Fintech in Nigeria 2024

Fintech in Nigeria 2024

Fintech in Nigeria 2024

FINTECH 2024

NIGERIA

Ugochukwu Obi, Tare Olorogun, Omolade Afonja, Adesola Baruwa, Anthony Obidike

(Perchstone & Graeys)

FINTECH LANDSCAPE AND INITIATIVES

General innovation climate

  1. What is the general state of fintech innovation in your jurisdiction?

Fintech has disrupted the Nigerian financial services industry. Innovators in the fintech space are now developing disruptive value propositions across the financial services value chain to address the needs of consumers in different areas such as payment and remittances, micro-investment and savings, wealth management, lending, and buy now, pay later services, etc. Nigeria now has several mobile applications developed by fintech startups that allow users to send and receive money via their mobile phones. There has been a noticeable increase in mobile lending products targeting small and medium-sized enterprises and retail consumers. These products allow users to apply for quick, unsecured and short-term loans, leveraging advanced technologies such as machine learning for credit risk analysis and assessment. To remain competitive and relevant in the financial space, the traditional banks are also digitizing their own offerings and services as well, partnering with the fintech startups, or developing their own solutions. For example, in 2019, a leading commercial bank in Nigeria, Guaranty Trust Bank, launched a data center and has developed interactive and intelligent bots to deliver faster and more personalized banking services.

The key drivers of fintech innovation in Nigeria are a combination of several factors that include the country’s youthful population, increasing smartphone and internet penetration, and a focused regulatory drive to increase financial inclusion and entrench a cashless payment environment. However, fintech adoption is highest among middle-class and affluent customers who live in urban areas. To date, mobile payment channels have emerged as the most preferred and convenient way of conducting financial transactions in Nigeria, made possible through fintech innovation.

Government and regulatory support

  1. Do government bodies or regulators provide any support specific to financial innovation? If so, what are the key benefits of such support?

The growth of the fintech industry is largely facilitated and aided by the federal government’s financial inclusion and digital economic policies. In the implementation of these policies, several regulations were issued by the relevant government agencies or regulators to promote fintech innovations and to make the industry safer for consumers. For example, the Central Bank of Nigeria (CBN) published the Framework for Regulatory Sandbox Operations in January 2021 to regulate the entry of new tech products by providing a controlled environment for their trial; thus, making it safer for consumers.

Specifically, the framework will benefit stakeholders in the technology and financial sectors as it encourages innovation to improve the delivery of payment services and is suited for products and services not covered by existing legislation. There is also the Open-Banking Regulation, issued by the CBN in May 2021, that encourages the sharing of financial data through an application programming interface by setting out the requirements for the secured sharing of such information. This is beneficial to technology companies that rely on financial data that are ordinarily within the exclusive possession of traditional banks. Notably, open banking will enable the lenders to have an accurate assessment of the financial status of the borrowers thus allowing them to provide more profitable lending terms. In 2022, the Securities and Exchange Commission issued the Rules on the Issuance, Offering Platform, and Custody of Digital Assets, which now seeks to protect consumers desirous of investing in digital tokens securities by requiring registration of such securities. A major advantage of the rules is that it allays the fear of investors who seek to provide capital for the operation of a business through digital asset offerings by providing documentation requirements, due diligence, registration, and the limit of funds to be raised. Also in the same year, the Nigeria Startup Act was introduced to harness the potential of our digital economy through co-created regulations. The Act is aimed at ensuring that Nigerian laws and regulations are clear, planned, and work for the tech ecosystem. Nigeria also has the CBN Guidelines on Payment Service Banks for Telcos to bridge the gap in financial inclusion and deepen banking services in Nigeria. While traditional banks will usually require stringent know-your-customer and compliance requirements in the offering of financial services, the Guidelines seek to ensure that payment service banks can provide basic banking and financial services to unbanked in the rural areas or underserved areas.

FINANCIAL REGULATION

Regulatory bodies

  1. Which bodies regulate the provision of fintech products and services?

Bodies regulating Nigeria’s fintech comprise:

  • the CBN;
  • the Securities and Exchange Commission (SEC);
  • the Corporate Affairs Commission (CAC);
  • the National Insurance Commission;
  • the Nigerian Communications Commission;
  • the Nigerian Deposit Insurance Commission;
  • the Nigerian Information Technology Development Agency;
  • the Nigerian Data Protection Bureau;
  • the Federal Competition and Consumer Protection Commission; and
  • the Standard Organization of Nigeria.

