Navigating the Legal Landscape of Fintech in Nigeria: A Guide and tips for International Companies.

According to a recent article by leadership.ng, Nigeria’s fintech startups raised $1.2B in 2022. 

If international investors are placing their trust in the ecosystem, it means these companies are getting some things right.

It is a known fact that the Nigerian fintech space has seen an unrelenting and phenomenal growth in recent years. In a country of more than 200 million people, fintech has the potential to reach large numbers of underserved individuals and businesses.

However, navigating through the laws of the fintech scene in Nigeria can be a daunting task for those unfamiliar with the local regulatory environment.
In this guide, we will provide guidance for international companies intending to enter the fintech market in Nigeria.

We will also cover the legal landscape, licensing requirements, and key tips for international companies looking to do business in Nigeria.

Fintech, short for financial technology, refers to the use of technology to improve and automate financial services. These companies offer a variety of services, including mobile payments, online lending, and financial management tools.

Now let’s walk through the regulatory landscape below.

THE REGULATORY LANDSCAPE OF FINTECH IN NIGERIA

The fintech regulatory landscape in Nigeria is still evolving. As a country, Nigeria is yet to codify all the laws that affect the fintech space into a single document. Instead, there are many existing regulations and laws that influence and apply to the ecosystem.
It’s pertinent to state here that these are some of the issues the new startup Act of Nigeria hopes to address.

Let’s continue.

The Central Bank of Nigeria (CBN) is the primary institution responsible for maintaining financial stability and integrity in the country.

To fulfill this role, the CBN from time to time, releases circulars, guidelines and regulations to oversee financial services, including those provided by fintech companies.

Fintech companies can be generally classified into various categories, some of which are: Payment service providers, Lending platforms and other fintech services.

Payment service providers include companies that provide Switching and Processing operations; Mobile Money Operations; Specific Payment Solution Services; and Regulatory Sandbox.Lending platforms include companies that offer online lending services, such as personal loans and microfinance.

Other fintech services include financial management tools, such as budgeting and investment platforms.

The CBN has established specific guidelines for each type of fintech company. 

Payment service providers must be registered with the CBN and have a license to operate. Lending platforms are required to register with the CBN and obtain a license to operate, as well as be approved by the National Credit Bureau. Other fintech services must be registered with the CBN and allowed to operate.

In addition to the CBN, fintech companies in Nigeria may also be subjected to regulations by other government agencies, such as the Nigeria Deposit Insurance Corporation (NDIC) and the Securities and Exchange Commission (SEC).

Where a fintech’s business model entails offering investments or securities, the SEC will come in as a regulatory body.

What to do ?: International companies need to identify their business models and get familiar with the regulatory requirements of these agencies to ensure compliance with Nigerian laws.

LICENSING REQUIREMENTS:

To operate in Nigeria, fintech companies must obtain the necessary licenses and approvals from the CBN and other relevant government agencies. The licensing process varies depending on the type of fintech services offered.

Payment service providers must be registered with the CBN and have a license to operate. The payment provider license application process includes submitting a business plan, screening, and paying the license fee. Lending platforms are required to register with the CBN and obtain a license to operate, as well as be approved by the National Credit Bureau. The loan platform license application process includes submitting a business plan, screening, and paying the license fee.

Other fintech services must be registered with the CBN and allowed to operate. The business license application process includes the submission of a business plan and screening.

It is important for international businesses to carefully review the licensing requirements for their particular type of fintech service and ensure that all necessary permits and approvals are obtained.

KEY TIPS FOR INTERNATIONAL COMPANIES LOOKING TO INVEST IN
THE NIGERIAN FINTECH ECOSYSTEM

 A. FAMILIARIZE YOURSELF WITH THE NIGERIAN REGULATORY FRAMEWORK:

As an international investor, it is important to understand the regulatory framework that governs the fintech industry in Nigeria. This includes understanding the roles of regulatory bodies such as:

1. National Insurance Commission (NAICOM)
2. The Central Bank Of Nigeria (CBN)
3. Nigerian Deposit Insurance Corporation (NDIC)
4. Securities and Exchange Commission (SEC)
5. National Information Technology Development Agency (NITDA)
6. Corporate Affairs Commission (CAC)
7. National Office of Technology and Acquisition Promotion (NOTAP)
8. Federal Competition and Consumer Protection Commission (FCCPC)

International companies also need to know some of the laws we talked about earlier. These laws come together to regulate the fintech ecosystem. They include:

1. National Insurance Commission Act, 1997
2. Investment and Securities Act, 2007
3. Money Laundering (Prohibition) Act, 2011
4. Economic and Financial Crimes Commission (Establishment) Act, 2004
5. Terrorism (Prevention) Act, 2011
6. Advance Fee Fraud and other Fraud Related Offences Act, 2006
7. Foreign Exchange (Monitoring and Miscellaneous) Provision Act, 1995
8. Securities and Exchange Commission Rules (as amended), 2013
9. Cybercrimes (Prohibition, Prevention, Etc) Act, 2015
10. Federal Competition and Consumer Protection Act, 2018
11. Nigeria Data Protection Regulation, 2019
12. Companies and Allied Matters Act (as amended), 2020
13. Bank and Other Financial Institution Act, 2020
14. NCC Value Added Services and Aggregator Framework, 2018
15. CBN Act.

B. SEEK LEGAL ADVICE: 

It is advisable to seek legal counsel from a law firm with experience in the Nigerian fintech industry. Fintech lawyers can help you understand the legal requirements for operating in the market and advise you on any potential risks or challenges. Seeking legal guidance from a good tech lawyer is the best way to go.

C. OBTAIN NECESSARY LICENCES AND APPROVALS: Depending on the business model of your fintech, you may need to obtain certain licenses and approvals before you can operate in the Nigerian fintech market. This can include obtaining a license from the Central Bank of Nigeria or any of the other regulatory bodies highlighted in “A” above. Don’t forget the necessary work permits as issued by the Nigerian Immigration Service.

D. PROTECT YOUR INTELLECTUAL PROPERTY: It is important to protect your intellectual property, including your trademarks, copyrights, and patents. This can help you defend your business against any potential local or international legal challenges.

 E. COMPLY WITH DATA PROTECTION LAWS: Nigeria has strict data protection laws that regulate the collection, use, and storage of personal data. It is important to ensure that you are complying with these laws to avoid any legal issues.

 F. ESTABLISH PARTNERSHIPS AND COLLABORATIONS: Building relationships with local fintech companies and other stakeholders can be a helpful way to navigate the legal landscape and establish your business in the Nigerian market.

CONCLUSION

In conclusion, it is important to be aware of applicable laws and regulations. Furthermore, seeking advice from qualified legal professionals to ensure compliance and avoid potential legal pitfalls is aptly advised.

While this guide provides a general overview of legal considerations for fintech startups in Nigeria, it is not intended as legal advice. It also does not create a Lawyer-client relationship.