The Nigerian fintech industry is booming, offering innovative financial services to a growing market. However, navigating the complex regulatory landscape can be daunting for new and existing fintech companies. At Mascot Legal Practitioners, our team of experienced fintech lawyers helps companies of all sizes achieve compliance and avoid legal roadblocks. We understand the unique challenges faced by fintech businesses and provide tailored legal strategies to ensure your success.

Why Legal Expertise Matters

Understanding and complying with all applicable regulations can be a complex endeavor. Here's where a qualified fintech law firm like Mascot Legal Practitioners can make a significant difference:

Compliance Navigation: We guide you through the intricacies of the regulatory landscape, ensuring your company adheres to all relevant laws and requirements.

Risk Mitigation: We identify potential regulatory hurdles and proactively develop strategies to minimize legal risks.

Strategic Planning: We work alongside you to develop a comprehensive legal framework that supports your business goals and fosters sustainable growth.

Streamlined Operations: Our expertise helps you avoid delays and disruptions caused by non-compliance issues.

Taking the First Step

Understanding the legal landscape is the first step toward achieving regulatory compliance. Here are some initial actions you can take:

Identify Applicable Regulations: Based on your fintech services, pinpoint the relevant regulatory bodies and their requirements.

Conduct a Compliance Gap Analysis: Assess your current practices to identify any potential gaps in compliance.

Seek Legal Guidance: Partner with a qualified fintech law firm like Mascot Legal Practitioners to develop a customized compliance strategy.

The Regulatory Bodies

There is no direct and uniform legislation that regulates FINTECH services in Nigeria and for any FINTECH company to be able to know the appropriate bodies to approach for registration, it depends on the type of services the FINTECH company wants to offer. The Central Bank of Nigeria however, plays the major regulatory oversight over FINTECH services and products. It issues licenses and prescribes guidelines that regulate financial institutions. The  Regulatory Body that regulates FINTECH companies in Nigeria are:

The Corporate Affairs Commission (CAC):

The CAC is saddled with the responsibility of registration of the company including FINTECH and also responsible for keeping records of the company in Nigeria.

The Central Bank of Nigeria (CBN):

The CBN is the principal regulatory body for financial institutions in Nigeria including FINTECH.CBN has the power to grant licenses and issue regulatory frameworks that govern all financial companies in Nigeria. All companies including FINTECH companies must comply with the CBN regulatory framework.

Federal Inland Revenue Service (FIRS):

The Federal Inland Revenue Service is the agency responsible for assessing, collecting, and accounting for tax and other revenues accruing to the Federal Government of Nigeria. All Company including FINTECH must file their tax return with the FIRS.

The Nigeria Deposit Insurance Cooperation, (NDIC):

The NDIC is mandated to insure all deposit liabilities of a licensed bank and other deposit financial institutions in Nigeria. A FINTECH company that is in the business of receiving and depositing money for their client must register with the NDIC.

The Securities and Exchange Commission (SEC):

A FINTECH Company that aims to raise money from the capital market must register its securities with the SEC and comply with the provision of the Investment Securities Act (ISA).

The Nigeria Communication Commission (NCC):

Although the NCC is responsible for an incensing telecommunication company in Nigeria, However, any FINTECH company that makes use of mobile phones and mobile networks must apply to the NCC for a license to operate.

National Information Technology Development Agency (NITDA):

The NITDA is responsible for regulating information technology and ensuring that companies that make use of technology safeguard consumers' data in Nigeria in accordance with the regulation. FINTECH company that deals with consumer data needs to obtain a license from NITDA before they can process people’s data.

The National Office for Technology Acquisition and Promotion (NOTAP):

NOTAP is a federal government agency that Evaluates/Register Technology Transfer Agreements, Promotion of Intellectual Property, and Technology Advisory among others. FINTECH, a company that wishes to bring any technology into the country must register such technology with NOTAP.

National Insurance Commission National Insurance Commission (NAICOM):

NAICOM controls and regulates of insurance business in Nigeria. Thus, an Insurance Technology Company   (INSURTECH) that is desirous to carry on business in Nigeria will require a license from NAICOM to operate.