Regulated activities

  1. Which activities trigger a licensing requirement in your jurisdiction?

General licensing:

  • operating a corporate entity in Nigeria: incorporation of the company at the CAC;
  • foreign Investors to operate a business in Nigeria: obtain a business permit from the Federal Ministry of Interior;
  • providing financial services: licensing with the CBN; and
  • dealing in securities: registration with SEC.

Specific licensing:

  • operating a crowdfunding platform: registration with SEC;
  • issuing digital assets as securities to raise funds: registration with SEC;
  • operating a digital asset offering platform: registration with SEC;
  • operating a digital asset exchange platform: registration with SEC;
  • operating a digital asset custodian: registration with SEC;
  • wealth or portfolio management: registration with SEC;
  • operating a financing company (such as consumer loans, fund management, asset financing): registration with the CBN;
  • operating a payment service bank: registration with the CBN; and
  • capital importation: obtaining a certificate of capital importation from the CBN.

Consumer lending

  1. Is consumer lending 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 companies that provide consumer loans. Most of the time, consumers turn to Microfinance Banks (MFBs) to obtain microloans for personal or household use. The MFBs are regulated by the CBN’s Revised Regulatory and Supervisory Guidelines for Microfinance Banks. At state level, the moneylending laws of various states generally regulate moneylending in Nigeria. Under the laws, a company or individual who intends to lend money at an interest rate in Nigeria must obtain a moneylender license. Section 5 of the Money Lenders Law of Lagos State requires an entity to be licensed before the commencement and operation of a moneylending business.

Secondary market loan trading

  1. Are there restrictions on trading 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 like the Financial Market Dealers Quotations Group Plc (FMDQ). FMDQ Group Plc (FMDQ Group), which commenced as an over-the-counter market is a Securities and Exchange Commission-registered capital market holding company warehousing 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

  1. Describe the regulatory regime for collective investment schemes and whether fintech companies providing alternative finance products or services would fall within its scope.

Collective investment schemes in Nigeria are regulated by:

  • the Securities and Exchange Commission 2013 Rules (the Rules);
  • the SEC New Rules and Amendments to the Rules; and
  • the Regulations of the Commission, 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 that offer 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 any capital market operations in Nigeria.

Alternative investment funds

  1. Are managers of alternative investment funds 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 are the Rules on 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

  1. Describe any specific regulation of peer-to-peer or marketplace lending in your jurisdiction.

Peer-to-peer lending is still developing in Nigeria. Generally, the Banks and Other Financial Institutions Act 2020 (BOFIA) regulates financial activities in Nigeria. Section 3 of BOFIA requires any entity that would provide financial services must have a banking license. Also, any entity that intends to provide lending services must, in addition to obtaining the relevant CBN license, obtain a moneylending license in accordance with the moneylending laws of the various states. Digital lenders must also comply with Nigeria’s Data Protection Regulation 2019.

Crowdfunding

  1. Describe any specific regulation of crowdfunding in your jurisdiction.

The SEC New Rules and Amendments to the Rules and Regulations of the Commission, dated 21 August 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 provide that a crowdfunding portal shall be operated only by an entity registered as a crowdfunding intermediary.

Invoice trading

  1. Describe any specific regulation of invoice trading in your jurisdiction.

There is generally no specific regulation for invoice trading in Nigeria. Generally, the CBN via the Banks and Other Financial Institutions Act 2020, regulates activities such as factoring, financing, debt administration, etc. However, the Factoring Bill is currently being deliberated at the National Assembly.

Payment services

  1. Are payment services regulated in your jurisdiction?

BOFIA expressly brings payment services within the regulatory powers of the CBN. 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 numerous regulations, circulars, guidelines and frameworks. These include:

  • the New License Categorizations for the Nigerian Payment System, dated 9 December 2020 (the License Categorization);
  • the CBN Guidelines on Operation of Electronic Payment Channels in Nigeria 2020; and
  • the Supervisory Framework for Payment Service Banks, July 2021.

The License Categorization categorizes payment services in Nigeria into:

  • switching and processing;
  • mobile money operations;
  • payment solutions services (which includes agency banking, payment terminal service providers and payment solutions service providers such as payment gateways or portals); and
  • regulatory sandbox.

