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Fintech Questn

This document addresses frequently asked questions about fintech regulation in Nigeria. It discusses that while there is no single regulatory framework for fintechs, various laws and regulations apply depending on the services provided. The Central Bank of Nigeria regulates payment services through guidelines while the Securities and Exchange Commission regulates activities involving digital assets. Key regulators include the Central Bank of Nigeria, Nigerian Data Protection Commission, and Securities and Exchange Commission. Required licenses depend on the specific fintech service, and compliance requirements address anti-money laundering, data protection, and corporate governance policies.

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25 views

Fintech Questn

This document addresses frequently asked questions about fintech regulation in Nigeria. It discusses that while there is no single regulatory framework for fintechs, various laws and regulations apply depending on the services provided. The Central Bank of Nigeria regulates payment services through guidelines while the Securities and Exchange Commission regulates activities involving digital assets. Key regulators include the Central Bank of Nigeria, Nigerian Data Protection Commission, and Securities and Exchange Commission. Required licenses depend on the specific fintech service, and compliance requirements address anti-money laundering, data protection, and corporate governance policies.

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You are here:Home/Newsletters/Uncategorized/FINTECH

REGULATION IN NIGERIA; FREQUENTLY ASKED QUESTIONS


FINTECH REGULATION IN NIGERIA; FREQUENTLY
ASKED QUESTIONS
July 28, 2023/in Uncategorized /by Pavestones Newsletters
FINTECH REGULATION IN NIGERIA; FREQUENTLY ASKED
QUESTIONS
By Aderonke Alex-Adedipe and Sharon Okpo
DOWNLOAD PUBLICATION
Introduction
In recent years, the Nigerian financial technology
(FinTech) ecosystem has witnessed an
unprecedented surge in groundbreaking
technologies, disrupting traditional financial services
and revolutionizing the way we transact, invest, and
manage our finances. From peer-to-peer lending
platforms to mobile payment solutions and
blockchain-based innovations, the realm of FinTech
has captured the imagination of investors and
consumers alike.
With these revolutionary advancements, however,
comes a myriad of legal considerations and
regulatory complexities which FinTech companies
must navigate to ensure their success and longevity
in this ever-evolving industry. This newsletter seeks
to provide answers to inquiries often made about the
legal considerations for operating in the Nigerian
Fintech environment.
1. What is the most suitable Corporate for fintech
businesses?
The Companies and Allied Matters Act (CAMA), 2020
provides for various structures that may be adopted
by businesses such as limited liability and unlimited
liability companies, limited liability partnerships,
limited partnerships, business names, and
incorporated trustees. The most appropriate
structure for a fintech to adopt is that of a limited
liability company.
Incorporating your FinTech business as a limited
liability will not only provide a distinction of the
shareholders’ personal assets from that of the
company but also helps in protecting shareholders
against personal liability which may arise in the
operation of the business. It will also boost investor
confidence in the business, as equity ownership in a
limited liability company can easily be transferred.
In addition, incorporating as a limited company, in
general, will also aid in compliance with certain
regulatory requirements and obtaining relevant
licences required for the operation of a FinTech
business in Nigeria. For instance, the Central Bank of
Nigeria’s (CBN) minimum capital requirements for
payment services providers and payment service
banks, and the requirement to establish a holding
company structure for businesses wishing to operate
under more than one licence category provided by
the CBN.
2. Is there a single regulatory framework for FinTechs in
Nigeria?
Unlike other sectors within Nigeria which may
operate under a single or centralized body of laws
governing their businesses (e.g the traditional banks
having the CBN Act, and the Banks and Other
Financial Institutions Act (BOFIA), 2020 as their
primary legislations), there is no single/primary
legislation governing or regulating Fintech in Nigeria.
There are however various laws and regulations
which may be applicable to various aspects of the
Fintech business. The CBN being the primary body
responsible for regulating the financial sector in
Nigeria has a plethora of regulations that are
