The Financial Technology (fintech) Industry is rapidly developing in Nigeria. The surge of fintech in Nigeria is largely attributed to the Introduction of cashless policy by the CBN in 2012. Fintech is the use of creative and innovative technology to improve financial services. The advent of smartphones and other technology innovations has enhanced the access to finance.
Fintech has changed the traditional means of banking and rendering of other financial services. The use of technology to render services is evidenced through mobile and retail banking, payment and processing, lending, capital market trading, investment, crypto or virtual currency .
The evolution of fintech has created a new set of risks such as data theft, cyber-crimes and other legal challenges. Nigeria has witnessed an increase in fintech innovation and utilization. Given the rapid expansion of the fintech industry in Nigeria, it is important that the legislations regulating fintech in the country are adequate to regulate the operations in the Industry.
The purpose of this article is to examine the existing legal framework for the regulation of fintech in Nigeria.
Regulatory Legislations in Nigeria
There is no single legislation regulating fintech in Nigeria. However, there are several existing regulations and enactments that apply in the fintech market. The Central Bank of Nigeria (CBN) is the principal body responsible for of maintaining financial stability and integrity in Nigeria. To this effect, it issues guidelines and regulations for the monitoring of financial services. The guidelines include;
- The CBN Guidelines on Mobile Money Services in Nigeria, 2015
- The CBN Guidelines for Licensing and Regulation of Payment Service Banks in Nigeria, 2018
- The CBN Risk-Based Cyber-Security Framework and Guidelines for Deposit Money Banks and Payment Service Providers, 2018
- The CBN Microfinance Policy, Regulatory and Supervisory Framework, 2011
- The CBN Guidelines on Operations of Electronic Payment Channels in Nigeria, 2016
- The CBN Regulation for Bill Payments in Nigeria, 2018
- The CBN Regulatory Framework for the Use of Unstructured Supplementary Service Data (USSD) for Financial Services in Nigeria, 2018
- The CBN Guidelines on International Mobile Money Remittance Service in Nigeria 2015
- The CBN Regulation for Direct Debit Scheme in Nigeria 2018
- The CBN Guidelines on International Money Transfer Services in Nigeria, 2014
- The CBN Regulation on Electronic Payments and Collections for Public and Private Sectors in Nigeria, 2019
- The CBN Revised Guidelines for Finance Companies in Nigeria, 2014
Other legislations generally applicable in fintech services are;
- Companies and Allied Matters Act (as amended), 2020
- Investment and Securities Act, 2007
- Securities and Exchange Commission Rules (as amended), 2013
- Federal Competition and Consumer Protection Act, 2018
- National Insurance Commission Act, 1997
- Money Laundering (Prohibition) Act, 2011
- Economic and Financial Crimes Commission (Establishment) Act, 2004
- Terrorism (Prevention) Act, 2011
- Advance Fee Fraud and other Fraud Related Offences Act, 2006
- Cybercrimes (Prohibition, Prevention, Etc) Act, 2015
- Nigeria Data Protection Regulation, 2019
- Bank and Other Financial Institution Act, 2020
- Foreign Exchange (Monitoring and Miscellaneous) Provision Act, 1995
- NCC Value Added Services and Aggregator Framework, 2018
These regulations seek to ensure an effective financial system for the settlement of transactions, including the development of electronic payment systems in Nigeria. These regulations also leverage technology to promote financial inclusion and enhance access to financial services.
Under the Guidelines for the Operation of International Money Transfer Services in Nigeria 2014, the CBN sets out a detailed legal framework requiring, among others, international money transfer operators to obtain licences from the CBN before engaging in money transfer services or otherwise be sanctioned.
Under the CBN Guidelines on International Mobile Money Remittance Service in Nigeria 2015, foreign international money transfer operators that wish to operate in Nigeria must apply to the CBN for a license and show evidence of possession of a licence in their home country.
In addition to the CBN guidelines, payment services involving mobile telephone infrastructure are regulated under the NCC License Framework for Value-Added Service. Under this framework, mobile payment service providers must obtain a five-year renewable license from the NCC. 
Similar to the legislations regulating fintech, there is no single authority established to regulate fintech services. The bodies regulating fintech services will depend on the transaction the fintech company is engaging in. The CBN however, has primary regulatory oversight over fintech services and products. It issues licenses and prescribes guidelines that regulate financial institutions.
Other regulatory bodies are; The National Communication Commission (NCC), Nigerian Deposit Insurance Corporation (NDIC), Securities and Exchange Commission (SEC), National Insurance Commission (NAICOM), National Information Technology Development Agency (NITDA), Corporate Affairs Commission (CAC), Federal Competition and Consumer Protection Commission (FCCPC), Nigeria Securities & Exchange Commission, National Office of Technology and Acquisition Promotion (NOTAP).
Licensing and Restrictions on Fintech Services
Companies are required to obtain necessary license if they operate fintech services. For example, in the financial sector, a banking license must be obtained from the CBN before a fintech company can engage in lending operations. The CBN has issued sundry regulations which require providers of fintech services to obtain a license from the CBN.
