The Nigerian financial services sector is highly regulated with a gamut of legislative and other subsidiary legislations binding operators. The Central Bank of Nigeria (“CBN”) is the apex bank and main regulator for licencing and supervising financial services companies including Fintech businesses.
In Nigeria, no business can undertake a fintech operations unless duly licensed by the CBN. From our experience, the licensing procedure entails a long list of requirements, cash deposit with the CBN by promoters, due diligence on the promoters, directors and key management staff, and a fairly long timeline for completion (usually about to 6 months to 12 months).
However, there are easier access points to the Nigerian fintech space that allow the promoters to test the waters. These options are not absolute and may be inapplicable or unsuitable in all circumstances. Also, there may be some limitations in terms of scope of operations as a result of the type of corporate entity a promoter registers in Nigeria
1. Incorporation of a Technology Company before converting to Fintech Company: One quick way into the Nigerian fintech space is to register a technology solutions company. In Nigeria, many technology solutions companies provide support for financial institutions to deliver fintech products and services. Whilst the financial institutions and finetch companies are required to be approved by the CBN before their incorporation, a technology solutions company can be fully incorporated without any prior regulatory approval. Particularly for promoters of payment companies, it is advisable to consider registering a simple technology solutions company, open a bank account, process tax registration before seeking to apply for the necessary payment company licence. SEE MORE BELOW on Payment Company Licences in Nigeria:
2. Get a State Money Lending Licence before applying for the CBN licence: Doing lending business in Nigeria requires operational licence. However, the relevant regulator to seek licence from will depend on the scale of the proposed lending operations and locations. The CBN licences banks, microfinance banks and finance companies whilst municipal state authorities grant money lender licences for provision of micro credit services. It is advisable to consider the State Money Lender Licence first as this is cheaper, faster and easier to get as opposed to the licences of the CBN which are relatively tougher, slow and costly. Click below to read more on how to set up a State Lending Company in Nigeria:
3. Register a Nigerian Company to Enter into Partnership with Licensed Fintech Companies: The CBN allows Nigerian companies to partner with local and international partners to deliver fintech products and services. Please note that a Nigerian company seeking to enter into such a partnership must first obtain the prior approval of the CBN through a written application supported by a draft Memorandum of Understanding between the partners and a verifiable evidence of the track record of the partner organisation in providing the relevant fintech products and services. Partnership with a foreign licensed financial institution with a track record of experience will lead to getting the CBN’s approval much faster than seeking a direct application for fresh licence to operate in the Nigerian fintech space.
4. Buy Existing Fintech Company and therafter Change Ownership and Directorship: Existing fintech companies can be bought subject to the approval of the CBN. Purchase of companies is a quicker way into the business than seeking to set up a fintech company from the start. Please note that a change of shareholders and directors of a CBN-regulated company must be approved by the CBN before such changes can be completed. It is noteworthy to state that the operations of the financial institution being purchased will not be truncated as a result of the purchase transaction or the pending approval of the CBN for the change of ownership and directorship.
