Investment Law – Goldsmiths Solicitors Nigeria

The Nigeria Startup Act

Shola Adekunle — Mon, 21 Sep 2026 07:45:03 +0000

INTRODUCTION

The Nigeria Startup Act 2022, signed into law in October 2022, was co-created by the government and the technology ecosystem specifically to give startups regulatory certainty, incentives and an enabling institutional framework. Assessments marking its second anniversary generally concluded that the architecture was sound but implementation uneven. What is notable, three and a half years in, is that the same conversation is still happening in public. This article looks at why that gap has persisted, at a further complication that has emerged from the tax reform, and what founders and investors should realistically plan around.

THE STARTUP LABEL, STILL THE CHOKEPOINT

At the centre of the Act is the Startup Label, a certificate issued by the Secretariat that functions as the master key to the Act’s benefits. No company can access the tax reliefs, funding or regulatory support without first obtaining it. To qualify, a company must be a limited liability company registered with the Corporate Affairs Commission, in existence for no more than ten years, with objects focused on the innovation, development, production or commercialisation of a digital technology product or process, and with at least one Nigerian founder or co-founder holding equity. The Startup Portal opened in November 2023 to facilitate the labelling process. Registration has been substantial, with tens of thousands of startups and large numbers of investors, accelerators and hubs registering. Registration on the portal is, however, the first step rather than the label itself, and the design carries a structural vulnerability: by making every benefit contingent on a discretionary label issued by a single agency, the Act creates a centralised chokepoint. A company that meets the statutory criteria is not automatically entitled to benefits. It must navigate an administrative process, which reintroduces exactly the kind of bureaucratic delay and discretion the Act was meant to remove.

THE INCENTIVES, AND A LIVE INCONSISTENCY ABOUT WHICH REGIME GOVERNS THEM

The Act’s fiscal incentives remain, on paper, the strongest reason to obtain the label: a tax holiday under the pioneer-status route, capital gains tax relief for investors holding equity in a labelled startup for a minimum period, and deductions tied to qualifying research and development.

These fiscal incentives are still being described using Pioneer Status Incentive terms, an initial three-year tax holiday extendable by a further two years, subject to approval by the Nigerian Investment Promotion Commission, alongside investment tax credits of up to thirty percent on qualifying investment and a capital gains tax exemption for holdings of two years or more. This description sits awkwardly against the wider position that the Nigeria Tax Act 2025 replaced the Pioneer Status Incentive generally with a credit-based Economic Development Tax Incentive. Both cannot be the complete picture at once, and the practical reality in 2026 appears to be that the transition between the two regimes is still working itself out in practice, ahead of settled, consolidated guidance which may be issued by the relevant regulatory authorities.

For a founder or an investor, that means the incentive most commonly advertised as the Startup Act’s headline benefit currently comes with genuine uncertainty about which statutory basis actually governs it, and that uncertainty is itself part of the implementation gap the Act has struggled with since its enactment in 2022. Advice obtained on the strength of older descriptions of the reliefs should be revisited rather than relied upon.

THE SEED FUND, STILL SUBSTITUTED RATHER THAN FULFILLED

The Act directed that a Startup Investment Seed Fund be seeded with a minimum of ten billion naira annually, managed by the Nigeria Sovereign Investment Authority, to provide early-stage financing to labelled startups and grants to hubs and accelerators. In practice, the domestically funded seed fund has not been delivered in fulfillment of the provision of the Act. The Government has instead leaned on a donor-backed initiative, combining a co-investment fund, a grant to establish a startup hub, and a programme supporting social-impact startups. This is a meaningful intervention, but it is a substitution for, rather than a fulfilment of, the statutory sovereign commitment, and it changes the character of the support from an entitlement under Nigerian law into a project dependent on external partners whose continuation cannot be assumed.

INTERACTION WITH OTHER LAW

A label does not exempt a startup from the mandatory compliance with the requirements of other applicable laws. Labelled startups remain subject to company law under the Companies and Allied Matters Act 2020, to the new tax regime (introduced specifically by the Nigeria Tax Act 2025, and the Nigeria Tax Administration Act 2025), and to data-protection obligations under the Nigeria Data Protection Act 2023 and its General Application and Implementation Directive 2025, etc.

Read the full update or download the PDF here.

Investing in Nigeria 2026: A Strategic Legal Roadmap for Foreign Businesses

Shola Adekunle — Fri, 04 Sep 2026 12:44:00 +0000

Introduction

As of 2026, Nigeria’s regulatory landscape has undergone its most significant transformation in over two decades. With the enactment of the Nigeria Tax Act (“NTA”) 2025 and the Nigeria Tax Administration Act (“NTAA”) 2025 which took effect on 1 January 2026, companies can no longer easily exploit legal loopholes. For foreign investors, the message is clear: success in the Nigerian market now requires compliance-by-design rather than addressed only when regulatory issues arise. The new architecture, anchored by the NTA, NTAA and the Investments and Securities Act (“ISA”) 2025, moves Nigeria toward a unified and digitally integrated regulatory strategy. This article highlights six important legal considerations every foreign business should understand before establishing or expanding operations in Nigeria in 2026.

Market Entry and Corporate Structuring

Foreign investors intending to establish business in Nigeria are required to determine the appropriate corporate structure through which their business activities will be undertaken. The appropriate structure will depend on the nature of the proposed business, the extent of the investor’s physical presence in Nigeria, applicable sector-specific requirements and the tax implications of the proposed activities. Under the Companies and Allied Matters Act 2020 (“CAMA”), a foreign company incorporated outside Nigeria that intends to carry on business in Nigeria is generally required to incorporate a separate Nigerian entity before commencing business activities in Nigeria, subject to applicable statutory exemptions. A foreign investor may therefore establish a Nigerian subsidiary through which its business activities will be conducted. Following incorporation, a company with foreign participation is required to register with the Nigerian Investment Promotion Commission (“NIPC”) before commencing operations.

