Colin Egemonye – Goldsmiths Solicitors Nigeria https://www.goldsmithsllp.com Goldsmiths Solicitors Nigeria Tue, 24 Jun 2025 08:36:46 +0000 en-US hourly 1 https://www.goldsmithsllp.com/wp-content/uploads/2025/05/cropped-Untitled-design-32x32.png Colin Egemonye – Goldsmiths Solicitors Nigeria https://www.goldsmithsllp.com 32 32 The Petroleum Industry Act, 2021 – Goldsmiths Solicitors PIA Series 1 https://www.goldsmithsllp.com/the-petroleum-industry-act-2021/?utm_source=rss&utm_medium=rss&utm_campaign=the-petroleum-industry-act-2021 Fri, 02 Sep 2022 04:24:51 +0000 https://jokewoods.com/?p=6386

The Petroleum Industry Act (the PIA) was signed into law by Nigerian President, Muhammadu Buhari on 16 August 2021. Before its passage into law, it was a Bill pending for over 20 years at the National Assembly. Its passage represents a breakthrough for the petroleum industry in Nigeria with its innovative provisions and is aimed at repositioning the sector and meeting international best practices.

 

The PIA marks the beginning of the end of the Nigerian National Petroleum Corporation (NNPC) which was established on 1 April 1977. It provides for the incorporation of a National Oil Company – Nigerian National Petroleum Company Limited (NNPC Ltd.) which will eventually be vested with the responsibility of winding down the NNPC and taking over its operations.

 

Creation of Ministry of Petroleum Incorporated

The Act creates the Ministry of Petroleum Incorporated as a sole corporation.[1] The Ministry is to be a co-shareholder in the NNPC Ltd as discussed below.

 

Incorporation of NNPC Ltd.

The Act provides for the incorporation of the Nigerian National Petroleum Company Limited (NNPC Ltd) with the Corporate Affairs Commission (CAC) as a Limited Liability Company within six (6) months of the commencement of the Act.[2] It vests the ownership of all Shares with the Federal Government, to be held by the Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated in equal proportion.[3]

 

The shares held on behalf of the Federal Government cannot be transferred except approved by the Federal Government and endorsed by the National Economic Council on behalf of the Federation[4] and the transfer is to be done through an open and competitive bidding process and at a fair market value.[5]The Act makes NNPC Ltd the Concessionaire of all Product Sharing Contracts, Profit Sharing and Risk Service Contracts on behalf of the Federation.[6]

 

Following incorporation with the CAC and commencement of its operations, NNPC Ltd is required to remit the proceeds of sale of profit oil and profit gas less 30% to the Federation Account. The 30% is to be remitted to the Frontier Exploration Fund.[7]

 

Winding Down of NNPC

The Act divests the NNPC of its functions and transfers it to NNPC Ltd[8] after the conclusion of its winding down process, the NNPC as we know it shall cease to exist.[9] The Minister of Petroleum is required to consult with the Minister of Finance to appoint NNPC Ltd as the agent in charge of winding up NNPC.[10] All interests, assets and liabilities of NNPC are to be identified and transferred to NNPC Ltd within 18 months from the enactment of the Act.[11] All liabilities not transferred within the 18 months period are to be disposed in accordance with a framework to be set up by the Ministers of Finance and Justice – who doubles as the Attorney General of the Federation.[12] This framework is yet to be set up by these two Ministers.

 

The Establishment of the Nigerian Upstream Petroleum Regulatory Commission and the Nigerian Midstream and Downstream Regulatory Authority

The Commission and the Authority are the main regulatory bodies in the petroleum sector in Nigeria. They regulate the upstream, midstream and downstream petroleum sectors in accordance with the functions set out in the Act.

The Nigerian Upstream Petroleum Regulatory Commission.

The Act establishes the Nigerian Upstream Petroleum Regulatory Commission (the Commission).[13] The Commission is technically and commercially responsible for the regulation of the upstream petroleum operations in Nigeria,[14] including operations in the Frontier Basins of Nigeria.[15]

 

The Commission among other things is to, maintain a Fund known as the Commission Fund[16] and issues permits, licenses and other authorizations in the upstream sector such as the Petroleum Exploration License and Petroleum Mining Lease, etc. It is also in charge of integrated operations of both the Upstream and Midstream Petroleum Operations.

 

The Commission is required to maintain the Frontier Exploration Fund.[17] Its purpose is for the development of Frontier Acreages and, the exploration and development of Frontier Acreages activities in Nigeria, subject to appropriation by the National Assembly. The main source of revenue for the Fund is derived from 30% of NNPC Limited’s profit Oil and Gas.[18]

 

The Commission is required to comply with reporting obligations and is prohibited from accepting grants from persons and organisation regulated by them.

 

The Nigerian Midstream and Downstream Regulatory Authority

The Act establishes the Nigerian Midstream and Downstream Authority (the Authority).[19] It is vested with the responsibility of regulating the midstream and downstream petroleum operations in Nigeria, including the collection of gas flare penalty from midstream operations.[20]

 

The Authority is to maintain “the Authority Fund”[21] whose source of income, among other sources includes 0.5% of the wholesale price of Petroleum Products sold in Nigeria and which is to be collected from wholesale customers.[22] It is to ensure compliance with its reporting obligations and is prohibited from accepting grants and properties from persons or organisation that are regulated by them.

 

The Act establishes the Midstream and Downstream Infrastructure Fund[23] which is to be maintained by the Authority and penalties arising from Gas flaring from midstream operations are to be credited into the Infrastructure Fund which are to be utilized for midstream and downstream gas infrastructure investment within host communities of a designated facility.[24]

 

The Authority is charged with the responsibility of reimbursing oil marketing companies through funds available in the Petroleum Equalization Fund. However, where the money in the Fund is not sufficient for reimbursement, monies available in the Fund will be prorated at a ratio based on funds remaining and outstanding payments. Where the Fund runs at a deficit or there is no money in the Fund, oil marketing companies will have no claim on the outstanding amount.

 

Any entity or individual, representative, etc. that fails to grant access or provide information requested by the Commission or Authority will be guilty of an offence and liable upon conviction to the payment of N5million or 5years imprisonment and N100,000 for each day the offence continues.[25]

 

Establishment of Incorporated Joint Venture Companies.

In respect of Upstream Petroleum Operations, the NNPC Ltd and parties to Joint Operating Agreements can voluntarily restructure their Joint Operating Agreement as a Joint Venture carried out by way of a Limited Liability Company and referred to as an Incorporated Joint Venture Company.[26] The initial capitalization and transactions required for the formation of the IJVC will not create additional tax liabilities for the IJVC provided that all assets, liabilities and interests, jointly owned in the JOA are transferred to the IJVC at their net value.[27]

 

Repealed Laws

The Act repeals six (6) laws – the Associated Gas Reinjection Act 1979, the Hydrocarbon Oil Refineries Act, Motors Spirit Returns Act, Nigerian National Petroleum Corporation (Projects) Act, Nigerian National Petroleum Corporation Act, the Petroleum Products Pricing Regulatory Agency (Establishment) Act while two (2) laws are to be subsequently repealed upon the happening of some events – the Petroleum Profit Tax Act, 2004 and the Deep Offshore and Inland Basin Production Sharing Contract Act, 2019.[28]

 

The Act does not repeal the Petroleum Act as holders of the previously issued licences/leases such as the Oil Prospecting License, Oil Mining Lease, etc. are still governed by the provision of the Petroleum Act until the license/lease expires or are converted to leases or licenses issued under the Petroleum Industry Act.[29] However, provisions under the repealed laws shall remain in force provided that they are not inconsistent with the provisions of the PIA.[30]

 

Conclusion.

