Financial regulation
Regulatory bodies
Which bodies regulate the supply of fintech products and services?
- Central Bank of Nigeria (CBN);
- Securities and Exchange Commission (SEC);
- Corporate Affairs Commission (CAC);
- National Insurance Commission (NIC);
- the Nigerian Communications Commission (NCC);
- the Nigerian Information Technology Development Agency;
- Federal Competition and Consumer Protection Commission; and
- the standards organization in Nigeria.
Regulated business
What activities trigger a license requirement in your jurisdiction?
General Licensing:
- operation of a corporate entity in Nigeria: incorporation of the company at the CAC;
- foreign investors to do business in Nigeria: obtain a business permit from the Federal Ministry of Interior;
- provide financial services: licensing with the CBN; and
- trading in securities: registration with the SEC.
Specific Licensing:
- operation of a crowdfunding platform: registration with the SEC;
- issue digital assets as securities to raise funds: registration with the SEC;
- operation of a digital asset platform: registration with the SEC;
- operation of a digital asset exchange platform: registration with the SEC;
- operation of a digital asset manager: registration with the SEC;
- wealth or portfolio management: registration with the SEC;
- operation of a financing company (such as consumer loans, fund management, asset financing): registration with the CBN;
- operation of a payment service bank: registration with the CBN; and
- capital importation: obtaining a capital importation certificate from the CBN.
Consumer loans
Are consumer loans regulated in your jurisdiction?
Unlike commercial lending, consumer lending is still developing in Nigeria. The CBN’s Revised Guidelines for Finance Companies in Nigeria, of 2014, provides for the registration of finance companies, including consumer credit companies. Most of the time, consumers approach microfinance banks (MFBs) to obtain microloans for personal or household use. The MFBs are regulated by the CBN’s revised Regulation and Supervision Guidelines for Microfinance Banks. At the state level, the money lending laws of different states generally regulate money lending in Nigeria. According to the laws, a company or individual intending to lend money at an interest rate in Nigeria must obtain a moneylender’s license. Section 5 of the Moneylending Act of Lagos State requires an entity to be licensed before commencing and operating a moneylending business.
Secondary market loan trading
Are there restrictions on trading in loans in the secondary market in your jurisdiction?
No. Debt instruments can be traded in the secondary market, provided they meet the basic criteria for trading in the secondary market such as Financial Market Dealers Quotations Group Plc (FMDQ). FMDQ Group Plc (FMDQ Group), which started as an over-the-counter market is a Securities and Exchange Commission-registered capital market holding company that stores five wholly-owned subsidiaries including FMDQ Securities Exchange Limited, FMDQ Clear Limited, FMDQ Depository Limited, FMDQ Private Markets Limited and IQX Consult Limited.
Collective investment schemes
Describe the regulatory regime for collective investment schemes and whether fintech companies offering alternative financing products or services will fall within its scope.
Collective investment schemes in Nigeria are regulated by:
- the Securities and Exchange Commission 2013 Rules (the Rules);
- SEC’s new rules and changes to the rules; and
- the Commission’s regulations, dated 21 January 2021.
These rules protect investors who wish to pool their funds and cover activities or products such as fund management products, collective investment schemes and crowdfunding (and crowdfunding platforms).
Fintech companies offering investment services or crowdfunding platforms fall within this scope and are required to obtain an SEC license before seeking funds from investors or engaging in capital market operations in Nigeria.
Alternative investment funds
Are alternative investment fund managers regulated?
Yes, managers of alternative investment funds such as venture capital managers and private equity funds are regulated by the SEC. An example of such regulation is the rules for private equity funds, rule 249D of 28 February 2013. Venture capital managers are required to be registered with the SEC while the private equity fund is subject to authorization and registration by the SEC.
Peer-to-peer and marketplace lending
Describe any specific regulation of peer-to-peer or marketplace lending in your jurisdiction.
Peer-to-peer lending is still developing in Nigeria. Generally speaking, the Banks and Other Financial Institutions Act 2020 (BOFIA) regulates financial activities in Nigeria. Section 3 of BOFIA requires any entity offering financial services to have a banking licence. Any entity intending to provide lending services must, in addition to obtaining the relevant CBN license, obtain a money lending license in accordance with the money lending laws of the various states. Digital lenders must also comply with Nigeria’s Data Protection Regulation 2019.
Crowdfunding
Describe any specific regulation of crowdfunding in your jurisdiction.
The SEC’s new rules and amendments to the Commission’s rules and regulations, dated August 21, 2021, specifically regulate crowdfunding in Nigeria. Any entity seeking to raise funds through a crowdfunding portal must, among other requirements, be a micro, small or medium enterprise incorporated in Nigeria. The maximum amount that can be raised within 12 months depends on whether the company is classified as a micro (50 million naira), small (70 million naira) or medium enterprise (100 million naira). The rules stipulate that a crowdfunding portal must only be operated by an entity registered as a crowdfunding intermediary.
Invoice trade
Describe any specific regulation of invoice trading in your jurisdiction.
There is generally no specific regulation for trade in invoices in Nigeria. Generally, the CBN via the Banks and Other Financial Institutions Act 2020 regulates activities such as factoring, financing, debt management, etc. The Factoring Bill is currently being considered in the National Assembly.
Payment services
Are payment services regulated in your jurisdiction?
BOFIA expressly brings payment services within the CBN’s regulatory powers. Under BOFIA, they are referred to as other financial institutions (OFIs). While BOFIA generally makes provisions for banks and OFIs, specific and more detailed instruments guiding the provision of services as a payment service provider are provided in a number of regulations, circulars, guidelines and frameworks. These include:
- the New Nigerian Payment System License Categorizations, dated 9 December 2020 (the License Categorization);
- The CBN Guidelines for the Operation of Electronic Payment Channels in Nigeria 2020; and
- the supervisory framework for payment service banks, July 2021.
The licensing categorization categorizes payment services in Nigeria into:
- switching and processing;
- mobile money operations;
- payment solution services (which includes agency banks, payment terminal service providers and payment solution service providers such as payment gateways or portals); and
- regulatory sandbox.
Open bank
Are there any laws or regulations introduced to promote competition that require financial institutions to make customer or product data available to third parties?
Yes. These laws are:
- CBN Regulatory Framework for Open Banking;
- CBN Operational Guidelines for Open Banking in Nigeria;
- the Federal Competition and Consumer Protection Act;
- the National Information and Technology Development Act; and
- CBN Consumer Protection Consumer Framework for Banks and other Financial Institutions.
Insurance products
Do fintech companies that sell or market insurance products in your jurisdiction need to be regulated?
Yes they do.
The National Insurance Commission issued the Insurance Web Aggregators Operational Guidelines (the Guidelines) on 1 February 2022. The Guidelines provide for and guide the registration, supervision and monitoring of insurance web aggregators in Nigeria.
Credit references
Are there any restrictions on providing credit references or credit information services in your jurisdiction?
Yes, it is.
The Credit Reporting Act 2017 (CRA) is the primary regulation for credit reference and credit information services in Nigeria. The CRA provides for the licensing and regulation of credit agencies and also stipulates different maintenance and sharing of credit information among other actors.
In order to carry out credit reporting services as a credit bureau in Nigeria, such person shall obtain a license from the CBN in accordance with the provisions of the CRA. The credit bureau also provides that a credit bureau shall not release or provide information to any user of credit information with which it does not have a data exchange agreement, when performing its functions, unless written or otherwise authenticated consent is obtained from the relevant data subject. shown to a credit bureau. The instant provision restricts a credit bureau from providing credit information to any credit information user with whom a credit bureau does not have a data exchange agreement.