Minimum Capital Requirements

CAMA provides a general minimum issued share capital of ₦100,000 (One Hundred Thousand Naira) for private companies and ₦2,000,000 (Two Million Naira) for public companies. However, companies with foreign participation are subject to a higher minimum paid-up capital of ₦100,000,000 (One Hundred Million Naira) as mandated by the Federal Ministry of Interior’s Revised Handbook on Expatriate Quota Administration 2022, which has been actively enforced by the CAC since 2023. Notwithstanding the foregoing, the applicable minimum capital requirement may also depend on the nature of the proposed business. Companies operating in regulated sectors, including banking, insurance, aviation and capital markets, may be subject to significantly higher minimum capital requirements prescribed by the relevant sector regulator. Investors should therefore determine the applicable minimum capital requirements before incorporating the Nigerian entity, and ensure that the company’s capitalisation is consistent with the requirements applicable to its proposed business activities.

Tax Compliance and Incentives

Nigeria operates a multi-layered tax system spanning federal, state and local obligations. The Nigeria Tax Act 2025, the Nigeria Tax Administration Act 2025, and the Nigeria Revenue Service (Establishment) Act 2025 centralised the federal tax collection to reduce fragmented administration.

Corporate taxes are within the remit of the Federal Government and administered by the Nigerian Revenue Service (NRS). It is therefore important for companies upon incorporation to register with NRS for corporate tax purposes and obtain their Tax Identification Number (TIN) and remit their taxes including value added tax (VAT), Companies Income Tax (CIT), etc. as at when due to avoid regulatory sanctions.

Non-resident companies planning to operate in Nigeria should begin by carefully assessing whether their proposed activities will create a permanent establishment or significant economic presence, as this determines Companies Income Tax liability and the need for registration with the Nigeria Revenue Service. They must also identify potential withholding tax obligations on payments, VAT requirements and transfer pricing considerations, while checking possible relief under applicable double tax treaties, so that the correct compliance framework is established from the outset.

To achieve proper tax compliance, intending companies should register promptly, maintain accurate records of all transactions, and meet statutory filings and payment deadlines. Engaging a qualified local tax adviser early in the process is the most effective way to navigate NRS requirements, stay updated on any legislative changes, and ensure smooth, penalty-free operations once business activities commence.

Nigeria continues to offer a range of incentives available for investments in specific sectors or businesses which are designed to encourage capital inflows and industrial development, including Economic Development Incentive, Free Trade Zone incentives, Export Expansion Grant schemes, sector-specific fiscal incentives, and investment protection under applicable bilateral investment treaties. Alongside these incentives, foreign investors and businesses should develop appropriate legal risk management strategies, effective dispute resolution mechanisms, and comprehensive due-diligence practices before committing capital or commencing operations in Nigeria.

Foreign Exchange Compliance:

Foreign investors should give careful consideration to Nigeria’s foreign exchange requirements when bringing capital into the country. A foreign company investing in Nigeria must bring in its capital through an authorised dealer bank and ensure the bank issues a Certificate of Capital Importation (CCI) for every inflow. The CCI is the official document that confirms the capital was imported in accordance with Central Bank of Nigeria’s (CBN) foreign-exchange regulations. It is also particularly important for facilitating the repatriation of eligible capital, dividends, profits and other returns through the Nigerian banking system, subject to applicable foreign exchange rules and documentation requirements. The company must therefore open or maintain an account with a licensed bank, submit all required supporting documents, and insist that the bank processes and issues the CCI promptly (usually within 24 to 48 hours) after the funds or assets arrive.

Read the full update or download the PDF here.

What The Virtual Assets Coordination Order Means For Digital Assets Operators

Shola Adekunle — Mon, 24 Aug 2026 08:34:42 +0000

INTRODUCTION

The coming into force of the Investments and Securities Act 2025, which repealed the Investments and Securities Act 2007, marked significant changes to the regulatory framework applicable to virtual and digital assets in Nigeria. Virtual and digital assets are now recognized as securities, and the businesses involved in activities relating to such assets falls within the regulatory purview of the Securities and Exchange Commission (SEC). The implications of this reclassification for issuers, exchanges and the wider public have been discussed in previous articles. It has, however, become clear that this is only one aspect of the evolving regulatory framework applicable to digital-asset businesses in Nigeria. Three separate regulatory tracks, an executive coordination order, an increase in the capital requirements prescribed by the SEC, and a bill currently before the Senate have, over the past eighteen months, further shaped the regulatory framework applicable to digital asset businesses in Nigeria.

A SINGLE INSTRUCTION: WORKING FROM THE SAME PLAYBOOK

On 17 July 2026, the Nigerian president signed the Executive Order on Virtual Assets Coordination 2026, which took effect immediately. Rather than establishing a new regulator, the Order provides for greater coordination, among the Central Bank of Nigeria (CBN), the Securities and Exchange Commission (SEC) and the newly constituted Nigeria Revenue Service in relation to the licensing, supervision and enforcement of virtual asset activities through a Virtual Asset Council, chaired by the CBN, with a Virtual Asset Office established within the CBN to serve as its secretariat. The Order is intended to address regulatory gaps that may be exploited by fraudsters and unlicensed platforms and to strengthen measures relating to money laundering, terrorism financing and tax compliance, without imposing an additional licensing requirement on operators beyond the requirements under the Investments and Securities Act 2025 and the SEC’s applicable rules. For operators, the Order further emphasises the need for regulatory compliance across the various applicable regulatory frameworks, particularly as increased information sharing among the CBN, SEC and tax authorities may result in inconsistencies in regulatory filings, banking records and anti-money laundering monitoring being identified and acted upon.