Contrary to the speculations, the PIA only paves the way for the extinction of the Petroleum Act 1969 and does not completely repeal it. Provisions of extant laws should also be considered by operators in the Petroleum Industry in so far as they are not contrary to the PIA.

The PIA is a bold and ambitious piece of legislation. It shall mark the end of the Nigerian State oil Corporation the NNPC as we know it. If properly implemented, it should make the NNPC Ltd. a transparent company, which adopts international best practice in its operations.

 

Watch out for our next publication on the PIA series coming out on 21st September 2021 which shall address the streams/category of operators in the Petroleum Industry as well as licenses/leases available to them under the PIA.

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 visitwww.goldsmithsllp.comor contact us.

 

 

[1] Eighth Schedule, Petroleum Industry Act 2021

[2] Ibid, Section 53 (1)

[3] Ibid, Section 53 (3)

[4] Ibid, Section 53 (5)

[5] Ibid, Section 53 (6)

[6] Ibid, Section 64 (b)

[7] Ibid, Section 64 (c)

[8] Ibid, Section 64 (j)

[9] Ibid, Section 54 (3)

[10] Ibid, Section 55

[11] Ibid, Section 54 (1)

[12] Ibid, Section 54 (2)

[13] Ibid, Section 4

[14] Ibid, Section 6

[15] Ibid, Section 9

[16] Ibid, Section 24

[17] Ibid, Section 9(4)

[18] Ibid, Section 9(5)

[19] Ibid, Section 29(1)

[20] Ibid, Section 259 (c)

[21] Ibid, Section 47(1)

[22] Ibid, Section 47(2) (c)

[23] Ibid, Section 52 (1)

[24] Ibid, Section 33(y)

[25] Ibid, Section 26 (3) and 49 (3

[26] Ibid, Section 65

[27] Ibid, Second Schedule, Para 5(2)

[28] Ibid, Section 310(1)

[29] Ibid, Section 303

[30] Ibid, Section 311.

 

 

]]> How a Foreigner can Register a Local Company in Nigeria https://www.goldsmithsllp.com/how-a-foreigner-can-register-a-local-company-in-nigeria/?utm_source=rss&utm_medium=rss&utm_campaign=how-a-foreigner-can-register-a-local-company-in-nigeria Fri, 02 Sep 2022 04:10:38 +0000 https://jokewoods.com/?p=6383 Nigeria operates a free-market economy and there are no restrictions on foreigners setting up companies in Nigeria. Subject to the laws of Nigeria, a foreign individual or entity can set up a fully owned company in Nigeria and operate, employ expatriates and repatriate profits. However, before any foreigner can carry on business in Nigeria, it is a mandatory requirement that the entity is duly registered in the country.

 

The Companies and Allied Matters Act 2020 (CAMA) is the principal legislation that governs the registration of companies in Nigeria while the Corporate Affairs Commission (CAC) is the regulatory authority. Apart from the registration of the company, there are other regulatory requirements that must be met before any company can legally commence its business in Nigeria.

 

 

Registration with CAC

The process involved in the registration of a company in Nigeria are as follows:

  1. Availability and Reservation of Proposed Name
  2. Application and Registration
  3. Approval

 

Availability and Reservation of Name

The first step is to conduct a name availability search with the CAC. The purpose of this is to ensure that the proposed name of the company is available for use and that there is no other company that has registered the same or similar name. Once the name is available, the CAC would issue a certificate of name reservation, which is usually valid for 60 days, enabling the registration to proceed to the next stage. It is always advisable to propose two names in case the first name is not approved.

 

Application and Registration

Following the reservation of the proposed name above, the next step would be to prepare all the necessary documents in support of the application. These includes the memorandum and articles of association of the proposed company. To this end, the promoters of the proposed company are required to provide the following information:

  1. The type of company to be registered
  2. Registered address of the company
  3. The objects or nature of business of the company
  4. Details of the company secretaries
  5. Minimum issued share capital. (Please note that there is a minimum issued share capital requirement of N10,000,000 for companies with foreign participation. The minimum issued share capital could be more depending on the sector the company wishes to operate in).
  6. Particulars of the proposed shareholders.
  7. Particulars of the proposed directors.

 

Approval by CAC

Once the above information has been received and completed, they are submitted to the CAC for vetting. Payment of the filing fee is made and stamp duty is charged on the minimum issued share capital at the rate of 0.75%.  If satisfied, the CAC shall issue a certificate of incorporation evidencing that the company is now a legal entity authorized to commence business in Nigeria. Simultaneously, the Federal Inland Revenue Services (FIRS) would issue a Tax Identification Number (TIN) to the newly registered company. The TIN is a unique identifier that is linked to the company which enables it charge and remit the appropriate taxes to the FIRS.

 

 

Business Registration with Nigerian Investment Promotion Commission (NIPC)

Following the successful incorporation of the new entity with the CAC, there is a mandatory requirement for that entity to be registered with the NIPC before the company could legally commence any business in Nigeria. The NIPC has the primary responsibility to encourage, promote and cordinate investment in the Nigerian economy. The NIPC also has the responsibility of granting some incentives like pioneer status to any company which qualifies for such status.

The application to the NIPC involves filling the relevant application form, providing details of the shareholders and directors of the company and paying the appropriate official fee. If satisfied, the NIPC would issues a Certificate of Business Registration to the entity.

 

 

Business Permit, Expatriate Quota and Work Permit

In addition to the above, a wholly owned foreign company wishing to operate in Nigeria must obtain a business permit from the Nigerian Ministry of Interior and expatriate quotas if it wishes to employ foreigners in the country.  The expatriate quota is the precursor to the application for and issuance of work permit to the foreigner being employed by the company in Nigeria. Once approved, the expatriate is issued a Combined Expatriate Residence Permit and Aliens Card (CERPAC) which allows the employee to reside and work in Nigeria.

 

 

Certificate of Capital Importation

The company will need to obtain a Certificate of Capital Importation (CCI) from an authorised dealer, usually a local bank to serve as evidence of importation of capital which could be equity, debt, cash or goods into the country. The CCI also guarantees the unconditional repatriation of capital and profits out of the country.

