Financial Technology Basic Setup Requirements in Nigeria

Financial Technology – In a bid to improve the quality of life, humans have always been in a continuous search for improved ways of executing all the genres of tasks available. This frantic search for improvement is what led to the introduction and application of technology to finance management (Financial Technology) in every part of the world as at today.

Financial Technology which is popularly known as FinTech is a recent innovative technology which emerged to improve and gradually replace the traditional financial transaction system. This system is fast rising globally as there has been a significant improvement in its reliability in recent years. The introduction of Financial Technology has overtime played a vital role in business development in Nigeria. This has forced the traditional financial institutions such as banks to also implement new technologies to trend along with the Financial Technology Evolution.

Since its introduction in Nigeria, FinTech association of Nigeria have channeled their goals and objectives towards making Nigeria one of the world’s leading markets of FinTech innovation and investment. Their operations are being regulated by the Security and Exchange Commission (Sec), Central Bank of Nigeria (CBN), National Insurance Commission (NIC) and the government at all levels.

To set up a FinTech company in Nigeria, investor(s) should have a proper understanding of some basic steps and procedures before kick-starting the business. These basic requirements are discussed below:

 Firstly, investor(s) should identify their FinTech category of interest. However, some FinTech businesses practised in some parts of the world are prohibited here in Nigeria. For instance, the Central Bank of Nigeria has restricted indigenous banks and some other FinTech institutions from dealing in virtual currency, meaning, virtual currency is not a legal tender and has no legal protection in Nigeria. Apart from this, every prospective FinTech Entrepreneur should always be on the lookout for updated regulations guiding FinTech establishment in Nigeria as the regulations are hardly static.

Another basic requirement to be considered is the “Requisite License”. The license required in setting up a FinTech depends on the exact FinTech Industry one intends to establish, e.g; Banking, Insurance, payment Financial Technology. Recently, the CBN introduced a licensing regime called “Payment Service Providers” which enables FinTech firms to operate the e-payment platform. These platforms are also said to be categorized into three (3); the basic, standard and super. The minimum amount required to operate is N100 million while the maximum is N5 billion.

Some new FinTech Entrepreneurs don’t acquire a requisite license, what they do is they enter into an agreement with some existing operators who have valid license acquired from CBN. They collaborate either on service level agreement or technical partnership. The Nigerian Communication Commission (NCC) also regulates FinTech businesses by offering USSD usage regulations.

Investment is another crucial basic setup required for a new FinTech establishment. Please note that there is no special funding incentive scheme in FinTech business in Nigeria aside from the one initiated by the Federal Government of Nigeria to encourage both local and foreign investors to participate. Among these are; pioneer status, incentives for venture capital companies and Deduction for Research & Development.

Among many other significant factors (some of which we have discussed above), any local/foreign firm willing to establish a FinTech platform in Nigeria must become a member of the FinTech Association of Nigeria and also register as a separate entity with the CAC. The procedures for FinTech company registration under CAC are stated below:

  • A prospective investor must check for availability of the company proposed name with the Corporate Affairs Commission and make a reservation.
  • Upon discovery that the proposed company name is available, he should proceed by picking a registration form with the CAC and fill in some crucial information which includes, but not limited to:
  1. Address of the proposed company.
  2. The proposed company authorized share capital.
  • Particulars of directors and shareholders.
  1. Statutory declaration of compliance by a legal practitioner.
  2. Signed copies of the memorandum of association.
  3. Original copies of documents authorizing the company to exist
  • Photocopies of company directors/shareholders credentials (ID cards, passports, etc).

Some other FinTech company aspiring to engage in money lending activity requires the below requirement and clearance of the government agency which regulates the money lending.

  • You must register as a bank or other financial institution
  • Get mobile money operator license
  • Obtain a value added services(VAS) license from Nigeria Communication commission (NCC)
  • If you are adding Asset Management, you need to get license from Securities and Exchange Commission (SEC)
    • Cyber Crime Act 2015(Know you customer)
    • You must safeguard the privacy of customers’ Data
  • National Information and Technology Development Agency (NITDA)  get draft guidelines on data protection
  • EFFC  clearance
  • Money laundering prohibition Act 2011 clearance
  • Corrupt practices and other related offences act clearance
  • Terrorism (prevention) clearance
  • CBN antimony laundering /combating the financial terrorism clearance

From the above, we can see that the requirements for being a FinTech company are not cumbersome. Any firm seeking to engage in any of the FinTech related activities must begin by registering with CAC. Meanwhile, membership registration with the FinTech Association of Nigeria is equally important. Upon completing these registrations, they should also apply for requisite licenses with regulated agencies like CBN, SEC and NCC.

If you are interested in having a financial technology Application (Fintech App), the surest means to achieve that is by contacting the right App Developer with a proven track record. Contact us at Lead web Praxis for free consultations and a breakdown of the procedures required.

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