Two further workstreams under the Council remain relevant to the evolving regulatory framework.

The Central Bank of Nigeria has now opened applications for Cohort 2 of its Regulatory Sandbox Programme between (12–31 August 2026). The programme includes a dedicated Virtual Asset Service Provider (VASP) track that enables eligible operators to test virtual-asset, stablecoin, custody, wallet and related payment solutions under regulatory supervision before full deployment. Participation does not constitute a licence or authorisation to operate outside the approved testing parameters.
In parallel, the Nigeria Revenue Service has issued detailed Guidelines on the Taxation of Virtual Assets 2026. The guidelines establish a clear administrative framework intended to facilitate voluntary compliance and provide greater visibility into revenue derived from digital asset activities.

Operators developing product roadmaps for the next financial year should take both developments into account. While the sandbox and tax guidelines provide greater clarity than previously available, further regulatory guidance and refinements are still expected.

THE REVISED MINIMUM CAPITAL REQUIREMENTS FOR DIGITAL-ASSET OPERATORS

The January 2026 Circular preceded the above Order. In January 2026, SEC issued Circular No. 26-1, which revised the minimum capital requirements applicable to participants in the capital market and significantly increased the capital requirements applicable to digital-asset operators. Digital Asset Exchanges and custodians are now required to maintain a minimum capital of ₦2 billion, representing an increase from the previous threshold of ₦500 million. Digital Asset Offering Platforms are required to maintain a minimum capital of ₦1 billion, while ancillary virtual asset service providers are required to maintain a minimum capital of ₦300 million. Affected operators have until 30 June 2027 to comply with the new capital requirements. The revised capital requirements are intended to strengthen the financial capacity of firms involved in activities relating to digital assets and enhance the protection of client assets.

BANKING ACCESS AND SEC LICENSING REQUIREMENTS

None of the above developments changes the regulatory position that has applied since December 2023, under which digital-asset businesses are required to obtain a SEC licence before accessing banking services in Nigeria. The CBN’s Guidelines on the Operation of Bank Accounts for Virtual Assets Service Providers, which reversed the CBN’s earlier prohibition on banks servicing crypto businesses, permit banks to open designated accounts only for SEC-licensed operators and subject to conditions including dedicated settlement accounts, transaction limits and enhanced customer due diligence. Such operators also remain subject to the applicable anti-money laundering requirements. The coordination mandate of the Virtual Asset Council further strengthens this regulatory framework, particularly as banks may be required to ensure that the SEC licensing and capital requirements of digital-asset operators remain valid and up to date.

Read the full update or download the PDF here.

What the Investment & Securities Act 2025 Will Mean for Your Business

Colin Egemonye — Wed, 15 Jul 2026 08:45:58 +0000

The Investment and Securities Act 2025 (ISA 2025), signed into law by President Bola Ahmed Tinubu in March 2025 is the most comprehensive reform of Nigeria’s capital market legislation in nearly two decades. It repealed the Investment and Securities Act 2007 and provides for a new restructured framework to accommodate new asset classes and to significantly expand the enforcement powers of the Securities and Exchange Commission (SEC) so as to align Nigeria’s capital markets with world standards.

This article highlights six changes that are important to public companies, issuers, capital market operators including virtual/digital assets businesses in Nigeria.

The SEC is now the primary authority for approving M&A involving public companies

The SEC now has the primary authority to approve mergers and acquisition of public companies. The Investments and Securities Act (ISA) 2025 in Nigeria reasserts the Securities and Exchange Commission’s (SEC) primary jurisdiction over public company mergers and acquisitions, following the disruption of its previous monopoly by the 2018 FCCPA. This legislation establishes a complex, dual-regulatory environment requiring simultaneous compliance for both SEC and FCCPC approvals. Advisors must recalibrate transaction strategies to navigate parallel filings and heightened regulatory coordination.

Digital and virtual assets are now formally regulated securities

The new ISA 2025 classifies virtual and digital assets including cryptocurrencies, tokenised securities and digital investment contracts, as securities regulated by the SEC. For FinTechs, operators of digital assets and Virtual asset Service Providers (VASPs), who have been mired in the grey area between CBN and SEC regulatory authority now have clear regulatory certainty as to their classification and the regulatory authority to be subject to in respect of licensing and their business activities. Operators must register and satisfy capital requirements and adhere to disclosure and investor protection obligations as all registered capital market operators are obligated to do.

Crowdfunding intermediaries are now formally recognised

The Securities and Exchange Commission (SEC) set the framework for crowdfunding in Nigeria by way of its 2021 Rule on Crowdfunding. This is now complemented by the Investments and Securities Act (ISA) 2025 which consolidates Nigeria’s crowdfunding landscape. The new law converts former regulatory guidelines into statutory law, creating a more robust legal framework for intermediaries and the protections for micro-investors. Platforms enabling raising equity or debt for retail investors should consider their registration status, operating terms and investor agreements in the light of the new legislative framework.

The SEC can now appoint directors to public companies

In an unprecedented expansion of its regulatory powers under the ISA 2025, the SEC can nominate independent non-executive directors to the boards of directors of public companies where it has intervened or taken regulatory action. This is material enforcement capability that the ISA 2007 did not provide for. It suggests the legislature intends to give the SEC real corporate governance intervention powers, not just ability to issue financial sanctions.

Read the full update or download the PDF here.

Practical Tips on How to Obtain Sports Betting License in Lagos State, Nigeria

Colin Egemonye — Mon, 25 Nov 2024 10:40:45 +0000

Following the emergence of online betting, the Nigerian gambling industry has experienced extraordinary growth in the past few years. This also followed the legalization of some forms of gambling in the Nigerian Criminal Code Act, 1990. The industry has therefore continued to attract both local and international investors due to its huge potentials.

