment Card Industry Data Security Standard
4. Triple DES – Data Encryption Standards shall be the benchmark for all data transmitted and authenticated between each party. The Triple DES algorithm is the minimum standard.
5. AES – Advanced Encryption Standards
6. EMV – the deployed infrastructure must comply with the minimum EMV requirements for Contactless acceptance
7. ISO27001 – Information Security Management System
8. Other standards as may be specified by CBN from time to time.

Each participating stakeholder (operator) is mandatorily required to maintain valid certification to the above standards and regularly review the status of its systems, applications, networks and devices, to ensure they remain compliant.

Roles and Responsibilities of Stakeholders

The Guidelines provide for the separate roles and responsibilities of the stakeholders as follows:

Acquirers

Some of the roles and responsibilities of acquirers with respect to contactless payments in Nigeria include:

1. Only CBN licensed institutions can serve as acquirers for contactless payments.
2. Acquirers shall ensure that their applications, instruments, tokens and devices meet current standards and specifications for contactless payments.
3. Acquirers shall execute contactless payments agreements with parties for utilizing contactless platforms for payments.
4. Acquirers shall be able to accept all cards or payments instruments used in Nigeria.

Issuers

Some of the roles and responsibilities of Issuers with respect to contactless payments in Nigeria include:

1. Only CBN licensed institutions shall serve as Issuers for contactless payments.
2. Issuers shall ensure that activation of contactless payment is at customer’s instance, and with full consent.
3. Issuers shall ensure that their applications, instruments, tokens and devices meet current standards and specifications for contactless payments.
4. Issuers shall activate only accounts and wallets with Bank Verification Number (BVN).
5. Issuers shall ensure that transaction limits are strictly adhered to.

Payment Schemes and Card Schemes

Payment Schemes and Card schemes have the same roles and responsibilities with respect to contactless payments in Nigeria. These roles and responsibilities include:

1. Ensuring that all contactless transactions are processed online or submitted via current processing specifications.
2. Implement a documented risk management process to identify and treat risks associated with contactless payments.

Switching Companies

Switching companies have the responsibility of ensuring that contactless transactions consummated by all payment instruments issued in Nigeria are successfully switched between acquirers and issuers.

Payment Terminal Service Providers (PTSPs)

Some of the roles and responsibilities of PTSPs with respect to contactless payments in Nigeria include:

1. Ensuring that all their terminals for contactless payments are functional at all times.
2. Ensure they have adequate support infrastructure that support coverage for merchants.
3. Ensure all deployed devices and terminals have support service contact information.
4. Prevent instrument clashes even when multiple contactless payments devices are present.

Payment Terminal Service Aggregator (PTSA)

The PTSA shall, on an annual basis, or more frequently, certify POS terminals for contactless payments to ensure POS terminals meet the approved standard for the industry and also put in place a risk management process.

Merchants

Some of the roles and responsibilities of merchants with respect to contactless payments in Nigeria include:

1. Ensuring that deployed devices and applications are available for contactless payments of goods and services.
2. Merchants shall be held liable for fraudulent contactless payments arising from negligence/connivance.
3. Contactless payment transaction value and associated charges shall be clearly communicated to the customer prior to consummation of the transaction.
4. Display the contactless symbol

Terminal Owners

Terminal owners are to ensure that all terminals and devices are compliant with appropriate minimum specifications and also ensure the implementation of a documented risk management process.

Customers

Customers have the option to opt-in by applying and consenting to applicable terms and conditions and can withdraw without prior notice to the issuer. Customers are also obliged to authenticate contactless payments transaction as may be required, exercise due diligence in carrying out contactless payments transactions and protect their payments instruments from unauthorized use.

Transaction Limit

The CBN is to determine the appropriate transaction and cumulative daily limits for contactless payments from time to time. However, stakeholders are permitted to set limits in line with CBN’s limits.

Contactless payment transactions below stipulated daily limits may not require customers’ authorization such as token, biometrics, pin, etc. while higher-value contactless payments shall require customer verification such as pin, mobile code, biometric, etc.

Sanctions and Penalties

Stakeholders are required to comply with the provisions of the Guidelines and other relevant regulations of the CBN. Failure to comply attract appropriate sanctions and penalties as may be determined by the CBN.

Conclusion

The Exposure Guidelines provides a regulatory framework for the activities and conduct of affairs of the stakeholders in the contactless payments system in Nigeria. When the Guidelines become operational, all stakeholders will be required to conduct their affairs and carry out their roles in accordance with the minimum set standards under the Guidelines.

Please note that the contents of this article are for general guidance on the Subject Matter. It is NOT legal advice.

For further information or to see our other service offerings, please visit www.goldsmithsllp.com  or contact:

The post An Overview of the Central Bank of Nigeria Exposure Draft Guidelines on Contactless Payments in Nigeria first appeared on Goldsmiths Solicitors.

In this concluding part of our series examining the Petroleum Industry Act (PIA) 2021, we take a look at the provisions made for host communities under the Act. We also highlight funds established under the Act as well as other general provisions relating to customer protection, natural gas price for strategic sector, etc. in the Act. The Act makes provisions for host communities which encourages social and economic development and is aimed at promoting mutual cooperation between the host communities and petroleum operators within the community (Settlors).