 

 

Other Registrations/licensing Requirements

Depending on the sector of the Nigerian economy where the new company wishes to operate, it may be necessary to obtain registrations and/or licenses from some of the following (non-exhaustive) agencies:

  • Central Bank of Nigeria (CBN)
  • National Agency for Food and Drug Administration and Control (NAFDAC)
  • Nigerian Electricity Regulatory Commission (NERC)
  • Nigerian Communications Commission (NCC)
  • Nigerian Civil Aviation Authority (NCAA)
  • Nigerian Maritime Administration and Safety Agency (NIMASA)

 

 

Conclusion

Nigeria is a country of over 200 million people and operates a free market economy. There are no restrictions on foreigners wholly owning and operating companies in the country. The CAMA is the principal legislation that governs company registrations in the country and the CAC is the main regulatory body that oversees the registration of companies in Nigeria. The NIPC has the primary responsibility to encourage, promote and coordinate investment in the Nigerian economy. Any company wishing to employ expatriates in Nigeria must first obtain an expatriate quota for the relevant expatriate positions and then obtain work and residency permits.

There are other licensing and registration regimes, which depending on the sector the company wishes to operate in, it will also have to register with those agencies.

 

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 us.

 

 

]]> Overview of the Central Bank of Nigeria Exposure Draft Guidelines for Credit Guarantee Companies in Nigeria https://www.goldsmithsllp.com/overview-of-the-central-bank-of-nigeria-exposure-draft-guidelines-for-credit-guarantee-companies-in-nigeria/?utm_source=rss&utm_medium=rss&utm_campaign=overview-of-the-central-bank-of-nigeria-exposure-draft-guidelines-for-credit-guarantee-companies-in-nigeria Fri, 02 Sep 2022 03:59:28 +0000 https://jokewoods.com/?p=6380 On 4 August 2021, the Central Bank of Nigeria (CBN) issued the Exposure Guidelines to regulate the activities of Credit Guarantee Companies (CGCs) in Nigeria. The Guidelines are expected to create a conducive atmosphere for Micro, Small and Medium Enterprises (MSMEs) to access credit at low interest rates from banks and financial institutions in a bid to solve the problem of their inability to obtain loans. The Guidelines also stipulate the activities that CGCs are permitted to undertake while outlining the non-permissible activities, application processes for obtaining Approval-in-Principle and licence as well as the corporate governance structure of CGCs.

 

 

Definition of Credit Guarantee Companies

According to the Guidelines, a CGC is an institution licensed by the CBN with the primary objective of providing guarantees to banks and other lending financial institutions against the risk of default by obligors.

An example of a Credit Guarantee Company in Nigeria providing guarantees for MSMEs to access credit is Impact Credit Guarantee Limited.

 

Objectives of the Credit Guarantee Scheme

The objectives of the scheme include the following:

  1. Improve access to credit for MSMEs
  2. Reduce credit risk in lending by providing guarantees to PFIs
  3. Stimulate lower interest rates on loans
  4. Promote flexible collateral requirements
  5. Encourage new business formation, development and expansion
  6. Foster sustainable and inclusive growth
  7. Improve risk management in the financial sector.

 

 

Powers and Duties of the Central Bank of Nigeria

The Central bank of Nigeria shall have regulatory and supervisory powers and duties over CGCs in addition to the following:

  1. Grant and revoke licence.
  2. Determine minimum capital requirements.
  3. Approve the appointment of board members and senior management staff.
  4. Remove board members and senior management staff.
  5. Approve the appointment of external auditors.

 

 

Permissible Activities

The activities which CGCs may legally engage in include:

  1. Provide guarantee for risk assets.
  2. Render advisory services for financial and business development.
  3. Invest surplus funds in government securities.
  4. Maintain and operate various types of accounts with banks in Nigeria.
  5. Engage in the recovery of guaranteed sum from defaulting borrowers post claims payment.
  6. Other activities as may be prescribed by CBN from time to time.

 

 

Non-permissible Activities

The non-permissible activities for CGCs include the following:

  1. Provision of guarantee to entities outside Nigeria.
  2. Provision of credit to customers.
  3. Acceptance of demand, savings and time deposits or any other deposits.
  4. Management of pension funds or schemes.
  5. Foreign exchange, commodity and equity trading.
  6. All forms of trading in derivatives and swaps, etc.

 

 

Licensing Procedure and Requirements

The application for licence is made by the promoters of the CGC and addressed to the Governor of CBN. The application for licence shall be processed in two stages namely: Approval-in Principle and final licence.

 

Requirements for Approval-in-Principle

The requirements for obtaining Approval-in-Principle for CGC include:

  1. Apply to the Governor of the CBN in writing together with the following:
  2. A non-refundable application fee of N100,000.
  3. Evidence of the deposit of the specified minimum capital requirement of N10,000,000,000 into a CBN designated account.
  4. Evidence of capital contribution made by each shareholder.
  5. Evidence of name reservation with Corporate Affairs Commission.
  6. Detailed business plan or feasibility report.
  7. Draft copy of the Memorandum and Articles of Association of the company.
  8. Shareholders agreement.
  9. Detailed manuals and policies.
  10. Upon receipt of the application and satisfactory documentation, the CBN shall verify the capital contributions of the promoters of the CGC.
  11. Where CBN is satisfied with capital contribution of the promoters, it shall issue Approval-in-Principle to the promoters of the CGC.
  12. The CBN shall communicate its decision to the promoters within 90 days of the receipt of the application.
  13. The proposed CGC shall not register or incorporate its name with Corporate Affairs Commission until an Approval-in-Principle has been obtained from the CBN.

 

Requirements for Final Licence

Not later than six months after obtaining the Approval-in-Principle from CBN, the promoters of a proposed CGC shall submit an application for the grant of final licence. The application shall be accompanied with the following:

  1. Non-refundable licensing fee of N1,000,000 (One Million Naira)
  2. Certified True Copy (CTC) of certificate of incorporation of the CGC.
  3. CTC of the Memorandum and Articles of Association.
  4. CTC of CAC form 1.1.
  5. Evidence of payment of stamp duties.
  6. Internal control policy.
  7. Business continuity plan, etc.

However, before the final licence is granted, CBN shall inspect the premises and facilities of the proposed CGC.

 

 

Corporate Governance Structure for CGCs

The board is to be responsible for the affairs of the CGC and its performance. The board shall be made up of both executive and non-executive directors whose number is to be more than executive directors’. The board is to be composed of 5 members minimum and 7 members at the maximum. It should be noted that the appointment of the members of the board is subject to CBN’s approval.

 

There shall be the positions of a Managing Director and Chief Executive Officer. The two positions are not to be merged but to be occupied by different individuals.

The board is to be appraised annually by an independent consultant on aspects of board’s structure, composition, responsibilities and performance.

 

Sources of Funds of CGCs

CGCs can access funds from any source approved by CBN. These sources include:

  1. Paid-up share capital.
  2. General reserves.
  3. Long-term loans from international organisations and sponsors.
  4. Funds from development partners.
  5. Loans from governmental bodies.
  6. Preference shares.
  7. Bonds.
  8. Grants and donations from sources approved by the CBN, etc.