Federal Competitive and Consumer Protection Commission (FCCPA):

The FCCPA applies to all entities carrying on business in Nigeria including FINTECH companies, it prohibits anti-competitive practice, collusive tendering, or entering any arrangement that might cause a restraint on competition.

General Applicable Laws.

There general law may not apply to all companies as some of the laws regulate and safeguard different types of FINTECH services offered by the company.

Companies and Allied Matters Act (CAMA) 2020

Investment and Securities Act (ISA) 2007

Money Laundering Prohibition Act 2011

BOFIA

Corrupt Practices and related offence Act 2000

Economic and Financial Crimes Commission Act, 2004

Advance Fee Fraud and Other Fraud Related Offences Act 2006

Terrorism Prevention Act 2011

Cybercrimes Prohibition Act 2015.

Nigeria Data Protection Regulation 2019

The Nigerian Investment Promotion Commission Act 16 of 1995

Value Added  Tax Act Cap V1, LFN 2004

Other KEY Regulations

These regulations seek to ensure an effective financial system for the settlement of transactions, including the development of electronic payment systems in Nigeria. The regulations also leverage technology to promote financial inclusion and enhance access to financial services in Nigeria. These regulations include:

CBN framework for Regulatory Sandbox operation 2020, (Sandbox Operations Framework):

The Sandbox operation provides standards for the operations of a Regulatory Sandbox, and prescribes the processes and procedures for analyzing, collecting, updating, integrating, and storing of consumer data and information. The Sandbox application process is open to both existing CBN licensees (financial institutions with FINTECH initiatives) and other local companies.

CBN Regulation on Electronic Payments and Collections for Public and Private Sectors in Nigeria 2019: This Regulation provides all stakeholders with the operational procedures that guide end-to-end electronic payment for the Public and Private Sectors in Nigeria. It applies to all CBN-regulated entities operating in Nigeria that carry on end-to-end electronic payments of all forms of salaries, pensions & other remittances, suppliers, and revenue collections including but not limited to taxes, levies, penalties, recoveries, assessments, and the disbursement of funds for social programs payments bills, honorarium, scholarships and allowances among others.

CBN Guideline for Licensing and Regulation of Payment Service Banks in Nigeria 2018 (PSB):

The PSB guideline applies to financial companies that want to carry on the business of Payment Service Banks in rural communities in Nigeria. PSBs are expected to leverage mobile and digital channels to enhance financial inclusion and stimulate economic activities at the grassroots through the provision of financial services.

CBN Regulation for Direct Debit Scheme in Nigeria, 2018:

This Regulation applies to the existing and emerging multi-channel options (Online platforms, Instant Payments, etc.) that engage in direct debit services in Nigeria. The Direct debit is a cash-less form of financial settlement which facilitates recurring payments, it permits the originator of the instruction, known as’’Biller’’, to collect amounts due from a payer through the Payer’s bank by leveraging an instruction or mandate provided by the payer. An entity wishing to participate as a Biller in the Direct Debit scheme will typically contact its bank or payment service provider. The service may be deployed on channels provided by the Biller through its bank or Payment Service Provider.

CBN Framework for the Use of Unstructured Supplementary Service Data (USSD) Financial Services in Nigeria, 2018: 

The framework applies to service providers that provide financial services through the use of USSD in Nigeria including the following Financial institutions, Mobile Money Operators, Mobile network operators, NCC Licensee value added Service providers and Aggregator. For the CBN-licensed entities, other than Mobile Money Operators, a letter of no objection/introduction from the CBN would be required before being considered for the issuance of the USSD shortcodes by the NCC, subject to meeting the requirements of the NCC.

CBN Risk-Based Cyber-Security Framework and Guideline for Deposit of Money Banks and Payment Service Providers, 2018:

The framework provides a risk-based approach and also outlines the minimum cybersecurity baseline to be put in place by Deposit Money Banks (DMBs) and Payment Service Providers (PSPs),  The framework is designed to guide DMB  and PSP  in the implementation of their cybersecurity programs towards enhancing their resilience

CBN Regulation for Bills Payment in Nigeria 2018:

The Regulation covers Bill Payments on various payment channels and any payment platform that seeks to integrate the payment side of commercial activity and merchant aggregators in Nigeria. The payment methods include Cheques, Cards, Direct Debit, Instant Payments, and Automated Clearing House among others. Any company or entity desirous of operating a bill payment platform shall apply to the CBN for a license.