Open banking

  1. 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:

  • the CBN Regulatory Framework for Open Banking;
  • the CBN Operational Guidelines for Open Banking in Nigeria;
  • the Federal Competition and Consumer Protection Act;
  • the National Information and Technology Development Act; and
  • the CBN Consumer Protection Consumer Framework for Banks and Other Financial Institutions.

Robo-advice

  1. Describe any specific regulation of robo-advisers or other companies that provide retail customers with automated access to investment products in your jurisdiction.

The major regulatory framework for robo-advisory services in Nigeria are the SEC Rules on Robo-Advisory Service in Nigeria, dated 30 August 2021 (the Rules). The SEC, the sole regulator of capital markets in Nigeria introduced the Rules applicable to people who carry out robo-advisory services in Nigeria. By the Rules, a robo-adviser is required to comply, on an ongoing basis, with all the applicable business conduct requirements set out in the Investment and Securities Act (ISA) and the rules, regulations, notices and guidelines issued pursuant to the ISA. The Rules also provide that robo-advisers shall implement internal policies and procedures to address technology risks.

Other regulatory frameworks that may affect robo-advisers in Nigeria include:

  • the SEC Guidelines on Technology Risk Management;
  • the SEC Regulation on Anti-money Laundering and Combating the Financing of Terrorism Act 2013;
  • the SEC Advertisement Requirements; and
  • the Code of Conduct for Employees of Capital Market.

Insurance products

  1. 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

  1. Are there any restrictions on providing credit references or credit information services in your jurisdiction?

Yes, there are. The Credit Reporting Act 2017 (CRA) is the primary regulatory framework for credit referencing and credit information services in Nigeria. The CRA provides for the licensing and regulation of credit bureaus and also stipulates the various maintenance and sharing of credit information among other players.

To carry out credit information 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 CRA also provides that in performing its functions, a credit bureau shall not release or provide information to any credit information user with which it does not have a data exchange agreement unless the written or other authenticated consent of the relevant data subject has been obtained and shown to a credit bureau. The instant provision restricts a credit bureau from providing credit information to any credit-information user with which a credit bureau does not have a data-exchange agreement.

CROSS-BORDER REGULATION

Passporting

  1. Can regulated activities be passported into your jurisdiction?

No. Regulated activities cannot be passported into the Nigerian jurisdiction.

Requirement for a local presence

  1. Can fintech companies obtain a license to provide financial services in your jurisdiction without establishing a local presence?

No. By the provisions of the Companies and Allied Matters Act 2020 (CAMA), any person or entity wishing to carry on business in Nigeria must duly register same with the Corporate Affairs Commission unless such person or entity falls within the exemptions in section 80 of CAMA. The exempted entities are:

  • foreign companies invited by, or with the approval of, the federal government to execute specified individual projects;
  • foreign companies that are in Nigeria for the execution of specified individual loan projects on behalf of a donor country or international organization;
  • foreign government-owned companies engaged in export promotion activities; and
  • engineering consultants or technical experts engaged in any individual specialist project under contract with any of the governments in the federation or any of their agencies or with any other body or person, where such contract has been approved by the federal government.

Where such fintech company does not fall within this scope, it must be registered in Nigeria. However, the regulators recognize the need for partnerships with foreign entities for some fintech activities. For example, the Central Bank of Nigeria (CBN) Guidelines on International Money Transfer Service in Nigeria provide that a money transfer operator (MTO) may engage a foreign technical partner to provide global or regional payment or money transfer platform, provided that such MTO obtains a letter of no objection from the CBN. Such a foreign technical partner must, among others, be a registered entity licensed to carry out money transfers in its home country.

SALES AND MARKETING

Restrictions

  1. What restrictions apply to the sales and marketing of financial services and products in your jurisdiction?

There is generally no restriction on the sale and marketing of financial services in Nigeria. However, the Securities and Exchange Commission (SEC) issued a circular to all capital market operators, restricting them from assisting and facilitating online investment and trading platforms to have direct access to the securities of foreign companies not registered in Nigeria. On 11 May 2022, the SEC also issued the Rules on the Issuance, Offering Platform, and Custody of Digital Assets, which requires that digital assets offering platform and digital assets offered by issuers to the public (to raise funds) be registered with the SEC. Also, it should be noted that the Central Bank of Nigeria (CBN) issued a notice to deposit money banks to refrain from facilitating payment transactions associated with cryptocurrency trading.