Gambling activities in Nigeria broadly include sports betting, lottery, gaming, casinos, lotto, etc. In order to legitimately operate any type of gambling activity in Nigeria, an operator must first obtain the appropriate licenses from the regulatory authorities. Using Lagos State as a case study, this article explains the regulatory requirements and processes involved in obtaining a betting license in Lagos State.

Regulatory Framework

Previously, a betting company wishing to operate within Nigeria required both a federal license issued by the National Lottery Regulatory Commission (NLRC) and a state licence from the state in which it wishes to operate from.

At the federal level, the NLRC, established under the National Lottery Act, 2005, served as the primary body overseeing gaming activities across the country. Concurrently, state governments regulated online betting within their jurisdictions through their respective regulatory authorities.

However, a recent landmark judgment in Lagos State Government & Ors v. Attorney General of Federation and Anor with suit number SC/1/2008 delivered by the Supreme Court of Nigeria in November 2024, has changed this position by nullifying the National Lottery Act, 2005 and declaring that the National Assembly lacks the jurisdiction to legislate on matters related to lotteries and games of chance, as such powers reside exclusively with state Houses of Assembly to legislate on lottery and gaming within their respective states.

Thus, the import of the Supreme Court judgement is that the National Lottery Act, 2005 now applies only within the Federal Capital Territory (FCT) where the National Assembly has the legislative power to enact laws on lottery and gaming matters. Therefore, lottery and online betting companies are now only required to obtain licenses solely from the state(s) in which they intend to operate.

In Lagos State, the regulatory body responsible for controlling and regulating betting activities is the Lagos State Lotteries and Gaming Authority (LSLGA). Sports betting companies must obtain the requisite license from LSLGA before commencing operations in the state.

With a large internet penetration and the rise of online betting, in practice, an online betting company can obtain a license in one state and be accessible online in another state thereby avoiding the need to apply for licences in multiple states.

Requirements for Obtaining a Sports Betting License/Permit from Lagos State Lotteries and Gaming Authority (LSLGA):

As stated above, the regulatory body responsible for issuing the said license/permit in Lagos State is the Lagos State Lotteries and Gaming Authority (LSLGA). The requirements for obtaining this permit from the LSLGA include:

Company Incorporation: The first step towards obtaining the license from the LSLGA is the incorporation of a local company in Nigeria with the Corporate Affairs Commission (CAC) as mandated under the Companies and Allied Matters Act, 2020 (CAMA). This is a compulsory regulatory requirement for any company wishing to do any business in Nigeria.
Share Capital: The company must meet the minimum share capital requirement of N20,000,000.00 (Twenty Million Naira) as prescribed by the LSLGA. Please note however that the CAC now requires that any company with foreign participation must have a minimum share capital of N100,000,000 (One Hundred Million Naira). If the company being set up has foreign participation either by shareholding or directorship, the minimum share capital from a CAC point of view must therefore be N100,000,000. Also note that this amount is merely the minimum value of the company shares at the time of registration and the shares do not have to be fully paid up.
Financial and Technical Ability: The company must demonstrate the financial and technical ability to operate an online betting business. The applicants must demonstrate financial stability and viability by submitting audited financial statements, proof of sufficient capital, and a detailed business plan. Regarding the technical ability, operators must invest in a robust technical infrastructure for their online betting platform, including secure servers, data protection, and reliable payment processing systems. Compliance with international online security standards is also very essential.
Applicant companies cannot be wholly-owned by foreigners as Nigerians are required to hold at least fifteen percent (15%) of the shares in foreign-owned companies to fulfil local content requirement and promote local participation.
Payment of application and license/permit fees.

Procedures for Obtaining a Sports Betting License/Permit from LSLGA:

The procedure for obtaining this license from the LSLGA is divided into three stages as follows: the application stage, the approval in principle stage and the final or grant of license stage.

Application Stage:

At this stage, an application for a license/permit is to be submitted to LSLGA together with the following documents:

A letter of intent.
Evidence of payment of non-refundable application fee
Company incorporation documents issued by CAC (Certificate of Incorporation, status report showing details of directors, minimum share capital and registered address and MEMART).
Detailed business plan/proposal on the betting scheme which should provide information and documentation on the following:
1. Business structure information such as address of the registered office, branches, outlets and planned locations, particulars, profile and relevant qualification(s) of directors and key personnel, Tax Clearance Certificate (“TCC”) of Director(s) in the last three (3) years, description of operations and management structure, a betting industry analysis that clearly demonstrates an understanding of the industry, marketing and distribution plans, address of planned location, branches and outlet(s). Please note that these must be lock-up shops – kiosks and mobile vendors are not allowed.
2. Proposed sports betting operations including details of planned games, relevant sports activities, approximate odds to be used, Operator’s game rules and participants’ Code of Practice, Number and frequency of sports/games and prizes and price structure.
3. Financial projections including management account, company’s bank statement of the preceding year to support financing plans, five years projected profit and loss account, balance sheet, cash flow analysis which should provide for the annual licence fee and monthly gaming tax, capital investments, etc.
4. Hardware and software information including servers, routers, firewalls, operating systems and database application specification.
5. General information on the architectural diagram clearly illustrating the technical operational flow, the proposed platform (whether self-host or cloud based) and the contact information of the hosting company if cloud based.
6. Detailed information about the applicant’s bookmaker, betting sites and technical consultants, proposed technical topography including a schematic diagram clearly illustrating the technical operational flow.