Incorporation of Host Communities Development Trust

Host communities are communities situated in or appurtenant to the area of operation of a settlor and any other community as a settlor may determine.[1]

The settlor[2] is required to incorporate a Host Community Development Trust ‘the Trust’ in the community where they carry out petroleum operations.[3] The Settlor is also required to appoint the Board of Trustees (the Board) as well as members of each Committee in the said Trust. The failure of a settlor to do so can be a ground for revocation of License or Lease.[4] The settlor is also required to undertake a Needs Assessment which shall metamorphose into the Community Development Plan and determine the project to be undertaken by the Trust.

Timeline for Incorporating the Trust

The timeframe within which the Trust is to be incorporated by the settlors are as follows:

• The settlors with existing Oil Mining Lease, existing designated facilities and new designated facilities under construction – 12 months from the effective date;[5]
• Settlors with existing Oil Prospecting License – prior to the application for field development plan;
• Settlors with Petroleum Prospecting License and Petroleum Mining – prior to the application for any field development plan; and
• Settlors who are licensees of designated facilities granted under the PIA – prior to the Commencement of commercial operations.[6]

Reporting Obligations under the Trust

The Management Committee of the Trust (one of the Committees to be setup under the Trust) has both mid-year and annual reporting obligations to the Board of Trustees which is to be sent respectively not later than 31^st August of the preceding year and 28^th February of the succeeding year. The Board is also required to report to the Settlor not later than 31^st March of that year. The Board shall then submit an annual report to the Commission or Authority (as the case may be) not later than 31^st May each year.[7]

Funds under the Petroleum Industry Act

The Act makes provision for the establishment of various Funds. The Funds established or to be established would be used in administering the affairs of the sectors which they apply to.

The Host Communities Development Trust Fund – this Trust Fund is established by the  constitution of each Host Community Development Trust and the Settlors are required to make an annual contribution to the applicable community of 3% of its actual operating expenditure of the preceding year in the Upstream Petroleum Operation affecting the community.

The Act protects petroleum operations and activities in host communities by providing that where there is any vandalism, sabotage or any civil unrest which causes damage to any petroleum or designated facilities or disrupts petroleum activities in a host community, such community will forfeit its entitlement to the extent of the cause to repair the damage or the damage that occurred as a result of such disruption.[8]

The Decommissioning and Abandonment Fund (DAF) –

This Fund is to be setup, maintained and managed by each Licensee and Lessee to be held by a financial institution that has no connection with the Licensee and Lessee or its affiliate. It is to be held in an escrow account, accessible to the Commission or Authority. The Fund is to be used for the payment of decommissioning and abandonment costs.

The amount to be contributed yearly into the Fund is to be based on the Decommissioning and Abandonment Plan set out by the licensee or lessee and approved by the Commission or Authority  and the amount is to be reviewed every 10 years following the first submission.[9]

A Licensee or Lessee is required to inform the Commission or Authority (as the case may be) of the establishment of this Fund not more than 3 months from the date of commencing upstream petroleum operations or commissioning the facilities for midstream operations. They are also required to submit the Statement of Account of the said Fund to the Authority or Commission on an annual basis and a copy is to be provided to the FIRS. The residue amount in the Fund after the decommissioning and abandonment has been carried out and approved is to be taken as income for production sharing and tax purposes and the remaining amount shall be returned to the Licensee or Lessee after tax deductions.[10]

Midstream and Downstream Infrastructure Fund (MDIF) –

This Fund is established by the Act and is a body corporate capable of suing and being sued.[11] Its source of funds includes 0.5% of the wholesale price of petroleum products and natural gas sold in Nigeria to be collected by the wholesale customers and which is to be paid within 21 days of sale[12], funds and grants from multilateral agencies, bilateral institutions dedicated partly or wholly to midstream and downstream infrastructure in Nigeria, monies received from gas flaring penalties by the commission, etc.

The Fund is to be used to make equity investments of Government owned participating or shareholders interest in infrastructures relating to operations of the midstream and downstream sector.[13]

The Frontier Exploration Fund (FEF)[14] –

This Fund is created to facilitate petroleum exploration activities in Nigeria including drilling and testing of identifiable petroleum prospects and leads, the development of frontier acreages, exploration of frontier basin, etc.

The major source of fund for the FEF is 30% of the Nigerian National Petroleum Company Limited profit oil and profit gas in the production sharing, profit sharing and risk service contracts.

A commercial discovery made in a frontier acreage and the identifiable prospect or lead is tested and grilled by the Commission, the NNPC Limited will have the right of first refusal.

The Authority Fund[15] –

This Fund is to be used for the administration and operations of the affairs of the Nigerian Midstream and Downstream Petroleum Regulatory Authority. Its source of fund includes 0.5% of the wholesale price of petroleum products and natural gas sold in Nigeria to be collected from wholesale customers, fees charged by the Authority for services rendered to licensees, fees paid to the Authority, income derived from publications made by the Authority, etc.

The contribution of 0.5% of the wholesale price of petroleum products and natural gas sold in Nigeria to be collected from wholesale customers applicable to this Fund is distinct from the one to be made to the MDIF.

The Commission Fund[16]–

This Fund is to be used for the administration and operations of the affairs of the Nigerian Upstream Petroleum Regulatory Commission. its source of fund includes money appropriated by the National Assembly, fees charged by the Commission for services rendered, income derived from publications by the Commission, etc.

The post Host Communities and Funds under the Petroleum Industry Act 2021- Goldsmiths Solicitors PIA Series IV first appeared on Goldsmiths Solicitors.