FintechFinancial marketsFinancial Technology in Nigeria

Kennnedy MuturiOctober 3, 202237013 min
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The Nigerian Fintech industry continues to attract significant investment and interest from around the world. The competitive character of the financial technology field, especially in a fragile economy, can be linked to its success. Nigeria’s banking sector remains appealing despite the difficulties, with over $9 billion in value pools.

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In 2019, Nigeria’s fintech industry received funding from a variety of international investment firms, with Interswitch, a payment system infrastructure service, receiving $200 million in equity funding from Visa, Branch receiving $170 million in funding from foundation capital and Visa, and Stripe acquiring Paystack for an undisclosed sum in October 2020

The evolution of financial technology in Nigeria cannot be described without mentioning the stability of banks and other financial institutions and the Central Bank of Nigeria’s consistent policies (CBN).

On December 31, 2005, the CBN implemented a recapitalization of the banking system, increasing commercial bank capital from N2 billion to N25 billion. Its inexorably provides a foundation for the sector’s companies to build on strong regulations.

Besides the CBN, other regulatory bodies in the financial sector include the Nigerian Deposit Insurance Corporation (“NDIC”), the Securities and Exchange Commission (“SEC”), NAICOM, the Corporate Affairs Commission (“CAC”), the Nigerian Communications Commission (“NCC”), the NITDA, and the Federal Competition and Consumer Protection Commission (“FCCPC”).

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You must first register your business name with the Corporate Affairs Commission (CAC) in Nigeria before establishing your fintech company. A Financial technology company should be registered as a limited liability company.

The following are the specified prerequisites for forming a limited liability company.

  • The first step is to choose two different company names, after which a name availability check will be performed on the CAC web portal to ensure that the name is available and not already in use.
  • When registering a business, choose between a private limited company, an unlimited personal company, or a corporation limited by a guarantee.
  • The company’s goals and operations must be detailed.
  • The company register its primary address.
  • It will be necessary to determine the share capital and shareholding formula among shareholders.
  • A minimum of two (2) Directors’ information is requested; A copy of their photo ID, such as a voter’s card, national identity card, driver’s license, or international passport.
  • Information about the company secretary (one of the directors may also act as the Secretary of the company)
  • The applicant will be needed to provide information about the company’s stockholders. Names, occupations, residence addresses, email addresses, mobile phone numbers, and forms of identification such as a driver’s license, international passport, or national identity card are all examples of personal information. It should be noted that the listed directors might also act as shareholders in the firm if they so wish.
  • A lawyer should professionally draft the company’s memorandum and articles of association. On the other hand, the CAC has provided a generic MEMART that any new company can use.

A consultant will prepare the following incorporation documents. They include the following:

  • CAC Form 1.1 duly stamped Memorandum and Articles of Association with duly verified director information and a statement of share capital
  • The person fills out the incorporation documents with the help of an accredited lawyer who attests to the papers.
  • The necessary fees are paid online, and the incorporation documents are stamped online instantly.
  • The stamped incorporation paperwork will now be put into the CAC web portal once more for the commission’s final examination.
  • The commission will establish the company and assign an incorporation number immediately if all incorporation documents are appropriately completed and performed.
  • CAC will issue a Certificate of Incorporation and Certified True Copies of the other documents to the consultant or lawyer, usually within 48 hours of the company being duly incorporated by CAC.
  • If the company has a foreign investor, it must comply with the following requirements:
  • Become a member of the Nigeria Investment Promotion Commission (NIPC) (NIPC)
  • Get a business license.
  • Become a member of the National Office of Technology Acquisition and Promotion by registering (NOTAP)

All fintech companies in Nigeria are regulated by the Central Bank of Nigeria (CBN). The Central Bank of Nigeria (CBN) developed the Payment Systems Providers (PSP) license system for fintech companies to prevent and address risk management, cyber hazards, and capital sufficiency. Obtaining a license for your fintech business is a significant accomplishment, and different requirements apply to other fintech businesses depending on the services they provide. The Central Bank of Nigeria (CBN) has a licensing system that is separated into three categories:

Super license

Companies that run payment gateway systems, such as point-of-sale (POS) services and switching services, must have a super license. To obtain the super license, one must have at least N5 billion in shareholder capital and pay a licensing cost of N1-2 million every year for three years.

Standard license

Fintech enterprises that operate e-money issuers, agent recruiters and managers, wallet generation and maintenance, and other services are eligible for the standard license. To obtain a basic license, one must have a shareholder’s fund of at least N3 billion and pay a licensing cost that ranges from N500,000 to N1,000,000.

Basic license

Companies that conduct POS installations or terminal services and provide payment processing gateways, portals, and payment applications or solutions must have a basic license. To obtain the basic license, you must have a shareholder requirement of at least N100 000, 000 and a licensing cost that ranges from N100 000 to N500 000.

Raising financing for your company is critical, and it should be one of your priorities as a business owner. Your company could go out of business if you don’t have enough money. If you’re a business owner looking to start a fintech company in Nigeria, you can get finance from the following sources:

  • Self-financing: This refers to the capital given by the entrepreneur.
  • Grants from government agencies include the following: Various grants are also available through state and federal government programs.
  • Bank-issued loans: You can get various bank loans if you have a clear business plan and register your company name.
  • Investors: Shareholders who have read your business plan and are confident that your furniture manufacturing business will be profitable can put millions of naira into your company.
  • Friends and family: Relatives and friends that are willing to fund your business can also provide funding.
  • Venture capital (VC): this is given to companies with excellent growth potential.

Kennnedy Muturi

Ken is a Quantitative Trader with experience in investments, quantitative finance, financial modelling and algorithmic trading in Global Investable Markets (GIM). He enjoys using Bayesian Statistics, Time Series and Machine Learning in developing Robust consistent Alphas in Equities Market, FX, ETPs and Derivatives instruments. He enjoys deep dives in understanding High Frequency Trading infrastructures and improving how the African financial markets work. He holds a Bachelor's in Actuarial Science from Strathmore Institute of Mathematical Sciences : An Executive Program in Algorithmic Trading (EPAT) certificate in Algo Trading from QuantInsti : A current MSc student in Financial Engineering at World Quant University.

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