 

 

Compliance, Sanctions, and Revocation of Licence

CGCs are required to comply with all laws, rules and regulations. One of the directives is for CGCs to be prudent and not to guarantee more than 75% of the credit provided to any MSME. Where the CGC fails to comply, it shall be met with administrative sanctions. The sanction could be suspension of its operation, monetary penalties, prohibition from declaring dividends, or revocation of licence, etc.

The licence of a CGC may also be revoked where it is insolvent, misuses the licence or ceases operation for a continuous or aggregated period of six months within 12 months.

 

 

Conclusion

The issuance of the Guidelines is aimed at facilitating MSMEs access to credit at low interest rate. This is a step in the right direction by CBN. It will ensure that credit loans are guaranteed by minimizing credit risks that banks and other financial institutions are reluctant to take up. It would potentially also lead to business and economic growth for Nigeria especially in the MSME sector.

In applying for approval in principle and license, CGCs are to be prudent by ensuring that all CBN’s requirement for CGC’s licensing are met.

 

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 us.

 

 

]]> The New Central Bank of Nigeria Regulatory Framework and Guidelines for Mobile Money Services in Nigeria https://www.goldsmithsllp.com/the-new-central-bank-of-nigeria-regulatory-framework-and-guidelines-for-mobile-money-services-in-nigeria/?utm_source=rss&utm_medium=rss&utm_campaign=the-new-central-bank-of-nigeria-regulatory-framework-and-guidelines-for-mobile-money-services-in-nigeria Fri, 02 Sep 2022 03:38:04 +0000 https://jokewoods.com/?p=6373 On 9th July 2021, the Central Bank of Nigeria (CBN) released a single-document circular, setting out the framework and guidelines for the operations of Mobile Money Services in Nigeria (the Guidelines and Framework). The Guidelines and Framework sets out the rules which governs the business of mobile money operation in Nigeria and stipulates the minimum requirements and standards for the operation of mobile money system by participants. The purpose of this article is to consider the main provisions of those Guidelines and Framework.

 

 

What are Mobile Money Services (MMS)?

Mobile Money Services (MMS) are Services through which mobile phones and other mobile devices are used to access financial services such as money transfers, purchase airtime, make payments online, etc.

 

Models for the Implementation of MMS in Nigeria

  1. The Bank led model – consisting of a bank or a consortium of banks leveraging on the mobile payment system to deliver banking services.
  2. The Non-bank led model – consisting of corporate organisations duly licensed by the CBN to provide mobile money services.

 

Those prohibited from providing Mobile Money Services in Nigeria.

The following are prohibited by the Guidelines from providing mobile money services in Nigeria. They include: Deposit Money Banks, National Primary Mortgage Banks, National Microfinance Banks, and Telecommunication Companies and/or their subsidiaries.

 

 

Participants in the Mobile Money System

The following are participants in the Mobile Money System. They include: They are the Regulators, the Mobile Money Operators, Infrastructure Providers, Mobile Network Operators, other Service Providers, Consumers and Mobile Money Agents.

 

 

The main regulatory bodies for Mobile Money Services and Systems in Nigeria?

The CBN and the Nigerian Communications Commission (NCC) are the main regulatory bodies for mobile money services in Nigeria. The CBN grants license to Mobile Money Operators (MMOs) and generally regulates financial services rendered. The NCC grants approvals and issues unique short codes to the MMOs.

 

Mobile Money Operators

Mobile Money Operators are CBN licensed entities such as banks, consortium of banks, or corporate entities that provide the infrastructure for the mobile payment systems for the use of participants that are signed-on to their scheme.

 

 

Rules guiding Mobile Money Operators

The Guidelines stipulates the rules which MMOs are to abide by while transacting their business. They include rules on licensing, permissible and non-permissible activities, transactions, activation, operation of mobile payment transfer, their settlement accounts, operation of saving wallet, etc. Some of these rules are:

  1. MMOs are to be issued a unique scheme code by the Nigerian Inter-Bank Supplementary System (NIBSS) as a unique short code by the NCC;
  2. They are to ensure that their telecommunication equipment are type-approved by the NCC;
  3. They are to insure the total outstanding (unspent) balance which represents Mobile Money Subscribers’ unspent funds up to the applicable coverage level by the Nigeria Deposit Insurance Corporation (NDIC).
  4. They are to engage in only permissible activities such as wallet creation and management, e-money issuance, non-bank acquiring, card acquiring, pool account management, agent recruitment, etc.
  5. They are to ensure that registered users activate the service before the commencing transactions with a security code.
  6. Transactions initiated and concluded within their mobile payment system is required to contain detailed information and have a unique transaction reference issued by the system.
  7. They are to appoint and notify CBN of their settlement banks.
  8. They are to settle all obligations arising from mobile payment transactions into settlement accounts held with Deposit Money Banks and they are to maintain separate accounts for their other business activities.
  9. The settlement account will be a non-interest bearing account, will have no right of set-off and no form of bank charges.
  10. They are to ensure compliance with rules for the operation of Bank, Card and Store Value Account Based mobile payment transaction.
  11. They are to put in place detailed processes that cover the entire solution delivery, from user registration and management, agent recruitment and management, Consumer protection, dispute resolution procedures, Risk management processes, to transaction settlement.
  12. If an MMO intends to provide a savings wallet service, it is to notify the CBN and obtain its approval
  13. Scheme operators (MMOs that are Banks) are required to maintain a minimum shareholder funds of N2,000,000,000.00 (Two Billion Naira Only) unimpaired by losses at all times or such other amount as may be prescribed by the CBN from time to time
  14. A risk management officer tasked with providing internal risk management oversight is to be assigned by the MMO
  15. They are to have, well documented and tested business continuity plans (BPC) approved by the board, that address all aspects of the mobile money business, to take care of business disruptions and ensure system availability and recoverability.
  16. They are to ensure that the Mobile Money infrastructure BCP is tested through a fail-over process, at least twice a year and that the fail-over is tested, at least quarterly, and enterprise wide BCP is tested on yearly basis
  17. They are to ensure that a channel of communication is in place 24/7 to entertain enquiries and complaints in a language understood by customers.
  18. Resolve customer complaints within a reasonable time and not later than 48 hours from the date of reporting or lodging the complaint with the MMO.

 

 

Non-permissible activities for MMOs

Mobile Money Operators are not permitted to carry out the following activities:

  1. Grant any form of loans, advances and guarantees (directly or indirectly)
  2. Accept foreign currency deposits;
  3. Dealing in the foreign exchange market except when carrying out payments and remittances (including inbound cross-border personal remittances) services through various channels within Nigeria and, the sale of foreign currencies realized from inbound cross-border personal remittances to authorized foreign exchange dealers
  4. Insurance underwriting;
  5. Accept any closed scheme electronic value (e.g. airtime) as a form of deposit or payment;
  6. Establish any subsidiary;
  7. Undertake any other transaction which is not prescribed by these Guidelines

 

 

Dispute Resolution

The Guidelines provides that MMOs are to take the lead in resolving any dispute between it and its consumer. Any dispute that arises within institutions in the Mobile Money Scheme are to be resolved internally within 14 days and where it fails, it is to be resolved in accordance with the provisions of the Arbitration and Conciliation Act, 2004.