Due diligence will be conducted on every application to determine the suitability of the applicant for the license within a period of 10 to 15 working days. The applicant will also be required to make a presentation before the LSLGA to justify the grant of the license as part of the application process. Upon the satisfactory fulfilment of the requirements of the application stage and payment of the license fee, an Approval in Principle (AIP) will be granted.

Approval-in-Principle (AIP):

After a successful presentation and upon a satisfactory fulfilment of the pre-approval requirements, the applicant must pay a license fee currently N50,000,000.00 (Fifty Million Naira). Once this payment is made, the applicant is issued an Approval in Principle (AIP).

An AIP serves as a temporary licence allowing the company to operate for a period not exceeding three (3) months (90 days) during which the company will be excused from paying tax. The AIP is typically granted with specific conditions that must be met before the issuance of a final or substantive license.

Grant of License:

Upon the expiration of the AIP and the applicant’s fulfilment of all stipulated conditions set on the AIP, a final license is issued to the applicant. This license is valid for one (1) year from the date of issuance and is renewable annually for a fee currently N10,000,000.00 (Ten Million Naira).

Post-Licensing Obligations

Following the issuance of the license and commencement of operations, licensed operators are required to fulfill certain post-license obligations, including the remittance of a monthly gaming tax of 2.5% of their sales revenue to the regulatory body. Additionally, licenses must be renewed annually upon expiration to maintain operational compliance.

There are also other tax obligations for e.g. income tax, Value Added Tax (VAT), company income tax, etc. that are payable by the company either to the state revenue authority or the Federal Inland Revenue Services. The licensed operators are also required to make the filings of their annual returns with the CAC to ensure their regulatory compliance.

Conclusion

With the rise of online betting, the Nigerian gaming industry has experienced extraordinary growth in recent years. Previously, sports betting was regulated at both the federal and state levels in Nigeria. However, a recent landmark Supreme Court judgment in November 2024 clarified that betting companies are now only required to obtain licenses exclusively from the states where they intend to operate as the licensing and regulatory powers and oversight of the NLRC is now limited only to the Federal Capital Territory. Upon obtaining the license, operators must comply with all post-license obligations, including remittance of fees to the regulatory body, renewal of license, payment of taxes, filing of annual returns with the CAC, etc.

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:

How to Obtain Money Lenders License in Lagos State, Nigeria

Colin Egemonye — Thu, 26 Sep 2024 10:53:48 +0000

A money lender looking to operate in Nigeria must navigate a regulated framework that governs loan services across the country. With Nigeria being a leading Fintech hub in Africa, we have in last few years witnessed a surge in online money lending service. The operation of money lending business in Nigeria is regulated by the Money Lenders Laws of the various states in Nigeria, the Federal Capital Territory (FCT) and the Federal Competition and Consumer Protection Commission (FCCPC).

There are 36 states and a Federal Capital Territory (FCT) in Nigeria and an operator must obtain the lending operators license from the regulatory authority in the relevant state(s) in which they wish to operate or the FCT before commencing operations. It is important to note that where the money lending business is to be carried on in more than one state, a money lenders license must be obtained in each state in which the money lending business is to be carried on. It is a criminal offence to engage in the business of money lending without a license.

In Lagos State, the lender’s license is granted by the Lagos State Ministry of Home Affairs. Using Lagos State as a case study, this article explains how to obtain the said license in Lagos State and the digital lenders registration with the FCCPC. The processes and procedures are similar in other states.

Requirements for Money Lenders License in Lagos State

The Lagos State Money Lenders Law is the principal law which regulates money lending in the state and the regulatory authority responsible for issuing licenses is the Lagos State Ministry of Home Affairs. The license can only be issued to corporate entities in Lagos state. Thus, any potential investor interested in money lending business is required to first incorporate a company in Nigeria.

The requirements for processing and obtaining a money lenders license in Lagos state are as follows:

Incorporation documents including company certificate of incorporation, Memorandum and Articles of Association, etc. of the applicant company issued by the Corporate Affairs Commission (CAC).
The minimum share capital of the applicant company is N20,000,000 (Twenty Million Naira). However, where the company has foreign participation, the minimum share capital requirement is N100,000,000 (One Hundred Million Naira).
Police Clearance Certificate of two directors of the applicant company.
Three (3) years Tax Clearance Certificate (TCC) for the company and for at least two (2) directors.
Reference letter from the applicant’s bankers in Nigeria.
Proof of payment of the application and processing fees.

The Procedure for Obtaining Money Lender’s License in Lagos State

The procedure for obtaining the money lenders license in Lagos State is initiated with an application to the Chief Magistrate of the Magistrates Court within the magisterial district where the lending company is located and ends with the issuance of a money lenders license to the applicant. The procedure for obtaining the license is highlighted below:

An application in the prescribed form is made to the Chief Magistrate of the Magisterial District where the applicant company is located.
The Chief Magistrate issues a Lenders Certificate (Form B) and a letter addressed to the Permanent Secretary of the Lagos State Ministry of Home Affairs to the applicant company confirming due diligence of the applicant company and recommending the issuance of a lenders license.
An application is made to the Nigerian Police for the issuance of Police Clearance Certificates for two directors of the applicant company.
A formal application is made to the Lagos State Ministry of Home Affairs for the license accompanied with the following documents:
Form B and the Letter of Recommendation issued by the Chief Magistrate.
Incorporation documents of the applicant company.
Three years Tax Clearance Certificate (TCC) of the applicant company and of at least two directors.
Police Clearance Certificates for two directors of the applicant company.
A reference letter from a commercial bank being the bankers of the applicant company in Nigeria.
Proof of payment of the application and processing fees.
A physical inspection of the applicant company’s place of business will be carried out by the Lagos State Ministry of Home Affairs upon submission of the application.
A Money Lenders License is issued to the applicant company by the Lagos State Ministry of Home Affairs where it is satisfied that all the statutory requirements have been met and the applicant company is considered fit and proper to act as a licensed lender.

