Starting a Fintech Business in Nigeria

Fintech is an acronym for financial technology. It has been a thriving aspect of Technology in the past few years. It is a term used to describe the use of technology to improve financial services. Fintech is a rapidly growing space with a lot of opportunities as finance cannot be dispensed with. Fintech makes financial transactions faster, easier, and accessible to consumers. Fintech in Nigeria is a space that the government constantly seeks to regulate to ensure financial security. 

What is the minimum Share Capital for FinTech in Nigeria?

Although the required minimum share capital for private companies in Nigeria is N100,000 (One Hundred Thousand Naira) that of fintech is dependent on the type of license that the company requires to operate with. 

What are the categories of financial technology companies in Nigeria

1. Payments

This is the most common category in Nigeria and most businesses have adopted this channel of payment for their business. Examples of the players include Baxi Pay, Palmpay, Paga, Cellulant, Flutterwave, eTranzact, Paystack, Remita, and OPay. 

2. Digital Banking

Fintech companies in this area provide banking services but are more simplified than the traditional bank. An example of this type of company is Kudabank.

3. Lending

Companies in this space use digital lending platforms to offer small loans to consumers who have capacity to pay back. Examples of the firms in this area include Renmoney, Paylater, Page, Aella, CreditDirect, and Zedvance.

4. Savings and investment 

These are fintech companies that help structure saving and investment. Companies engage this service include PiggyVest (formerly Piggybank), Cowrywise, Farmcrowdy, Kolopay, Risevest, Carbon, and Eyowo

Who regulates Financial Technology companies in Nigeria?

The major Regulator of Financial technology companies in Nigeria is the Central Bank of Nigeria (CBN) which derives its powers to regulate from The Banks and Other Financial Institutions Act, 2020(BOFIA). Other regulators include The National Deposit Insurance Corporation by virtue of the NDIC Act, 2006, The Nigerian Communication Commission by virtue of the Nigerian communication Act, 2003, and The Securities and Exchange Commission (SEC) by virtue of the Investment and Securities Act, 2007, National Insurance Commission and The Corporate Affairs Commission (CAC) by virtue of the CAMA 2020.

What are the regulatory requirements for registering a fintech company in Nigeria?

For a Fintech company to fully operate in Nigeria, the company must register with the Corporate Affairs Commission (CAC) as a legal entity in Nigeria. The Central Bank of Nigeria or the relevant regulatory body must license the company after necessary applications are made, and necessary documents tendered. However, where the company has foreign participation, it must obtain a business permit, register with the Nigeria Investment Promotion Commission (NIPC) and National Office of Technology Acquisition and Promotion (NOTAP) Registration. 

Fintech companies who seek to engage in money lending must obtain a license from the various state government agencies regulating the money lending business.

Read Also : How a FINTECH can obtain a Payment Service Provider License in Ghana

FINTECH Licensing requirements and operation

Licensing of a FinTech company depends on the type of license the company seeks. A fintech company can either be a Digital Bank, A Payment Service Bank (PSB), or a Payment Service Provider (PSP). Examples of licenses for fintech include:

1. Alternative Lending/Digital Credit licenses (2.5 billion share capital)
   
2. Digital Crowdfunding Intermediary licenses (one hundred million share capital)
   
3. Digital Banking licenses with subset of licenses such as –

• a). Switching and Processing licenses – Two billion share capital

• b). Mobile Money Operator licenses – Two billion share capital

• c). Payment Solutions Service Provider licenses – One hundred million share capital

• d). Payment Terminal Service Provider licenses – One hundred million share capital

• e). Super-Agent Banking licenses – Fifty million share capital

• f). Payment Service Bank licenses – Five billion share capital

• g). Foreign Exchange & Remittance licenses – Two billion share capital

4. Insurtech licenses are divided into life insurance (two billion share capital), general insurance (ten billion share capital), reinsurance (twenty billion share capital), composite insurance (eighteen billion share capital)
5.  Robo-Advisory licenses – Five million share capital)

How much does it Cost to Obtain a Fintech License in Nigeria?

Below are the various official fees payable for the application of the different types of Fintech licenses in Nigeria. 

1. Switching and Processing Licence: Application fee of N100,000, payment of the refundable sum of N2 billion in escrow to CBN and licensing fee of N1 million to be paid before the issuance of the final licence.
2. Mobile Money Operator Licence: Application fee of N100,000, payment of the refundable sum of N2 billion in escrow to CBN and licensing fee of N1,000,000 to be paid before the issuance of the final licence.
3. Payment Solution Services (PSS): Application fee of N100,000, payment of the refundable sum of up to 250 million (depending on which of the licenses the company wishes to obtain) in escrow to the CBN and licensing fee of N1,000,000 to be paid before the issuance of the final licence.
4. Payment Terminal Service Provider (PTSP) Licence: Application fee of N100,000, payment of the refundable sum of N100 million in escrow to the CBN and licensing fee of N1,000,000 to be paid before the issuance of the final licence.
5. Payment Solution Service Provider (PSSP) Licence: Non-refundable application fee of N100,000, payment of the refundable sum of N100 million in escrow to the CBN; and licensing fee of N1 million to be paid before the issuance of the final licence.
6. Super-Agent Licence: Non-refundable application fee of N100,000, payment of the refundable sum of N50 million in escrow to the CBN and licensing fee of N1 million to be paid by the applicant before the issuance of the final licence.

How long does it take to acquire a Fintech Licence in Nigeria?

There are a lot of factors that go into determining the duration of acquiring a Fintech Licence. These factors are different depending on the type of licence that an applicant seeks to obtain. Therefore, there is no fixed duration for the acquisition of a fintech licence. 

Conclusion

In conclusion, the fintech space is one that is highly regulated for the benefit of consumers and the companies and as such it is important to stay up to date with the regulations that are constantly provided. We would be glad to provide advisory, fintech company registration and application for license services. Contact us here today!