 

 

Reporting Obligations.

All licensed Mobile Money Operators have the following reporting obligations:

Weekly returns

MMOs are required to reconcile daily, the balances in their pool accounts and make weekly returns to the Director, Payments System Management Department of the CBN.

 

Monthly reports

  • Not later than the 14th of every month, MMOs are to submit data and information including the Nature, value and volume of transactions, Nature and number of customer complaints and remedial measures taken, and incidents of fraud to the CBN.
  • Non-bank MMOs are to submit monthly assessment report on the performance in prescribed format, and the submission of same to the Director, Payments System Management Department of the CBN.

 

Annual reports

  • MMOs are to make available to the CBN their audited annual returns within the first three months after the year end or 31st of March.
  • A copy of the External Auditor’s Report of the MMOs reviewing the Business Continuity Plan is to be forwarded to the CBN latest March 31st of the following year.

 

Record keeping

  • MMOs are to keep record of transactions emanating from the organization’s Mobile Money System for at least, seven (7) years.
  • MMOs are to maintain audit trails and settlement logs for at least, seven (7) years.
  • MMOs are to maintain a log online containing the electronic summary of transaction and the electronic receipt for at least, three (3) months and it is to be archived subsequently for at least, seven (7) years.
  • Scheme operators are to ensure that all settlement information details are preserved for reference for at least, seven (7) years.

 

Sanctions

Some of the sanctions for the failure/refusal to comply with provisions of the Guidelines are:

  1. Withholding Corporate approvals
  2. Financial penalties
  3. Suspension from mobile money operation
  4. Revocation of the mobile money operation license.

 

Cessation of Mobile Money Operator

MMOs wishing to exit from the mobile payments system are to notify the CBN in writing regarding the intention for the discontinuation, 120 days before ceasing its operations.

 

 

Conclusion.

The Guidelines provide the minimum standards required of MMOs to ensure secure mobile money transactions and ensure fair and healthy competition in the Nigerian financial sector.

These Guidelines are very far reaching and have severe sanctions for non-compliance. MMOs should therefore ensure compliance with the provisions of the Guidelines and Framework.

 

 

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:

 

 

]]> Requirements of the Central Bank of Nigeria (CBN) Guidelines for Shared Services Arrangements for Banks and Other Financial Institutions in Nigeria, 2021 https://www.goldsmithsllp.com/requirements-of-the-central-bank-of-nigeria-cbn-guidelines-for-shared-services-arrangements-for-banks-and-other-financial-institutions-in-nigeria-2021/?utm_source=rss&utm_medium=rss&utm_campaign=requirements-of-the-central-bank-of-nigeria-cbn-guidelines-for-shared-services-arrangements-for-banks-and-other-financial-institutions-in-nigeria-2021 Fri, 02 Sep 2022 03:25:19 +0000 https://jokewoods.com/?p=6368 On 26 May 2021, the CBN published its Guidelines for Shares Services Arrangements for Banks and other Financial Institutions in Nigeria (the Guidelines). These Guidelines come into effect on 1st June 2022.

 

Prior to this publication, there were no stated uniform practice for Shared Services Arrangements for Banks and other Financial Institutions in Nigeria. The Guidelines now sets out the minimum standards required for Shared Services and Transfer Pricing Arrangements in the Nigerian Banking and Financial Industry.

 

The Guidelines complement CBN’s Guidelines for Licensing and Regulation of Financial Holding Companies in Nigeria and applies to Commercial Banks, Merchant Banks, Financial Holding Companies, other Financial Institutions, Payment Services Bank and other Payment Services e.g. MMOs, licensed by the CBN.

 

 

What are Shared Services Arrangements?

Shared Services Arrangements are arrangements whereby a member of a group provides services to one or more of its members within the same group (otherwise known as the recipients). The funding of these services is therefore, shared among the recipients.

 

The Aims of the Guidelines

The Guideline seeks to ensure compliance with transfer pricing regulations in Nigeria, regulate shared services arrangements, ensure good corporate governance practice and transparency in the Nigerian financial sector.

 

Approved Services

With CBN’s approval, Shared Service Agreements (SSA) may be entered into in respect of the following services:

  1. Human resources
  2. Risk management
  3. Internal control
  4. Compliance
  5. Market and corporate communication
  6. Information Communication Technology (ICT)
  7. Legal services
  8. Facilities (office accommodation including incidental services e.g. Security)
  9. And other services which the CBN may approve from time to time.

 

 

Main Provisions of the Guidelines

Banks and Other Financial Institutions are to comply with the following in respect of shared services:

  1. They are to have and submit their Shared Service Policies as approved by their respective Boards to the CBN. This is to be reviewed annually;
  2. Recipient financial institutions are to, with the approval of the CBN, enter into an SSA with their parent Company in respect of Approved Services which they do not have the expertise and capacity to carry out.
  3. Shared Services other than Approved Services under the Guidelines will not be charged to the Recipient Financial Institution by the donor.
  4. Foreign subsidiaries will be charged for Shared Services based on the volume and complexity of services consumed by them in the case of technology acquired by the Financial Institution on their behalf.
  5. In the case of technology transfer from the Foreign Parent to the Financial Institution (Nigerian subsidiary), the SSA executed by the parties must expressly convey right to beneficial use of the technology to the local Financial Institution.
  6. The Boards of the respective Financial Institutions (the Parent and Subsidiary) are responsible for putting appropriate governance structures in place, overseeing, and ensuring compliance with existing legislations on Shared Services Arrangements.
  7. Disclosure of Shared Services – This is to be done on the website of the financial institution and is to be contained in their Annual Report to the CBN, stating the importance of the shared services to the institution.
  8. Documentation of Shared Service Fees- Financial Institutions must ensure that the fees in respect of Shared Services are adequately documented as though, the Parties are unrelated. It is not to be merely stated in a journal or entry or set-off against any inter-company account. Documentation could be through invoices, bills, contracts or other similar forms.

 

  • There must be an annual submission of Independent Consultant’s Report reviewing the fees and services rendered and stating the extent of compliance by the Financial Institution with existing legislations.

 

The Independent Review Report is to be sent to the Director of the Banking/Financial Institution Supervision Department or the Director of the Payment Management System (as the case may be) on or before the 31st January of each Accounting year and is to be submitted to the CBN on an annual basis.

 

 

Transfer Pricing Arrangements

Transfer pricing refers to the rules and methods for pricing transactions within institutions under a common control. It is how related parties price services and transactions among themselves.

 

Permitted Transfer Pricing Methods

  1. Comparable uncontrolled price (CUP) method
  2. Resale price method
  3. Cost plus price method
  4. Transactional net margin
  5. Transactional Profit Split
  6. Any other Transfer Pricing method that may be approved by CBN.

The Transfer Pricing method adopted by Financial Institutions is to be stated in their SSA.