CRYPTOASSETS AND TOKENS

Distributed ledger technology

  1. Are there rules or regulations governing the use of distributed ledger technology or blockchains?

No, there are no regulations governing the use of blockchain technology in Nigeria. However, the Securities and Exchange Commission (SEC) issued the Rules on the Issuance, Offering Platform, and Custody of Digital Assets 2022,which regulate the issuance of digital assets as securities in Nigeria. The Rules regulate the digital asset offering (including initial coin offerings and other distributed ledger technology offers of digital assets) in Nigeria or targeting Nigerians. Also, in May 2023, the Federal Government of Nigeria issued the National Blockchain Policy. The policy seeks to provide a roadmap for Nigeria’s adoption and utilization of blockchain technology. The Policy lays out a comprehensive framework for integrating blockchain technology into different spheres of the economy. It also addresses key issues such as governance, interoperability, security, and regulatory compliance. In addition to these, it offers direction and guidance to stakeholders in both the public and private sectors to ensure the adoption, innovative and responsible use of blockchain technology.

Cryptoassets

  1. Are there rules or regulations governing the promotion or use of cryptoassets, including digital currencies, stablecoins, utility tokens and non-fungible tokens (NFTs)?

Yes. The SEC has released new Rules on Issuance, Offering Platforms, and Custody of Digital Assets 2022. Also, the CBN issued a circular to banks prohibiting the processing of crypto-related payment transactions. It should, however, be noted that in 2021, the CBN issued the e-Naira, its central bank digital currency, and the Regulatory Guidelines on the eNaira, dated October 2021.

Token issuance

  1. Are there rules or regulations governing the issuance of tokens, including security token offerings (STOs), initial coin offerings (ICOs) and other token generation events?

Yes, the SEC has released new Rules on Issuance, Offering Platforms and Custody of Digital Assets 2022, which regulate the offering of digital assets including initial coin offerings.

ARTIFICIAL INTELLIGENCE

Artificial intelligence

  1. Are there rules or regulations governing the use of artificial intelligence, including in relation to robo-advice?

No, there is currently no law relating to artificial intelligence in Nigeria. However, the Securities and Exchange Commission issued the Rules on Robo-Advisory Service in Nigeria, dated 30 August 2021 to regulate people who carry out robo-advisory services in Nigeria.

CHANGE OF CONTROL

Notification and consent

  1. Describe any rules relating to notification or consent requirements if a regulated business changes control.

The Federal Competition and Consumer Protection Act 2019 (FCCPA) provides for the notification of a merger to the Federal Competition and Consumer Protection Commission (the Commission). The FCCPA provides that a party to a small merger may voluntarily notify the Commission of that merger at any time, while it is mandatory for a party to a large merger to notify the Commission in the prescribed form and manner. Further, the Commission mandates that a proposed merger shall only be implemented upon notification and approval of the FCCPC. The Securities and Exchange Commission’s prior approval must also be obtained where any of the merging entities is a public company.

Returns of change in control or ownership of a company must also be filed with the Corporate Affairs Commission.

FINANCIAL CRIME

Anti-bribery and anti-money laundering procedures

  1. Are fintech companies required by law or regulation to have procedures to combat bribery or money laundering?

Yes. The Central Bank of Nigeria (CBN) Anti-Money Laundering and Combating the Financing of Terrorism in Banks and Other Financial Institutions Regulations 2013 imposes an obligation on all financial institutions, including fintech companies, to have policies on anti-money laundering (AML) and countering the financing of terrorism, as well as appropriate know-your-customer requirements and record keeping. They are mandated to take appropriate steps to identify, assess and understand their money laundering risks for specific customers on their platform and areas of operation. Moreover, they are required to report suspicious fund transfers to the CBN.

Guidance

  1. Is there regulatory or industry anti-financial crime guidance for fintech companies?

The following laws generally govern AML and financial crimes in Nigeria:

  • the Advance Fee Fraud and other Fraud Related Offenses Act 2006;
  • the Banks and Other Financial Institutions Act 2020;
  • the CBN Anti-Money Laundering and Combating the Financing of Terrorism in Banks and Other Financial Institutions in Nigeria Regulations 2013;
  • the Corrupt Practices and Other Related Offenses Act 2000;
  • the Economic and Financial Crime Commission (Establishment) Act 2004;
  • the Money Laundering (Prohibition) Act 2011 (as amended);
  • the Terrorism Prevention (Freezing of International Terrorist Funds and other Related Matters) Regulations 2013; and
  • the Terrorism Prevention Act 2012 (as amended).