applicable to various aspects of the Fintech business
some of which include:
i. CBN Guidelines on Open Banking, 2023
ii. The CBN Guidelines on Mobile Money Services in
Nigeria, 2015
iii. The CBN Guidelines on International Mobile
Money Remittance Service in Nigeria, 2015.
iv. The CBN Guidelines on International Money
Transfer Services in Nigeria, 2014
v. The CBN Guidelines on Finance Companies in
Nigeria
vi. The CBN Guidelines for Licensing and Regulation
of Payments Service Banks in Nigeria, 2018, etc.
In addition to these regulations listed above, there
are other regulations which may apply to certain
Fintech companies depending on their operations,
some of which are listed below;
i. CAMA 2020, which is applicable to all companies
and business registered in Nigeria.
ii. Federal Competition and Consumer Protection
Act, 2018
iii. Money Laundering (Prohibition) Act, 2018
iv. Economic and Financial Crimes Commission
(Establishment) Act, 2004
v. Nigerian Data Protection Act (NDPA), 2023
vi. Banks and Other Financial Institutions Act, 2020
vii. Foreign Exchange (Monitoring and
Miscellaneous) Provision Act, 1995
viii. Advance Fee Fraud and other Fraud Related
Offences Act, 2006
ix. Securities and Exchange Commission (SEC)
Rules for the Registration of Virtual Assets
Service Providers, 2022
x. SEC Rules on Issuance, Offering Platform(s), and
Custody of Digital Assets,
xi. SEC Rules on Digital Assets Exchange, 2022,
etc.
3. Who are the Key Regulators in the Nigerian Fintech
Sector?
There are various regulatory bodies exercising
oversight of various aspects of the Fintech business
in Nigeria some of which include;
i. The CBN– exercising oversight for payment service
providers, bureau de change companies, digital
banks, payment service banks, etc.
ii. The FCCPC– exercising oversight in relation to
mergers and/or acquisitions, competition and
consumer protection regulatory functions.
iii. The Nigerian Data Protection Commission
(NDPC)- regulating how companies collect, store,
and process personal data in order to safeguard
the rights of data subject.
iv. SEC- where the business of the FinTech involves
trading in digital assets and other capital market
activities.
v. The National Office for Technology Acquisition and Promotion
(NOTAP)- where the company imports foreign
technology in the course of its business such as
the use of patented inventions, supply of technical
expertise, etc. the company will be required to
register such technology transfer agreement.
4. What Licence is required to operate a fintech business in
Nigeria?
The nature of the license required is dependent on
the specific service to be provided by the fintech
business. Some of the most sought after licenses are
highlighted below:
i. Money lender’s licence– this applies to FinTechs
providing digital lending solutions to customers.
This licence is to be obtained from the State
within which the business intends to operate.
ii. Payment Service Providers Licence– some of the licences
obtainable here include the mobile money
operation licence, the switching and processing
licence, payment solutions service provider
licence, payment terminal service provider
licence, super-agent licence and payment solution
services licence.
iii. Microfinance Bank Licence– this licence is obtainable
from the CBN, and allows the company carry on
such activities such as;

 Acceptance of deposit
 Provision of microloans
 Provision of credit to customers
 Issuance of debentures
 Provision of banking activities to customers
(limited to domestic remittance of funds), etc.
iv. Sub-broker Licence- this applies to Fintechs that offer
a digital platform for others to invest in and purchase
shares and stocks form foreign companies. This
licence is obtainable from the SEC.
5. What are the compliance requirements for Fintech in
Nigeria?
i. Anti-Money Laundering (AML)/Know-Your-Customer (KYC)
Policy– Fintech companies are required to establish
and maintain robust AML/KYC policies to prevent
financial fraud and financing terrorist activities.
ii. Data Protection- Fintechs are also required to ensure
that their data protection policies are efficient
and effective in protecting the data of the users of
their platform(s) and service(s). They are also
required to file yearly reports of data audit
conducted with the NDPC to ensure continued
compliance with the requirements of the NDPA.
iii. Annual Returns and Corporate Governance- Fintechs like
other companies incorporated under CAMA are
also required to file their annual returns as and
when due. They are also required to establish a
proper corporate governance structure and
generally comply with requirements established
by their regulators.

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