 

Consequences of Non-compliance

  1. The officers responsible for non-compliance may be liable to administrative sanctions.
  2. The CBN Governor may impose such sum as the Governor deems fit, which shall not exceed the minimum penalty imposed under the CBN Act, Foreign Exchange (Monitoring and Miscellaneous) Provisions Act, the Credit Reporting Act and any other law relating to banking.

 

 

Conclusion

The Guidelines are intended to ensure that related parties engaging in shared services arrangements operate at arm’s length, that is, as if they are unrelated. There are variety of sanctions imposed by CBN for non-compliance. Banks and other Financial Institutions are therefore encouraged to develop systems for compliance well before the commencement date of 1st June 2022. Compliance is mandatory from 1st June 2022.

 

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

 

 

]]> All you need to know about Nigerian Securities and Exchange Commission’s Regulatory Incubation Guidelines https://www.goldsmithsllp.com/all-you-need-to-know-about-nigerian-securities-and-exchange-commissions-regulatory-incubation-guidelines/?utm_source=rss&utm_medium=rss&utm_campaign=all-you-need-to-know-about-nigerian-securities-and-exchange-commissions-regulatory-incubation-guidelines Fri, 02 Sep 2022 03:10:52 +0000 https://jokewoods.com/?p=6362 On 16 June 2021, the Nigerian Securities and Exchange Commission (SEC) announced an imminent roll-out of an Incubation Programme called SEC Regulatory Incubation (RI) programme for FinTechs operating or seeking to operate in the Nigerian Capital Market.

 

There is no doubt that FinTech operations in Nigeria have continued to gain enormous grounds.  In order to keep up with the pace of developments in that space, regulators such as SEC have continued to update their rules and regulations in order to effectively regulate the FinTech space without compromising market integrity and investor confidence.

 

The RI programme is to be launched in the third quarter of 2021 and will only admit identified FinTech business models for a one-year period.

 

 

What is the Regulatory Incubator?

There has been growing concern among FinTech operators in Nigeria regarding new FinTech business models whose kinds of operations, though may have semblance of business to be regulated by SEC are not specifically designated to be regulated by SEC. As a result, this SEC Regulatory Incubation will allow these FinTech companies operate under some prescribed basic but limited provisions for a specified period.

 

This practice will enable SEC to have a first-hand supervision of these new models of providing Capital Market services before it becomes fully established either by proposing amendment to existing Rules or by making new ones.

 

These requirements apply to Fintech seeking registration and whose function or operations have been reviewed and deemed requiring an amendment to existing Rules or the creation of completely new ones.

 

 

Who will qualify for Admission into the RI Programme?

The programme applies to all FinTech businesses who consider that there is no specific regulation governing their business models or who require clarity on the appropriate regulatory regime that would apply to their businesses.

 

It also applies to all new business models and processes that require regulatory authorisation from SEC to continue carrying out full or ancillary technology-driven Capital Market activities. For instance, this will be a good opportunity for any digital asset exchanger.

 

There are certain pre-qualification requirements which applicants must meet to qualify for admission. These pre-qualification requirements include:

  1. Applicant shall be using innovative technology to offer a new type of product or service, or applying innovative FinTech to an existing product or service;
  2. Applicant shall be ready to take-off with live customers and operate within the purview of the SEC Regulatory Framework;
  3. The product or service shall be one that addresses a problem (compliance or supervision) or brings potential benefits to consumers or industry; and
  4. Applicant shall complete the FinTech Assessment Form and discuss the proposal with the Commission at an early stage.

 

Participation will involve two stages. The Initial Assessment Phase and the Regulatory Incubation Phase.

The above category of FinTech business can participate by submitting the relevant assessment forms provided by SEC for SEC’s assessment.

 

Depending on SEC’s assessment of each form together with meeting every other pre-qualification requirement, SEC will communicate with the FinTech companies selected for the programme ahead of each take-off-date.

 

 

Regulatory Incubation Operations Requirement

There are guidelines provided for certain operation requirements which must be met by the FinTech operator for regulatory incubation operations. These include that the FinTech operator shall:

  1. have an office in Nigeria;
  2. undertake to comply with AML/CFT requirements;
  3. be deemed fit and possess relevant skills in financial services and/or technology; and
  4. undertake to provide full disclosure to the Commission on the business through an incubation implementation plan etc.

 

 

Restrictions and Conditions

Please note that there are conditions attached for participating in the RI. All participating FinTech operators must among other conditions and restrictions comply with the following

  1. must not conduct any other investment business except as presented to the Commission;
  2. shall be under regulatory incubation only for a maximum period of one-year after which they shall apply for registration if found eligible or discontinue the activity.
  3. shall have the capacity to on-board a maximum of 100 clients who shall be fully informed of the service or product prior to onboarding. Subject to the Commission’s appraisal and approval, the firm may on-board additional clients if the need arises. Firms that are already in operation shall maintain their existing clients and cease on-boarding new ones.

 

A FinTech operator participating in the RI can be terminated upon failure to abide by any of the above conditions and restrictions in addition to any other grounds which SEC deems fit.

As has been mentioned above, an interested FinTech operator shall first and foremost prepare and file an assessment form with SEC together with an application form and a processing fee of ₦200,000.00.

 

 

CONCLUSION

The introduction of this RI presents a good opportunity for FinTech operators who need clarity on whether or not SEC can regulate their innovative business model. This helps in answering their questions of whether they would be required to obtain any relevant licences from SEC in order to comply with regulatory requirements.

FinTech operators who fall under this category will first and foremost be pre-qualified before they are admitted for the RI. These FinTech operators are advised to fill SEC’s assessment forms together with an application fee and forms and submit to SEC for their initial assessment.

 

Please note that the content of this Article is for general guidance on the Subject Matter. It is NOT and is not to be taken as giving legal advice.

 

 

]]> Goldsmiths Solicitors FinTech Webinar – Regulatory Conversations https://www.goldsmithsllp.com/fintech-regulatory-issues-in-nigeria/?utm_source=rss&utm_medium=rss&utm_campaign=fintech-regulatory-issues-in-nigeria Fri, 02 Sep 2022 03:01:37 +0000 https://jokewoods.com/?p=6359 On 30 June 2021, Goldsmiths Solicitors in collaboration with Afriwise, held the first of its Webinar series which examined the regulatory issues for FinTech to be aware of when doing business in Nigeria. The salient points from that discussion was published by the well respected African Law & Business publication, a very credible pan-African source of news with phenomenal coverage, covering 191 jurisdictions.

This publication no doubt reinforces Goldsmiths Solicitors as a leading law firm in the Nigerian FinTech space.

 

The head of Goldsmiths Solicitors’ oil and gas and intellectual property (IP) groups, Lagos-based Colin Egemonye, a dual-qualified barrister in Nigeria, and England and Wales, highlighted some key Nigerian regulatory considerations for fintech companies.

 

These include anti-money laundering and know-your-customer (KYC) checks, as well as data protection and privacy considerations.“How do you store data? How protected are your users? How compliant are you with data protection laws?” Egemonye asked, before noting the reporting obligations such as data compliance reports, a process which “continues throughout your life cycle as a business”.