Validity and Renewal of Money Lender’s License in Lagos State

The license is valid in Lagos State for a period of one year and therefore subject to renewal every subsequent year. To process the renewal of the license, the licensed operator is required to obtain a new Lenders Certificate (Form B) from the Chief Magistrate accompanied with the expired license, updated tax clearance certificate and evidence of payment of the renewal fee. Upon being satisfied that the requirements continue to be met, a renewed license is issued.

Registration with the Federal Competition and Consumer Protection Commission (FCCPC).

In 2022, the Federal Competition and Consumer Protection Commission (FCCPC) issued the Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending, 2022 (“the Guidelines”). The Guidelines require digital lenders to register with the FCCPC before the commencement of business operations. The process of registering with the FCCPC is summarized as follows:

The digital lender is to obtain an Audit Trust Mark from the Nigerian Data Protection Commission.
Obtain a compliance Audit Report and Privacy Impact Assessment Report from a duly registered Data Protection Compliance Organization (DPCO).
Obtain and complete the requisite digital lender’s registration form from the FCCPC. The completed form is to be accompanied with some documents which include:
Incorporation documents of the applicant.
The company’s terms of use and privacy policy
The company’s code of conduct
Brief description of the business and details of its groups, subsidiaries and affiliates.
Evidence of feedback and complaint resolution mechanism
Evidence of payment of the registration fee
Obtain and complete the requisite declaration form from FCCPC.

The application is to be submitted to the FCCPC together with the required documents. In practice, the FCCPC allows some flexibility in the registration process by allowing applicants to begin the digital lender’s registration process while waiting for the Audit Trust Mark and the Compliance Report and Privacy Impact Assessment Report.

Failure to register with the FCCPC may lead to the permanent blacklisting of the digital lender’s business and the removal of its digital apps from online platforms such as Google Play Store and Apple Store, etc. which will make the lender unable to transact its business in Nigeria.

Conclusion

With the growth of FinTechs in Nigeria, there has been tremendous growth in the Nigerian online money lending space in the last few years. The business of money lending is regulated in Nigeria by the state governments, the FCT and the FCCPC.

An operator is required to obtain a lenders license in any of the 36 states of Nigeria in which it wishes to carry on business. Individual licenses must be obtained in every state in which an operator seeks to do business.

Any company desirous of providing money lending services through any digital platform is required to register with the FCCPC before commencing business in Nigeria failing which its business and digital apps could be permanently blacklisted.

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:

How to Obtain a Payment Solution Service Providers Licence in Nigeria

Colin Egemonye — Tue, 04 Apr 2023 09:09:08 +0000

Introduction

A Payment Solution Service Providers (PSSP) licence is a financial licence within the payments system which is issued by the Central Bank of Nigeria (CBN). A PSSP licence authorizes the licensee to provide and operate payment processing gateway and portals, solution/application development, and merchant service aggregation and collections services. A PSSP license does not provide the authorization to hold customers’ funds or create and issue wallets. PSSPs are predominantly Financial Technology (FinTech) companies that enable and facilitate online and offline payments solutions which include collections, check-out, biller aggregation and payout services.

The CBN is the regulatory authority that issues PSSP licenses in Nigeria. The CBN also provides constant regulatory oversight over the activities of PSSP licensees in Nigeria.

Who can Apply for a PSSP Licence in Nigeria

Only a company that is duly registered with the Corporate Affairs Commission (CAC) in Nigeria and also meets the minimum share capital requirements and other regulatory requirements of the CBN can apply for a PSSP licence in Nigeria.

The Process of Obtaining a PSSP Licence from the CBN in Nigeria

A PSSP licence is processed in two stages viz:

Approval-in-Principle (AIP): This is the preliminary stage of obtaining a PSSP license. During this stage, an application is to be made to the CBN for the grant of the license and they are expected to give an Approval-in-Principle or reject the application. Where an AIP is given, it is only valid for a period of six months. The AIP does not authorize the applicant to commence operation but only allows the applicant to take steps towards obtaining the final licence.
Final Licence: The applicant is required to consolidate the AIP stage by taking steps to ensure its readiness for commencement of operation, notifying the CBN of its readiness to commence operation, by paying and applying for final licence. Upon the grant of the final licence, the applicant can commence its operations.

The process of obtaining a PSSP licence from the AIP stage to the final licence stage involves the following:

Write an application letter for a PSSP license which is addressed to the Director, Payments Systems Management Department of the CBN.
The application letter is accompanied with the required documents which include:

Certificate of incorporation of the company with the Corporate Affairs Commission (CAC), with a share capital of N100,000,000 (One Hundred Million Naira)
Memorandum and Articles of Association of the company
Form CAC 2A (Return of Allotment of shares)
Form CAC 7A (Particulars of Directors)
Tax Clearance Certificate (TCC) and Tax Identification Number (TIN) of the Company
Company’s profile
Details of ownership
Board structure
Business plan
Information Technology policy
Dispute resolution framework
Necessary certifications such as Payment Card Industry Data Security Standard (PCIDSS), Payment Terminal Service Aggregator (PTSA), etc.
Evidence of payment of the non-refundable application fee of N100,000 (One Hundred Thousand Naira).
Evidence of the deposit of the refundable minimum capital of N100,000,000 (One Hundred Million Naira). This is required to be made in full (one lump sum) and in the name of the applicant.

3. The CBN assesses the application for the PSSP licence and the accompanying documents and if it is satisfied with the application, it proceeds to grant an Approval-in-Principle.