DATA PROTECTION AND CYBERSECURITY

Data protection

  1. What rules and regulations govern the processing and transfer (domestic and cross-border) of data relating to fintech products and services?

The Nigeria Data Protection Regulation 2019, is the principal regulation and framework for the governance of data protection in Nigeria. The Operational Guidelines for Open Banking in Nigeria 2022 also regulate the sharing of financial data via an application programming interface.

Cybersecurity

  1. What cybersecurity regulations or standards apply to fintech businesses?

The Cybercrime (Prohibition, Prevention) Act 2015 is the principal regulation that guides and regulates all cybersecurity or cybercrimes in Nigeria. In specific relation to deposit money banks and payment service providers, the Central Bank of Nigeria also released the Risk-Based Cybersecurity Frameworks and Guidelines for Deposit Money Banks and Payment Service Providers.

OUTSOURCING AND CLOUD COMPUTING

Outsourcing

  1. Are there legal requirements or regulatory guidance with respect to the outsourcing by a financial services company of a material aspect of its business?

No, there is no general regulatory guidance for the outsourcing of financial services in Nigeria. However, the Rules on Issuance, Offering Platforms and Custody of Digital Assets 2022 provides for (and regulates) the outsourcing of some of the activities of digital asset offering platforms, digital asset custodians and digital asset exchange operators.

Cloud computing

  1. Are there legal requirements or regulatory guidance with respect to the use of cloud computing in the financial services industry?

In August 2019, the National Information Technology Development Agency issued the Nigerian Cloud Computing Policy, adopting cloud computing by the Nigerian government. The policy promotes ‘cloud first’ as a proposition to federal public institutions and small to medium-sized enterprises as an efficient way of acquiring and deploying computing resources for improved quality of digital services.

INTELLECTUAL PROPERTY RIGHTS

IP protection for software

  1. Which intellectual property rights are available to protect software, and how do you obtain those rights?

Intellectual property rights available for the protection of software in Nigeria are copyright and patents, and are governed by the Nigerian Copyrights Act and the Patent and Designs Act, respectively. Generally, no formal application is required to obtain copyright protection; however, an applicant may decide to register formally by an application to the Nigerian Copyrights Commission. In the same vein, a patent can be obtained by an application to the Registrar of Patents and Trade if such software is new, or constitutes an improvement to an existing patented innovation.

IP developed by employees and contractors

  1. Who owns new intellectual property developed by an employee during the course of employment? Do the same rules apply to new intellectual property developed by contractors or consultants?

Under the Nigerian Copyright Act, unless otherwise stated in a contract of employment, copyright shall belong in the first instance to the author (the employee). However, where a literary work is made by the author in the course of his or her employment by the proprietor under a contract of service or apprenticeship for the purpose of publication, the said proprietor shall, in the absence of any agreement to the contrary, be the first owner of copyright in the work in so far as the copyright relates to the publication. In all other respects, the author shall be the first owner of the copyright in the work.

For patents, the Patents and Designs Act vests designs and inventions made in the course of employment in the employer and gives little or no room for separate contracts to state otherwise. However, in practice, the employee (who, most often, is the inventor) would assign his or her rights to the employer to back up the application for the issuance of a patent.

Joint ownership

  1. Are there any restrictions on a joint owner of intellectual property’s right to use, license, charge or assign its right in intellectual property?

Yes, the Patents and Designs Act places a restriction on joint owners of a license assigning the same contractual rights to a third party differently. Thus, subject to the contract between parties, joint owners may individually transfer or assign their shares in intellectual property but cannot individually license their share in intellectual property; it must be done jointly. Aside from granting their license, restrictions are subject to a contract between parties.

Trade secrets

  1. How are trade secrets protected? Are trade secrets kept confidential during court proceedings?

Trade secrets are generally protected by non-disclosure agreements binding the parties and preventing them from disclosing sensitive information about their respective companies.

Although trade secrets are not a statutory form of intellectual property rights, they can be used to prevent the unauthorized disclosure of sensitive information. Thus, the most practiced way of protecting trade secrets is by signing a non-disclosure agreement. Often, non-disclosure agreements are drafted to bind parties as to the secrecy of certain information they are privileged to know. Other ways of protecting trade secrets include non-compete clauses or agreements and using sophisticated IT security infrastructure.

