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As an entrepreneur, establishing and operating a fintech in Nigeria depends on adherence to certain rules. Just like policies, these rules are open to reviews and amendments. This is why the Central Bank of Nigeria (CBN) recently made some changes to the legal and regulatory framework around the establishment and operation of fintech companies in Nigeria.

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What does this suggest?

Today, Nigerian fintech has become an important player in driving Financial inclusion among unbanked Nigerians. This has made the central bank increasingly concerned about its operations. To make sure that fintech in Nigeria has adequate capital and is operating in a manner that protects and prioritises the welfare of its customers.

The Central bank of Nigeria has formulated rules they have to observe. In my opinion, these rules are there to increase the level of certainty, predictability and credibility of the fintech industry. Meeting these requirements assures the public they are both reliable and trustworthy. Here are some of the new changes in the rules of operating a fintech company.

1. Fintechs & Banking Business

This rule says that any fintech that conducts “banking business” must acquire a banking license to operate in Nigeria. This means that any fintech that accepts or canvass for deposits from the public through any means including, electronically or have received fixed amounts of money as deposits, with a promise to repay interest, dividend, profit or fees, at specified intervals is operating a banking business.

2. Fintechs are now Financial Institutions

Any fintech whose offerings include payment services, investment management services, international remittance companies, lending, factoring services, and purchase order financing, is now classified as a type of financial institution.

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And as such must procure the relevant license from the CBN before they commence business.

3. Trademark must be Compliant

This means that the word “Bank” or any of the derivatives of the word “Bank”,( in English or any other language) cannot be added to a fintech name or trademark. Although there is an exception if the Fintech is licensed by the CBN as a bank.

4. Banking Supervision

This rule means that Fintechs are now subjected to routine checks, and special and target examinations of the CBN if deemed necessary. Also, CBN can now sack and replace the directors and management of any Fintech company. As well as transfer any part of a Fintech business to a third party buyer. However, these powers are only exercised if a fintech is in a serious financial crisis.

5. Power to Freeze Bank Accounts

Accounts linked to criminal offences such as illegal transactions domiciled in a Fintech can be frozen by the CBN Governor. But only if he reasonably believes it as such. When this happens, the governor wi make an ex-parte application for an order of the Federal High Court to freeze such accounts.

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An affidavit must accompany the application showing the reasons for the Governor’s belief.

6. Adherence to Monetary Policy Directives

Now, Fintechs must comply with monetary policy directives and guidelines of the CBN. And are required to keep proper books of accounts and policies based on file standard returns. Any fintech that fails to do this has committed an offence and is liable to fines and imprisonment.

7. Annual Contribution to the Banking Sector Resolution Fund

All financial institutions are obligated to pay an annual levy. This levy is equivalent to 10 basis points of their total assets,

as of the date of their audited financial statements, for the immediately preceding financial year on or before April 30th every year. This levy is to be paid into a resolution fund to be domiciled at the CBN and is tax-deductible.

8. Payment Service Holding Companies

Fintechs that have more than one license is now required to establish payment service holding companies. Which operates independent of the parent company and would be licensed by the CBN for that purpose.

9. Approval for Strategic Partnerships

All Strategic partnerships between payment service providers and banks and other financial institutions must now be pre-approved by the CBN.

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This article was first published on 31st May 2022


I am an accomplished content creator and recently delved into technical writing. I enjoy using my skills to contribute to the exciting technological advances and create awareness of evolving technological trends in Nigeria.

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