Fintech operators licensed by the CBN include mobile money operators, switching companies, payment gateways, and payment terminal service providers and aggregators. Operators of bill payment platforms are required to either obtain a license from the CBN or be integrated into a licensed payments service provider. Mobile money operators and other fintech service providers which make use of telecommunications infrastructure, also require the approval of the NCC.
The CBN in exercising its right of oversight over Payment System, drafted the Payment System Management Bill in the absence of any law regulating payments in Nigeria. It has overtime, through the Payment Vision System (PVS) 2020 initiative witnessed several achievements such as the Bank Verification Number scheme, Cashless policy, Guidelines on international money transfer, Card fraud prevention strategies, Mobile payment among others. In its mission to promote strong and credible payment system, it has again approved a new categorisation for the payment system for new and existing payment service providers. The licensing framework streamlines permissible activities to Switching and Processing, Mobile Money Operations, Payment Solution Service and Regulatory Sandbox.
There is presently no comprehensive directive of fintech products or services that are prohibited in Nigeria. The regulatory authorities respond to fintech issues as they arise.
The CBN has adopted a cautious stance towards crypto currencies. In January 2017, the CBN issued a circular to banks and other financial institutions to desist from transacting in virtual currency as it is not a recognized legal tender in Nigeria. However, while banking operations in virtual currencies are discouraged, transactions in virtual currencies are not prohibited in Nigeria, leaving this area of fintech unregulated.
As regards Crowdfunding, in August 2016, SEC issued a statement banning crowdfunding activities until comprehensive regulations on the subject have been established. In March 2020, it released its Proposed Rule on Crowd funding (Draft Rules) for comment form the general public. If approved, it proposes conditions under which private companies are permitted, with the required structure and mechanism in place, to raise capital from the public.
Also, in February 28, 2018 SEC issued a public notice indicating its participation in the International Organization of Securities Commission as an effort to regulate crypto currencies, bitcon and other virtual currency. In September, 2018 the Governor of CBN announced that the CBN and the Financial Control Authority of the UK are to develop fintech regulations in Nigeria.
Data Protection and Cyber Security
The Fintech Industry faces a major risk of data theft and other cybercrimes. The NITDA regulates the protection of data applicable to Nigerians in and outside Nigeria. Data encryption, which is also a requirement of the CBN Regulatory Framework for the Use of USSD for Financial Services, is a measure used to protect data. The CBN Consumer Protection Framework for Banks and other Financial Institutions also regulates the protection of consumer assets and privacy.
The Cybercrime Act, a general law on Cyber security in Nigeria, though combats cybercrimes, does not provide mechanism financial institutions can put in place to strengthen their cyber defense. However, the CBN by issuing the Risk-Based Cyber-Security Framework and Guidelines for Deposit Money Banks and Payment Service Providers has made provisions for cyber security governance and oversight, cyber security risk management system, cyber resilience assessment, cyber security operational resilience, cyber-threat intelligence and metrics, monitoring and reporting.
The need for fintech regulations in Nigeria cannot be overemphasised as the industry continues to experience rapid development. SEC has made considerable progress in addressing the issue of crowdfunding. The Proposed Electronic Transaction Bill which seeks to regulate certain aspects of fintech services such as the protection of data in electronic transactions, electronic contracts, and the use of electronic signatures, if passed into law is a welcome development in the Nigerian Fintech Industry. However, there are so many aspects of fintech that have been left unregulated. A uniform regulation addressing the use of fintech is well deserved in Nigeria.
As a growing industry without a comprehensive regulatory framework, it is instructive that fintech companies operating in Nigeria are encouraged to consult legal experts for a full understanding of the applicable laws, requirements and the appropriate measures to be taken in order to ensure compliance.
 Global Legal Insights, Fintech 2020, 2nd Ed, Available at https://www.globallegalinsights.com/practice-areas/fintech-laws-and-regulations/nigeria Accessed December 8, 2020.
 Olayemi Anyanechi, “Fintech Regulation in Nigeria” (March 19, 2019) Available at https://www.lexology.com/library/detail.aspx?g=6df8a1cc-8235-4ce7-9b69-3c8cb318a221 Accessed December 8, 2020
 Fintech Regulation in Nigeria, Available at: http://bloomfield-law.com/Publications/BLP_Article_Fintech_Regulation_in_Nigeria_160419.pdf Accesed 7th Dec, 2020.
 Section 47(2) of the CBN Act (as amended), 2007
 New Licence Categorisation for Nigerian Payment System Available at https://www.cbn.gov.ng/Out/2020/CCD/Categorization%20of%20PSPs.pdf Accessed December, 11 2020.
 Global Legal Insights, Fintech 2020, 2nd Ed, Available at https://www.globallegalinsights.com/practice-areas/fintech-laws-and-regulations/nigeria Accessed December, 2020.
Written by Osama Obasoyo
Osama Obasoyo is an associate with Marcus-Okoko & Co., and specializes in Financial Technology Law, Corporate Governance and Regulatory compliance