The courts in Nigeria generally uphold the sacrosanct nature of trade secrets. However, wherein a matter, there is an overriding public interest that, if ignored, will result in a miscarriage of justice, the court will direct that such trade secret should be made public or disclosed in the interest of justice.

Branding

  1. What intellectual property rights are available to protect branding and how do you obtain those rights? How can fintech businesses ensure they do not infringe existing brands?

The intellectual property rights available to protect branding in Nigeria are trademarks and copyrights.

No formal application is required to obtain copyright protection, as such work is automatically protected once it is created. However, aside from copyright, which is protected automatically, other intellectual property can be obtained by an application to the various commissions or registries in charge of each intellectual property right.

To prevent an infringement upon an existing brand, fintech companies must conduct searches at various commissions or registries to ensure that such an intended brand has not been registered.

Remedies for infringement of IP

  1. What remedies are available to individuals or companies whose intellectual property rights have been infringed?

The remedies available to individuals or companies whose IP rights have been infringed include an action for IP infringement. The aggrieved party may obtain an order of the court compelling the defendant to account for all profits made from such infringement and remit the same to the aggrieved party, or they may also obtain an order of court enabling them to gain access to the defendant’s premises and take possession of the infringed products (Anton Pillar injunction). The court with the jurisdiction to hear IP matters in Nigeria is the Federal High Court.

COMPETITION 

Sector-specific issues

  1. Are there any specific competition issues that exist with respect to fintech companies in your jurisdiction?

The fintech space in Nigeria is well-regulated. However, some provisions of relevant regulations may be too stringent for fledgling start-ups within the fintech industry. One of these requirements is shareholders ‘funds unimpaired by losses’ required to be deposited with the Central Bank of Nigeria when applying for specific licenses within the payment system industry.

TAX

Incentives

  1. Are there any tax incentives available for fintech companies and investors to encourage innovation and investment in the fintech sector in your jurisdiction?

There are currently no incentives specifically available to fintech companies in Nigeria. However, incentives are generally available to companies in Nigeria. The Finance Act 2019 exempts companies with a turnover of 25 million naira or less from companies’ income tax, value added tax and tertiary education tax. Also, companies classified as operating in a pioneer industry or engaged in the production of pioneer products, are exempted from the payment of companies’ income tax for three years. The Venture Capital (Incentives) Act 2004 provides that companies that invest in venture projects may, upon approval, be eligible for capital allowances for up to 30 percent and exemption from capital gains tax.

The Startup Act 2022 also provides labeled start-ups with some tax incentives such as:

  • tax reliefs and incentives granted under the Pioneer Status Incentives;
  • exemption from contributions to the Industrial Training Fund; and
  • investment tax credit for up to 30 percent.

Increased tax burden

  1. Are there any new or proposed tax laws or guidance that could significantly increase tax or administrative costs for fintech companies in your jurisdiction?

No, there are currently no tax laws in Nigeria that would significantly increase tax or administrative costs for fintech companies. However, by the Companies Income Tax (Significant Economic Presence) Order 2020, non-resident companies (who have a significant economic presence in Nigeria) providing digital services to Nigeria will now be required to pay taxes.

IMMIGRATION

Sector-specific schemes

  1. What immigration schemes are available for fintech businesses to recruit skilled staff from abroad? Are there any special regimes specific to the technology or financial sectors?

There are currently no special immigration schemes specific to fintech businesses in Nigeria. Hence, fintech companies that wish to recruit skilled foreign staff must comply with established regulations for such recruitment, by making an application to the Federal Ministry of Interior for the issuance of an expatriate quota with respect to the relevant number of expatriate personnel it intends to employ. In the alternative, the company can also apply for a temporary work visa, which will only be valid for three months.

UPDATE AND TRENDS IN FINTECH IN NIGERIA

Current developments

  1. Are there any other current developments or emerging trends to note?

The Securities and Exchange Commission issued the Rules on Issuance, Offering Platforms, and Custody of Digital Assets 2022, which now regulates the issuance of digital assets to the public. The Nigerian Startup Act was signed into law in 2022 and it aims to create an enabling environment to attract and protect investments in the tech startup space. The Business Facilitation Act 2023 was also signed into law to aid the ease of doing business in Nigeria. In the same vein, the Securitization Bill and Factoring Bill are currently before the National Assembly.

* The information in this chapter was accurate as of May 2023.

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