 

For those setting up a new fintech business in Nigeria, issues to consider include the overlap of regulatory authorities, regulatory uncertainties and high cost implications, said Egemonye. For instance, “the cost of licenses are quite high”, and there are additional taxes and stamp duty payable.

 

There is also a lack of unified regulations, he said and “sometimes it is not very clear what the policies are”. In addition, there is a lack of stringent regulatory requirements  and it can take a very long time to obtain a license, he explained. He added that there are many agencies in Nigeria and they often they say different things.

 

Fintech companies can overcome these issues By adopting international best practices and adhering to international standards. In addition, fintechs could establish better relationships with regulators, he said: “It is very important that fintech companies establish these relationships and maintain them.”

 

Establishing international affiliations or reciprocal agreements could be beneficial, as well as adopting corporate social responsibility measures. This could involve providing training for regulators which in turn could help to build relationships with regulators, he noted.

 

 

TECHNOLOGY COMMERCIALISATION AND IP

For many fintechs, it is also important to be able to monetise IP rights, said Egemonye, emphasising that IP protection can bridge the gap between technology theft and commercialising technology. It can also protect fintechs from unfair competition. It also “protects your names, your symbols and your slogans”, he said. In addition, the protection of IP rights is vital for venture capital.

 

However, Egemonye queried whether trade secrets are actually protected in, for example, confidentiality and non-disclosure agreements. He warned that fintechs must be aware of the protection they are actually afforded in these types of contracts.

 

 

CORPORATE GOVERNANCE and TAX ISSUES

There are a number of corporate governance considerations for fintech companies in Nigeria, including directors’ reporting duties, disclosure obligations and having the right monitoring and control procedures in place.

Tax issues remain, with Egemonye saying:

“One would have thought by now there would be specific tax laws in Nigeria.” The lack of specific tax laws means fintech companies are subject to the general tax laws applying to companies, including company income tax, value added tax, capital gains tax and stamp duty, he said.

 

However, some companies may be eligible for relief or a deduction in company income tax and value added tax. There is also a tax exemption on interest on foreign loans for some companies, he said. However, these incentives “are not specific to fintech companies” Egemonye noted.

 

 

EMERGING REGULATORY ISSUES

There are “quite a lot of emerging issues fintech companies need to be aware of” he continued, however, there have been lots of improvement from governments and their interest in technology and fintech companies. Furthermore, “in Nigeria there is a renewed government interest in technology generally”.

 

Nigeria’s Securities and Exchange Commission has a Regulatory Incubation Programme which is specifically designed for fintech companies operating and wanting to operate in Nigeria. It aims to address some of the regulatory issues for technology-focused companies.

 

One of the biggest legal constraints in Nigeria will be faced by those in the e-commerce sector, a sector which lacks a specific law, said Egemonye, although the Electronic Transactions Bill 2019 addresses certain e-commerce issues, but has not yet been enacted.

 

Egemonye concluded: “The fintech sector is fast paced and fluid” and there has been “lots of renewed interest generally in Nigeria”.

 

Fintech has been booming in Africa over the last few years.

Nigerian fintech Global Accelerex received a USD 20 million investment from private equity firm Africa Capital Alliance in November last year.

 

 

Key Contributor:

]]> A Summary of the Central Bank of Nigeria (CBN) Regulatory Framework for Non-Bank Acquiring in Nigeria https://www.goldsmithsllp.com/a-summary-of-the-central-bank-of-nigeria-cbn-regulatory-framework-for-non-bank-acquiring-in-nigeria/?utm_source=rss&utm_medium=rss&utm_campaign=a-summary-of-the-central-bank-of-nigeria-cbn-regulatory-framework-for-non-bank-acquiring-in-nigeria Fri, 02 Sep 2022 02:15:47 +0000 https://jokewoods.com/?p=6356 On 28th May 2021, the CBN issued a framework for non-bank acquiring in Nigeria. The framework sets out requirements for Participants and it is the primary regulation for non-bank acquiring in Nigeria.

 

Participants in non-bank acquiring

  1. Non-Bank Acquirer
  2. Settlement Bank/Sponsor Bank
  3. Merchant’s Deposit Money Bank
  4. Card Schemes
  5. Other Payment Schemes
  6. Nigeria Central Switch (NCS).

 

Who is a Non-Bank Acquirer?

A Non-Bank Acquirer is a CBN licensed switching and processing Company or any other Company as may be approved by the CBN, other than Acquiring Banks.

 

Requirements for Approval as a Non-Bank Acquirer

An intending Non-Bank Acquirer must be a CBN-licensed Switching and Processing Company or any other company as approved by the CBN and is to seek for approval from the CBN with the following documents:

  1. Evidence of engagement with a card scheme
  2. Due Diligence and Merchant Onboarding Process
  3. Merchant Risk Monitoring Framework
  4. Sponsorship letter from one (1) Settlement Bank
  5. Draft Merchant Agreements
  6. Details of its settlement arrangements
  7. Service Level Agreement (SLA) with Settlement Bank

Business Continuity Plan and any other document(s) that may be required by the CBN.

 

 

The role & responsibilities of Non-Bank Acquirer are as follows:

  1. Process and settle transactions on behalf of merchants in Nigeria.
  2. Put in place, risk controls measure to monitor merchant activity as well as a fraud monitoring/behavioral management solution, such as the KYC/AML policy.
  3. Control merchant approvals and Provide Payment Scheme acceptance privileges;
  4. Stipulate its responsibilities to the merchant, for the security and settlement of transaction amounts to merchant accounts.
  5. Ensure that Merchants’ accounts are credited in respect of the acquired transactions, as agreed in executed SLAs
  6. Have controls in place, related to establishing and changing merchants’ bank accounts where settlement funds are deposited.
  7. Execute Agreement with each payment scheme whose transactions it wishes to acquire.

 

 

Termination of Non-Bank Acquirer’s Approval

The CBN may terminate a Non-Bank Acquirer’s Approval if:

  1. It fails to meet the conditions for renewal of operating license, as a switching and processing company in Nigeria;
  2. CBN revokes any existing license/approval;
  3. An agreement with or approval of payment scheme(s) is terminated;
  4. It is unable to maintain relationship with at least two (2) payment schemes;
  5. There is an operational failure that leads to significant losses/fraud.

Non-Bank Acquirers are prohibited from havingdirect access to or from holding Merchants’ Funds for any other reason whatsoever.

 

 

Settlement/Sponsor Bank

An application for approval is to be sponsored by at least, one (1) acquiring bank (Settlement/Sponsor bank) where the settlement will be domiciled.

 

The role of the Settlement bank is to:

  1. Generate financial/transaction data; and
  2. Compute settlement position in the acquisition process.

 

The roles of other Participants in a Non-Bank Acquiring Process, that is, the Settlement Bank, Merchant’s Deposit Money Bank, Payment Schemes and NCS are and, may from time to time be provided in the Guidelines for the Operations of Electronic Payment Channels in Nigeria as well as other relevant regulations.

