Financial technology, popularly referred to as FinTech, is the new technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. This is a fast rising sector in Nigeria as there has been significant investment in technology and investments in recent years.
This brief write-up will essentially focus on what must be known before registering a FinTech company and the guidelines for registering a FinTech company in Nigeria.
Type of FinTech Business:
The first thing to identify is what category of FinTech business is being engaged, taking into consideration some parts of general FinTech business are prohibited in Nigeria. The Central Bank of Nigeria (CBN) has restricted banks and other regulated financial institutions from dealing in virtual currency, as they are not legal tender in Nigeria, and therefore, they have no legal protection in Nigeria. This finding will help to stream down the regulatory bodies that govern them and know the required licenses to be obtained, as they are various licenses under e-payment solution.
The license required depends on the FinTech industry you intend to focus on e.g. insurance, banking and payment etc.
The Central Bank of Nigeria recently introduced a licensing regime called Payment Service Providers required by FinTechs to operate in the e-payment space. These are categorized into 3 licenses namely; Super, Standard & Basic. The amount required to play at the different tiers ranges from a minimum of N100 million to 5 billion.
Some FinTech Startups don’t obtain the requisite licenses but enter into agreement with existing operators with valid license within the financial industry by way of service level agreements or technical partnerships, which allows them to deliver these services under the partner/client financial institutions.
Also, the Nigerian Communications Commission (NCC) regulates FinTech businesses where the FinTech services being offered by a company involves mobile phones pursuant to the Licence Framework for Value Added Service (VAS) issued by the NCC.
Generally, there are no special funding requirements and special incentive scheme for investment in FinTech business in Nigeria. However, there are some incentives generally available in Nigeria, which may be relevant to the FinTech industry. These incentives were adopted by the Nigerian government to encourage both local and foreign investors to invest in Nigeria. They include: Pioneer status, incentives for venture capital companies and Deduction for Research & Development.
Registration with Corporate Affairs Commission(CAC):
Every individual or local or foreign company wishing to establish a Fintech startup or entity in Nigeria must incorporate a separate company with the CAC. The procedure for company registration with the CAC is as follows:
Furthermore, there are other registrations required by law to be carried out by a company with the foreign shareholders. They include:
In Conclusion, registering a company with the FinTech related objects with the CAC must commence the setting up of a Fintech company in Nigeria. Upon the registration of the said company with the CAC, the company must now apply for requisite licenses with other regulatory agencies, which include the Central Bank of Nigeria and the Nigerian Communication Commission (NCC). A FinTech company seeking to engage in money lending business may also register with the various state government agencies regulating the money lending business.
Written by Corporate & Commercial Law Department at Resolution Law Firm