4. Upon obtaining AIP from the CBN, the applicant then makes payment of the licence fee of N1,000,000 (One Million Naira) to the CBN designated account and proceeds to apply for a final licence within six months of obtaining AIP.

5. The CBN inspects the registered place of business of the applicant company and its readiness to commence operation and proceeds to issue the final licence if it is satisfied with the outcome of its inspection.

Validity and Renewal of PSSP Licence

PSSP licence validity period is as determined by the CBN and renewable if the operations of the PSSP licensee is satisfactory to the CBN. Recently, CBN renewed Cellulant’s PSSP licence and this shows the satisfaction of the CBN with the services of the company in providing payment solutions in Nigeria. Thus, the renewal of a PSSP licence by the CBN is a vote of confidence on the operation of a PSSP licensee.

Conclusion

A Payment Solution Service Providers (PSSP) licence is an important licence within the Nigerian payment systems which enables the provision of financial services such as the operation of payment processing gateway and portals which is utilized by merchants to accept debit or credit card purchases from customers. A PSSP licensee provides both online and offline payment solutions. A PSSP licence is obtainable from the CBN by submitting an application to the CBN and paying the required application and license fees within the stipulated timelines.

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

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

The Nigerian Startup Act, 2022, Nigeria’s Bold Step to Encourage Innovation?

Colin Egemonye — Fri, 04 Nov 2022 08:22:34 +0000

The Nigerian Startup Act, 2022 (the Act) was signed into law on 19^th October 2022 by President Muhammad Buhari. The core objectives of the Act are to boost digital operations and encourage innovation particularly in Nigeria’s technology ecosystem. The law aims to provide an enabling environment for the operation of startups in Nigeria and positioning Nigeria as a leading technology center in Africa. In this article, we highlight some of the important provisions of the Act and consider whether this Act will encourage Innovation or simply be another regulation in the already over regulated Nigerian business environment.

What is a Startup?

A Startup is defined in the Act as “a Company in existence for not more than 10 years, with its objectives being the creation, innovation, production, development or adoption of a unique digital technology innovative product, service or process”.

Regulatory Authorities and Structures under the Nigerian Startup Act.

The Act introduces several Authorities and structures which are responsible for the administration and development of startups in Nigeria. These established regulatory Authorities are distinct from other regulatory bodies which regulate the various sectors in which a startup may operate in Nigeria. Some of these Authorities and structures are:

The National Council for Digital Innovation and Entrepreneurship (the ‘Council’).

The Act establishes the Council and empowers it to formulate policies for the realization of the objectives of the Act. The Council consists of about 13 members including the President and Vice President of Nigeria who are to respectively serve as Chairman and Alternate Chairman of the Council. The Council is also to appoint a Council Agent who is to submit reports on the status of programmes implemented to the Council.

The National Information Technology Development Agency (NITDA)

The NITDA functions as Secretariat and is the operational arm of the Council. It is to be chaired by the Director General of NITDA. As part of its duties, the Secretariat is required to manage the process of startup labelling and establish a Startup Support and Engagement Portal to provide support to startups.

The Startup Support and Engagement Portal (the ‘Portal’).

The Portal is to serve as a platform and may be described as a one-stop shop through which startups conduct their registration process with the relevant Ministries, Departments and Agencies (‘MDAs). The activities of the Startup Portal are to be administered by a Coordinator to be appointed by the Secretariat with the approval of the Council.

The Startup Consultative Forum (the ‘Forum’).

The Forum is to be set up on the Startup Portal to provide a platform for information sharing and collaboration among startups. It is to comprise of industry stakeholders including representatives from labelled startups, venture capitalists and angel investors.

Accelerators and Incubator and Innovation Hubs.

The Secretariat is to establish accelerator and incubator programmes for startups. An accelerator is a fixed-term cohort programme designed to provide startups with mentorship and educational assistance, while an incubator on the other hand is a company, partnership or NGO whose primary object is to support the establishment and development of startups, promotion of innovation, and related activities through the offer of dedicated physical spaces and services. The Council is also to issue a framework for the establishment and operation of startup innovation clusters, hubs, physical and virtual innovation parks in each state of the Federation. The Hub is to promote collaboration among startups and between startups and big companies.

Startup Labelling

A company, sole proprietorship or partnership may be issued a certificate by the Secretariat labelling it as a startup and thus, making it entitled to incentives provided under the Act. To be eligible for startup labelling, the following conditions must be met:

In the case of a company, the company ought to be in existence for not more than 10 years from the date of its incorporation;
Its objects ought to be that of innovation, development, production, improvement and commercialization of a digital innovative product or process;
It is to be a holder or repository of a digital technology product or process, or the owner or author of a registered software;
At least one of its founders or co-founder is to be a Nigerian who would share from the profit or revenue from the sale of shares.

It is vital to note that the provisions of the Act including the startup labelling will not apply to an organization that is a holding company or a subsidiary of a company which is not registered as a startup.

Procedure for the application for a Startup Label

A startup desirous of being so labelled is required to make an application in the prescribed form on the Startup Portal which is to be established by the Secretariat with the approval of the Council. This application is to be supported by documents and fee to be prescribed by the Secretariat.

Validity/Duration of the Startup Label

The startup label when issued is valid for 10 years from the date of issuance. Startups so labelled are expected to comply with specified obligations. Where a labelled startup fails to comply with its obligations, the Coordinator may notify the startup of its default and the startup is expected to rectify the default within 30 days of being notified. Where the startup remains in default after the 30-days period, its label may be withdrawn.

A startup whose label has been withdrawn may only re-apply to the Secretariat for re-issuance once the default has been rectified.