 

 

Conclusion

The Framework for Non-Bank Acquiring in Nigeria is a welcome development. The Framework seems to specify requirements for the Non-Bank Acquirer and makes some provisions for the role of the Settlement Banks. It points to the Guidelines for the Operations of Electronic Payment Channels in Nigeria for more direction on the roles of other participants.

 

The Non-bank financial institutions including FinTech companies that fall into this category will be guided by this regulation, the Guidelines for the Operations of Electronic Payment Channels in Nigeria as well as any other legislation that may be enacted from time to time. The Framework also emphases the importance of risk management and the need for Non-bank acquirers to have a KYC/AML policy.

 

Please note that the content of this Article is for general guidance on the Subject Matter. It is NOT and is not to be taken as giving legal advice.

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

 

 

]]> Before You Set Up That Fintech Company: Regulatory Requirements to Be Aware of in Nigeria https://www.goldsmithsllp.com/regulatory-requirements-for-fintech/?utm_source=rss&utm_medium=rss&utm_campaign=regulatory-requirements-for-fintech Sat, 06 Aug 2022 04:11:21 +0000 https://jokewoods.com/?p=5118 In this Article, we shall identify what a FinTech Company is, the Regulatory bodies that control and regulate the FinTech sector in Nigeria and regulatory requirements for FinTech Companies in Nigeria.

 

What is a Fintech Company?

FinTech has been defined as an economic industry composed of companies that use technology to make financial services more efficient[i].

Thus, a FinTech Company is one that provides financial services such as banking services, money transfer, online payment services, etc. digitally as opposed to the traditional over-the-counter or in-person financial services. Examples operating in Nigeria include Interswitch, Flutterwave, Remita, Opay, Piggyvest, etc.

 

Regulatory Bodies for Fintech Companies in Nigeria.

The activities of FinTech Companies are regulated by various agencies in Nigeria. These are mostly government agencies and define the scope, administrative and operational requirements for FinTech companies.

 

The Corporate Affairs Commission (CAC):

This is usually the first regulatory point of contact for startup FinTech companies. They are responsible for incorporation of Companies[ii] and without due approval by the CAC, no FinTech Company can be validly operational in Nigeria.

 

The Central Bank of Nigeria (CBN):

The CBN[iii] is the main regulatory body that has primary responsibility for granting licenses to any individual or entity that desires to carry on banking business[iv] and the business of other Financial Institutions[v] including FinTech Companies in Nigeria.

Any FinTech Company which, before the enactment Banks and Other Financial Institutions Act (BOFIA), 2020 (the Act that establishes the CBN) carries on the business of other Financial Institutions without being duly licensed by the CBN is required to obtain license in accordance with the Act.[vi]

The Securities and Exchange Commission (SEC):

SEC develops and regulates the Nigerian Capital Market with the view of protecting investors and enhancing efficiency. FinTech Companies that provide services in the Nigerian Capital Market such as E-Dividends, Direct Cash Settlement and Dematerialization, registration of securities, Capital Market surveillance, etc. will be required to register with SEC. Every Collective Investment Scheme is to be registered with SEC.[vii] Fintech Companies that are desirous of raising funds through the Capital Market are also required to register with SEC.[viii]

Other regulatory bodies include: The Nigerian Communication Commission (NCC), the Nigeria Deposit Insurance Corporation (NDIC), National Information Technology Development Agency (NITDA), the Federal Competition and Consumer Protection Commission (FCCPC). 

 

The Regulatory Requirements for Fintech Companies in Nigeria:

1. INCORPORATION

This is a mandatory requirement and it is the first leg in the wheel of doing business in the FINTECH space in Nigeria. Before any FinTech Company can transact business in Nigeria, it must be registered or incorporated with the CAC except the company exempt by the Commission.

In incorporating a FinTech Company, essential requirements such as the minimum issued share capital, shareholding, directorship, etc. must be considered by the promoters of the FinTech Company in order to ensure compliance with existing laws and regulations.

 

 

2. LICENSING

FinTech Companies must be duly licensed by the licensing authorities before providing financial services. The CBN is charged with this mandate except as exempted under the BOFIA 2020.[ix]

 

Other requisite license(s) may be obtained from SEC[x], NDIC and NCC depending on the nature of services to be rendered. FinTech Companies may also be required to obtain licenses/approvals from NCC, or other agencies authorised to grant licenses by virtue of any existing laws or regulations.

 

 

3. DATA PROTECTION

FinTech Companies are required to ensure that the data provided by their users and stakeholders are protected except when exempted by law. The 1999 Constitution of the Federal Republic of Nigeria (as amended), CBN Cyber-based Security Framework and Guidelines for Deposit Banks and Payment Service Providers 2018, Cybercrime (Prohibition, Prevention, Etc.) Act 2015, Nigerian Data Protection Regulation 2019, Nigerian Communications Commission (NCC) Draft Consumer Code of Practice Regulations 2018 are some of the data laws which FinTech Companies are required to comply with in Nigeria.

 

 

4. KYC/AML POLICY

FinTech companies are also required to maintain and be guided by a robust Know-Your-Customer/Anti-Money Laundering Policies. This is to mitigate against financial fraud including financing terrorist activities.

The KYC/AML Policy of every FinTech Company must be in line with requirements provided by existing laws, regulations and international best practices. Some of these laws and regulations include; Money Laundering (Prohibition) Act, 2011 (as amended), Money Laundering (Prohibition) Act 2011, Advanced Fee Fraud and other Fraud Related Act 2006.

 

 

Conclusion/Recommendation

There is no doubt that the FinTech space in Nigeria is fast evolving and has attracted tremendous interests both locally and internationally. The importance of making sure you comply with the laws and regulations which govern FinTech Companies in Nigeria cannot therefore be overemphasized. In order for you to legally operate in Nigeria as a FinTech business you must ensure that the company is duly incorporated, have all requisite licenses and approvals and are constantly abreast with what can only be described as a fast-paced regulatory landscape.

 

Please note that the content of this Article is for general guidance on the Subject Matter. It is NOT and is not to be taken as giving legal advice.

 

 

[i] Finextra (2016) ”What is FinTech and Where Does it Live” Available at URL: https://www.finextra.com/blogposting/12890/what-is-fintech-and-where-does-it-live Accessed 24th May, 2021.

[ii] Section 8 Companies and Allied Matters Act, 2020.

[iii] Established under Section 1 of the provisions of the Banks and Other Financial Institutions Act (BOFIA), 2020.

[iv] Section 2 and 131 of the Banks and Other Financial institutions Act, 2020

[v] Section 57 and 131, Ibid

[vi] Section 57 (3), Ibid

[vii] Section 54 and 153 of the Investment and Securities Act, 2007

[viii] Global Legal Insights (2020) “Fintech 2020|Nigeria” Available at URL: https://www.globallegalinsights.com/practice-areas/fintech-laws-and-regulations/nigeria Accessed 24th May, 2021.

[ix] Section 57 BOFIA 2020

[x] Ibid

 

 

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