CBN Guideline for Electronic Payment in Nigeria 2016:

These Guidelines apply to all financial institutions that offer AUTOMATED TELLER MACHINE (ATM) Operations in Nigeria and Point of sale (POS) Card Acceptance Services in Nigeria. Failure of financial institutions to adhere to guidelines attracts penalties.

CBN guideline on Mobile Money Services in Nigeria 2015:

This guideline addresses business rules governing the operation of mobile money services, and specifies basic functionalities expected of any mobile payment service and solution in Nigeria. It is applying to a bank-led – Bank and/or its Consortium as Lead Initiator and a Non-Bank Led, I.e. corporate organization duly licensed by the CBN as Lead Initiator.

CBN Guideline on International Mobile Money Remittance Service in Nigeria 2015:

This guideline provides minimum requirements for the operation of international mobile money remittance (IMMRS) services in Nigeria. Any institution that wants to carry on the business of international money remittance must apply to CBN for a license to operate.

CBN Guideline on International Money Transfer Service in Nigeria 2014:

These guidelines address the rules governing the operation of international money transfer services in Nigeria.  Financial company that intends to provide international money transfer services must duly apply to CBN for the license to operate.

CBN Revised Guideline for Finance Companies in Nigeria 2014:

The Guideline applies to all companies desiring to be licensed as a Finance Company. The act prohibits financial institutions from engaging in other businesses which are not finance and thus all financial companies must be strictly limited to solely engaging in Finance Company business. Any company seeking a license for a Finance Company business in Nigeria must apply in writing to the Governor of the Central Bank of Nigeria by following the requirements as stated in the guidelines.

CBN Microfinance Policy, Regulatory and Supervisory Framework 2011:

CBN is responsible for licensing microfinance banks. All Microfinance banks must have “microfinance bank” attached to their registered name at the CAC. Microfinance Banks are required to be adequately capitalized, technically sound, and oriented towards lending based on cash flow. The Policy provides for three (3) categories of microfinance banks; Unit Microfinance bank which is required to operate in only one branch and have paid up capital of N20,000,000.00 (Twenty Million Naira); State Microfinance Bank is required to operate in one State and can open branches in the State. The State Microfinance bank is required to have N100,000,00.00 (Hundred Million) share capital. The third category is the National Microfinance Bank which can operate in more than one state and is required to have paid-up share capital of Two Billion Naira.

NCC Value Added Services and Aggregator (VAS) Framework 2018:

The Framework applies to Network Operators, Aggregators, Content/application service providers Segments, and Developers of content, applications, and platform in Nigeria. Financial Companies that want to make use of VAS must apply to NCC for the license to operate. Also, the provision of the Nigerian Communications Act, 2003 (section 31.1) barring any company in Nigeria from offering any telecommunications service without an appropriate license applies equally to value added services. These include location-based services, commercial ringtones and ringback tones, music downloads, and mobile money services among others.

SEC Crowdfunding Rule 2021:

The Rule applies to investment-based crowdfunding and the SEC has mandated that all existing portals/platforms that facilitate investment-based crowdfunding should comply with the requirements of the SEC Crowdfunding Rules and register with the SEC or cease their operations by the 30th of June 2021. Failure to comply with the rules would render any operation by an unregistered entity illegal and they will be subject to regulatory sanctions as provided by the Rules.

Moneylender Laws of respective States:

Moneylending regulations vary by state. Take, for instance, the Moneylenders Law in Lagos State. According to this law, anyone who lends money at interest or provides a sum with the expectation of receiving a larger sum in return is considered a moneylender unless proven otherwise. However, certain entities like cooperative societies, banks, insurance firms, and licensed pawnbrokers are exempt from this classification.

To obtain a Money Lender’s License, a company must apply to the Magistrate Court and the Ministry of Home Affairs and Tourism, along with accompanying documentation. Additionally, if a company has foreign directors, it must appoint a Nigerian alternate director. Applicants with foreign shareholders must also provide proof of residence. Once the license application is submitted, the ministry will approve the application.
source: https://mascotlegal.com.ng/2024/05/07/regulatory-framework-for-registration-of-financial-technology-fintech-in-nigeria/