Obligations of Startups under the Act

Startups are to fulfil specific obligations to enable them enjoy the benefits and incentives granted under the Act. They are to:

Comply with extant laws governing businesses in Nigeria, such as the Companies and Allied Matters Act, 2020;
Comply with obligations set out by the coordinator after the issuance of the startup label;
Notify the Coordinator of any changes in its structure or objects within a month from the date of such change;
Provide information annually on the number of human resources, total assets and annual turnover achieved from the period the startup label was granted;
Maintain proper book of accounts in accordance with reporting obligations under extant laws and regulations;
Provide an annual report on incentives received and advancements made by virtue of the incentives.

Incentives provided under the Act

The Act makes provision for various tax and fiscal incentives to labelled startups. These incentives cuts across reliefs for the labelled startups, their employees, service providers and investors. They are:

The Pioneer Status Incentive Scheme.

Labelled startups that fall within industries provided under the list of Pioneer industries and products as provided under the List of Pioneer Industries and Products, 2017 or any subsequent law may apply to the Nigerian Investment Promotion Commission (NIPC) for the grant of reliefs and incentives under the scheme. An example of startups that may benefit from this Scheme are companies involved in the development of ready-made software. A startup qualified to benefit from this scheme may enjoy a renewable 3-year tax holiday.

Four years tax holiday.

Labelled startups may be exempted from any form of income taxation for a period of four (4) years from the date of the issuance of the startup label. The Ministry of Finance is expected to provide simplified requirements for startups to benefit from this incentive.

5% tax relief on assessable profits.

To benefit from this additional tax relief, the labelled startups is to have at least 10 employees of which 60% are employees without any form of work experience and who are within 3 years of graduating from school or any vocation within the assessment period. This tax relief is valid for a maximum period of five years.

Export incentives for labelled startups involved in exportation of products and services.

Startups deemed eligible under the Export (Incentives and Miscellaneous Provisions) Act are also entitled to export incentives and financial assistance from the Export Development Fund, Export Expansion Grant, and the Export Adjustment Scheme Fund.

Investment Credit Tax.

This relief is applicable to angel investors, venture capitalists, private equity fund, accelerators or incubators of a labelled startup and entitles them to tax credit equivalent to 30% of their investment.

Exemption from Capital Gains Tax (CGT) on disposal of assets by investors.

The Act exempts investors from taxation upon the disposal of its assets in a startup.

Exemption on the Personal Income Tax of employees.

The Act exempts eligible employees from remitting 35% of their personal income for a period of 2 years from the date of engagement by the labelled startup. However, the Act does not provide the requirements for eligibility but gives the Secretariat and the Joint Tax Board the responsibility of determining the requirements for eligibility.

Reduction of withholding tax for foreign entities who are service providers of labelled startups.

Foreign entities that provide technical, consulting, professional or management services to a labelled startup is required to pay 5% withholding tax as opposed to the 10% withholding tax applicable to service providers. This tax shall be the final tax to be paid by the foreign entity.

Funding for Startups under the Act

Some of the funding arrangement provided under the Act are:

The Startup Investment Seed Fund (‘the Fund’).

The Act establishes the Fund which is to be managed by the Nigeria Sovereign Investment Authority (‘the Fund Manager’). A sum of at least N10,000,000,000 (Ten Billion Naira) is to be paid annually into the Fund which would be utilized to provide financial support to startups and reliefs to accelerators, incubators and hubs.

Access to Government funds and the Credit Guarantee Scheme (CGS).

The Act establishes the CGS with the primary objective of providing accessible financial support to labelled startups. The Act also directs the Secretariat to ensure that labelled startups have access to grants and loan facilities administered by the Central Bank of Nigeria (CBN) and other bodies empowered to assist MSMEs.

The Startup Portal as a One-stop Shop for Labelled Startups.

The major function of the Startup Portal to be set up by the Secretariat is to act as a one-stop shop for startups to register with the MDAs regulating some sectors in Nigeria. The Act charges the Secretariat to collaborate with some regulatory bodies in setting up sections on the startup portal for the registration and administration of the activities of labelled startups with these bodies. These regulatory bodies are the Corporate Affairs Commission (CAC), the National Office for Technology Acquisition and Promotion (NOTAP), the National Copyright Commission and the Trademark, Patent and Designs Registries, the Nigeria Export Processing Zone Authority, the Central Bank of Nigeria (CBN) and the Securities Exchange Commission (SEC). The aim of this exercise is to ensure swift and seamless registration processes for startups. For instance, the Secretariat is to work with CBN and SEC to create a section on the startup portal to ease the licensing procedure for financial technology (Fintech) companies. The Secretariat in conjunction with the NEPZA is also to establish a Technology Development Zone to spur the development of startups, accelerators and incubators.

The startup portal is also to have a section through which labelled startups who intend to participate in CBN’s sandbox or SEC’s regulatory incubator or in any other sandbox may fast track their application process. The labelled startup must however meet all the requirements to participate in the sandbox or regulatory incubator.

Repatriation of Capital and Profits.

In order to encourage foreign investments in startups, the Secretariat is to work with the CBN to ensure the repatriation of the proceeds of investments by foreign investors through an authorized dealer at the prevailing CBN rate. The repatriation is to be done on freely convertible currency of dividends or profits attributed to the foreign investor net all applicable taxed; and the proceeds in the event of sale or liquidation of the labelled startup, net all applicable taxes. To benefit from this arrangement, the investor would be required to present its Certificate of Capital Importation (CCI) as proof of injection of funds into the labelled startup.

Conclusion

The signing of the Nigerian Startup Act is no doubt a welcome development in Nigeria. The provisions of the Act when implemented would encourage innovation and investment in the Nigerian startups especially in the FinTech space. There are many tax and fiscal incentives that are available to labeled startups including investors, foreign entities and employees. There are however concerns that this Act is yet another layer of bureaucracy in the already over regulated Nigerian business environment.

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: