International Money Transfer Operator (IMTO) License in Nigeria: Procedure and Requirements under the Updated Guidelines

Introduction

An International Money Transfer Operator (IMTO) is a Central Bank of Nigeria (CBN)-approved firm that facilitates the transfer of monies from persons or entities residing outside of Nigeria to Nigerian nationals. IMTOs are in charge of receiving funds from other countries and transferring it to Nigerian citizens.

The International Money Transfer Operator (IMTO) license is a necessary requirement for running a lawful money transfer business in Nigeria. To operate as an IMTO in Nigeria, a business must first get a CBN license by submitting an application to the Director of the Trade and Exchange Department. This article examines the procedure for obtaining an International Money Transfer Operator License in Nigeria.

Definition of International Money Transfer Operator

The Central bank of Nigeria Guidelines on International Money Transfer Services in Nigeria, 2024 defines International Money Transfer Operators as companies approved by the CBN to facilitate the transfer of funds from individuals or entities residing abroad to recipients in Nigeria, and the payment of a corresponding sum to a beneficiary through a clearing network to the IMTO belongs.

Requirements for obtaining an International Money Transfer Services in Nigeria

The application for approval to carry on business of international money transfer services shall be submitted to the Director, Trade and Exchange Department, Central Bank of Nigeria, Abuja.

No person or institution shall operate International Money Transfer Services unless such person/institution has been duly approved by the CBN.

Any financial product involving international money transfer by any person or institution that is not duly registered with the CBN is illegal.

The applicants must comply with the requirements of the CBN Guidelines for licensing of banks and other financial institutions in Nigeria on Anti money Laundering, Combating the financing of Terrorism and Countering Proliferation of weapons of Mass Destruction. 

The approval process shall be in two phases namely, Approval-in-Principle and Final Approval.

Documents Required by an International Money Transfer Operator (Approval-in-Principle)

Any International Money Transfer Operator willing to operate in Nigeria shall submit the following documents in support of the application to the Director, Trade and Exchange Department of the CBN:

• A non-refundable application fee of N10,000,000 (Ten Million Naira) or such other amount as may be specified by CBN from time to time, payable through electronic transfer or bank draft.

• Approval to operate in other jurisdictions or agency agreement (for all IMTOs)

• Evidence of tax clearance and incorporation documents in Nigeria (for indigenous IMTOs) to include Certified True Copy of MEMART, with the primary object clause indicating the provision of money transfer services

• The ownership structure of the IMTO

• Board of Directors approval to operate international money transfer service

• CAC Form C02 (Return of Shares) and C07 (Particulars of Directors)

• Profile of the company to include Curriculum vitae/bio data, contact and email address, telephone numbers of the Board and Management of the company.

• Information on the beneficial owners of the company (where applicable)

• Credit reports from a licensed credit bureau for the shareholders and key officers of the IMTO

• Minimum share capital of US$ 1 million for foreign IMTOs and the equivalent for indigenous IMTOs

• Any other information, document, or report as CBN may from time to time specify.

After complying with the above requirements and receiving favorable consideration, an IMTO can open a bank account and begin pre-operational processes. It’s important to note that the Approval-In-Principle application does not grant the IMTO the right to start operations, also Approval-in-Principle may be withdrawn if the IMTO does not meet with the requirements stated above.

Documents Required by an International Money Transfer Operator for Final Approval

The IMTO shall submit an application for final approval to CBN within three (3) months of receiving the Approval-In-Principle from CBN, subject to the following requirements:

• Names of authorised dealer bank(s) to serve as local agent(s) and copy of agency agreement

• Submission of a detailed business plan to the CBN which shall include:

1. Nature of the business
2. Internal control systems and monitoring procedures
3. Security features for IMTOs with offices in Nigeria
4. Three (3) years of financial projection/market analysis for the company
5. Transaction and other charges that will be borne by the customers
6. Diagrammatic illustration of transaction flows
7. Consumer protection and dispute resolution mechanisms
8. Information technology policy of the company including:

1. Privacy policy
2. Information ownership/disclosure/loss policy
3. Backup and restore policy
4. Network security policy
5. Encryption policy
6. Confidential data policy
7. Password policy
8. Third-party connection policy
9. Incidence response policy
10. Physical security policy

9. Enterprise risk management framework
10. Contingency and disaster recovery plan/business continuity plan
11. Draft agreements with the participating parties
12. Project deployment plan (time, location, operation, etc)
13. Any other information as may be required by CBN from time to time

Overseas partnership requirements 

An indigenous IMTO who wishes to engage a foreign technical partner shall obtain the prior approval of the CBN. The following conditions shall apply to the technical partner:

• The technical partner must be a registered entity, licensed in its home country to carry on money transfer activities.
• The overseas technical partner should be well established in the money transfer business, with a track record of operations. 
• Have a minimum net worth of US$1 million, as per the latest audited financial statement, or as may be determined by the CBN from time to time. 
• There should be a Memorandum of Understanding that clearly defines liabilities in the event of disputes and/or process failures. 
• The CBN will further conduct appropriate due diligence on the promoters, directors, and key officers of the proposed money transfer operator.

Annual Renewal of License

IMTOs must renew their licenses annually for an annual fee of N10,000,000 (Ten Million Naira), which must be paid by January 31 of each year. The renewal must also take place within the first quarter of the year.

Failure by an IMTO to provide a copy of the CBN renewal approval to its agent bank(s) within the first quarter of the year shall be grounds for such agent bank(s) to discontinue any further transactions with the IMTO concerned.

Permissible Activities of an IMTO License Holder

The permissible activities of international money transfer operator shall include inbound money transfer only. The transactions shall be limited to the following operations:

• The acceptance of money for the purpose of transmitting it to a person resident in Nigeria or another country. 

• Cross-border personal money transfer services, such as money transfer services for family maintenance and money transfer services in favour foreign tourists visiting Nigeria, shall be allowed under this arrangement.

• The money transfer services shall target individual customers and the transactions shall be on a “person to person”, “business to person“and business to business” transfer basis which may be reviewed by the CBN from time to time.

Non-Permissible Activities

The following activities are not permissible by IMTOs:

• An IMTO shall not engage in any other business other than those stipulated above.
• An IMTO shall not engage in any outbound transaction.
• Buy foreign exchange from the domestic foreign exchange market for settlement

Prohibition of Banks and Financial Technology Companies

All banks and financial technology firms are prohibited from becoming IMTOs. Banks may, however, act as IMTOS agents. Persons prohibited from working in banks under the BOFIA, 2020, are also prohibited from becoming IMTOs.

Conclusion

The International Money Transfer Operator license is indispensable for running a reputable money transfer business in Nigeria. It is issued by the Central Bank of Nigeria (CBN) to organisations requiring to provide cross-border money transfer services. 

To receive an IMTO license in Nigeria, an organization must submit an application to the Director of the CBN’s Trade and Exchange Department. Once the application is approved, the IMTO can open a bank account and commence pre-operational procedures.

However, the award of approval-in-principle does not authorise the IMTO to begin activities. IMTOs must follow the CBN’s requirements on anti-money laundering and combating terrorist financing. They must keep accurate records of all transactions, issue receipts to clients, and submit returns to the CBN. 

Obtaining an IMTO license increases money transfer operators’ credibility and trustworthiness, allowing them to participate in Nigeria’s enormous and developing remittance sector. The license signifies compliance with regulatory prerequisites, fosters openness, and instills trust in the security and dependability of the services offered.

By Adeola Oyinlade & Co.

Adeola Oyinlade & Co.; a leading full-service law firm in Nigeria provides help and offers advisory to both local and foreign clients on finance and banking related matters including how to process financial and banking licenses in Nigeria. 

Need help? Kindly contact us using the details below:

Email: [email protected]

Mobile: +234 803 826 7683 / +234 802 686 0247

Introduction

Telecommunication licenses are indispensable for any entity wishing to provide communication services in Nigeria. The NCC is responsible for issuing these licenses, ensuring that operators comply with legal and regulatory standards. The licensing framework is designed to promote fair competition, protect consumers, and enhance the quality of telecommunication services. This article summaries the procedure and requirements for obtaining a telecommunication license in Nigeria.

Meaning of Telecommunication License

A telecommunication license is a legal authorisation granted by the Nigerian Communications Commission (NCC) that permits individuals or companies to operate telecommunication services within Nigeria. The license is governed by the Nigerian Communications Act of 2003, which establishes the NCC as the regulatory authority responsible for overseeing the communications sector.

There are various types of licenses, including:

• Individual License: This is a type of approval in which the terms, conditions and obligations, scope and limitations are specific to the service being provided. The process of licensing can take the form of auctions, tenders, fixed prices or a standard administrative procedure, etc.

• Class License: This is a type of general approval in which the terms and conditions/obligations are common to all license holders. It requires only registration with the Commission for applicants to commence operation.

• Unified License: Allows the provision of multiple telecommunication services under one license.

• Value Added Service License: Permits the provision of additional services such as internet and content services, often relying on existing network infrastructure.

Importance of Telecommunication License

1. Legal Compliance: Operating without a license is illegal and may result in significant fines and penalties. The NCC requires that all telecommunication services be licensed to ensure adherence with national regulations.

2. Consumer Protection: Licensing helps safeguard consumer interests by ensuring that service providers meet certain standards and obligations, thereby enhancing service quality and reliability.

3. Market Regulation: Licenses enable the NCC to regulate the telecommunication market effectively, ensuring fair competition and preventing monopolistic practices.

4. Quality Assurance: The licensing process includes assessments of technical capabilities and financial viability, which helps maintain high service standards across the industry.

5. Revenue Generation: Licensing fees contribute to the government’s revenue, which can be reinvested into the telecommunications infrastructure and other public services.

6. Support for Development: By regulating the sector, the NCC can foster growth and innovation in telecommunications, which is crucial for economic development and digital inclusion in Nigeria.

Conditions for obtaining a telecommunication license in Nigeria

To obtain a telecommunication license in Nigeria, applicants must meet several conditions set by the Nigerian Communications Commission (NCC). These conditions ensure that only qualified entities can provide telecommunication services, thereby maintaining industry standards and protecting consumers. These conditions include:

• The applicant must be a corporate body registered under Nigerian law. This includes compliance with the Companies and Allied Matters Act.

• The applicant must meet the NCC’s technical requirements for operating the specific service for which the license is sought. This may involve demonstrating technical expertise and infrastructure capability.

• The applicant must possess sufficient financial resources to provide long-term services. This requirement ensures that the entity can sustain operations and meet service obligations.

• For services that depend on specific resources, such as spectrum or numbering, the NCC must confirm the availability of these resources. The applicant must secure a reservation or assignment of such resources before applying.

• The NCC may impose other conditions as deemed necessary for the specific service being provided. This can include compliance with industry regulations and standards.

• Applicants must provide various documents, including incorporation documents, tax clearance certificates, feasibility reports, and evidence of funding.

• Payment of a non-refundable administrative charge, typically 5% of the relevant license fee, is required upon submission of the application.

Application Process

To obtain a telecommunication license in Nigeria, the following procedure and requirements must be met:

Requirements for Individual License 

• Sign up on eservices.ncc.gov.ng and click on Licensing Application Management System to apply.

• Fill the form and upload the relevant documents listed below:

• Certificate of Incorporation.
• Tax Clearance Certificate.
• Certified True Copy (CTC) of Articles & Memorandum of Association.
• Feasibility report of proposed service.
• Soft Copy of Passport photographs of authorized representative.
• Certificates of qualified technical staff (where applicable).
• Certified True Copy (CTC) of Form CO7 (List of Company Directors).
• Soft Copy of Passport photographs of Directors of the company.
• Certified True Copy (CTC) of Company’s Registered Address.
• Utility bill of the official address of the Company.
• Evidence of funding for the project.
• The amount budgeted for the project i.e. estimated funding for the deployment of the proposed service.

• Applications should be submitted when all documents above have been uploaded.

• On submission of the application, a non-refundable administrative charge, which is 5% of the relevant license fee would be paid via the Licensing Application Management System.

• License fee is payable on approval of application.

• All Automated Vehicle Tracking Service (AVTS) applicants henceforth must obtain a security clearance from the State Security Service (SSS) for the proposed service before applying for the license, as a condition precedent for the grant of license by the Commission. The Personal History Statement Form (PHS) for the company and its Directors will be provided by the Commission for completion by applicants.

• All VAS (Content Service using Short Code) applicant (s) must present:
• Evidence of an Agreement or a Memorandum of Understanding (MOU) entered between the company and any of the VAS Aggregators.

• Alternatively, the company should provide a copy of License duly issued to it by the Central Bank of Nigeria (CBN) for Mobile Money Services or from the National Lottery Regulatory Commission (NLRC) for lottery services.

Requirements for Class License

• Sign up on eservices.ncc.gov.ng and click on Licensing Application Management System to apply.

• Fill the form and upload the relevant documents listed below:

• Certificate of Incorporation or Registered Business Name.
• Tax Clearance Certificate.
• Certified true copy of Articles & Memorandum of Association to include telecommunication as an object clause that allows the Company to provide telecommunication service in Nigeria
• CAC Status Report
• Soft Copy of Passport photographs of authorized representative.
• Certificate of qualified technical staff
• Details of proposed service
• Soft Copy of Passport photographs of Directors of the Company/Sole Proprietorship.

• Applications should be submitted when all documents above have been uploaded.

• On submission of the application, a License fee of Ten Thousand Naira (₦10,000.00) only, is payable via the Licensing Application Management System.

Additional License & Renewal Application Requirements

Existing licensees wishing to apply for additional license(s) or renew their current licenses must be up to date on their existing licensing obligations. These obligations include but are not limited to the following:

• Payment of Annual Operating Levy (AOL): the company is required to submit Audited Accounts (Management Accounts are to be submitted if Audited Accounts are not yet available) for assessment of the AOL payable to the Commission. Note that Non-Operational Licensees are also required to pay AOL.
• Submission of Year End Questionnaire/Information
• Submission of Individual Consumer Code of Practice
• Type approval of equipment in use on network
• Payment of Spectrum and National Numbering Plan (NNP) fees (where applicable)
• Obtaining prior approval from the Commission before change in shareholdings above 10%.
• Notification on change of address, business name etc.
• Obtaining approval before license transfer
• Requirement to roll-out service / commence operation etc.
• Submission of Annual Ownership Report not later than 31^st March every year (Corporate Affairs Documents).
• Current Tax Clearance Certificate
• Licensees seeking renewal must make their applications at least six (6) months before expiration.

Conclusion

Obtaining a telecommunication license in Nigeria involves a detailed process with specific requirements that must be met to ensure compliance with regulatory standards set by the Nigerian Communications Commission. Failure to obtain a valid license can result in substantial penalties, stressing the importance of meeting these standards. As a result, potential operators should get competent legal advice to effectively handle the licensing procedure.

By Adeola Oyinlade & Co.

Adeola Oyinlade & Co.; a leading full-service law firm in Nigeria provides help and offers advisory to both local and foreign clients in the Nigerian telecommunication sector including assisting clients in obtaining licenses in Nigeria. 

Need help? Kindly contact us using the details below:

Email: [email protected]

Mobile: +234 803 826 7683 / +234 802 686 0247

Introduction

Financial technology, generally referred to as “Fintech”, is a thriving business that applies technology. Leveraging innovation to improve financial services, cut transaction costs, and increase access to financing. Smartphones enabled financial breakthroughs like mobile banking. Fintech is disrupting traditional financial markets, including capital market trade. The banking industry prioritizes technology innovation more than ever before.

This article examines the meaning and characteristics of fintech, legal and regulatory frameworks and types of fintech licenses in Nigeria.

Meaning of Fintech

The term “Fintech” refers to financial technology, which encompasses all types of technology used to provide financial services to businesses and consumers. Fintech is the combination of finances and technology. It creates and promotes new financial products, institutions, markets, and technologies. Fintech provides people with opportunities to decrease intermediaries, lower costs, and increase transparency in accessing financial services.

This encompasses a wide range of offerings, such as online banking, mobile payments, lending, digital wallets, savings/investment tools and financial management applications. Fintech businesses use cutting-edge technology such as artificial intelligence, blockchain, and big data to provide novel financial products and services that are intended to be more efficient, accessible, and user-friendly than traditional financial institutions.

Characteristics of Fintech

Some of the characteristics of Fintech include:

• Fintech focuses on innovation rather than disruption. “Disruptive” is the most overused term in FinTech. While some FinTech operations are undoubtedly disruptive, disruption is not required. but Innovation.

• Fintech must focus on both process and technology. While technology is plainly necessary to address the problem being solved or the opportunity being generated, users will be required to adapt critical procedures, regardless of whether the customer is an end consumer or a business. Successful Fintech consider how the change being implemented will affect end customers and how they will adjust.

• Fintech provide services to B2C, B2B, and hybrid enterprises (with components of both). FinTech solutions are often “one-to-many” solutions, which means they may be applied to a wide range of businesses rather than being custom-built and employed by just one. Those applications of technology belong in a different category.

• Fintech are frequently enhancements to an existing product or process that make it better, faster, and occasionally less expensive, rather than something entirely new.

• Fintech are typically founded by persons who work in financial services and perceive a better/newer way to accomplish something or uncover a completely new solution inside their business. However, like with everything, there are no absolutes; some Fintech are founded by people outside of the business. These FinTech pioneers are frequently accompanied by industry veterans who can provide intimate knowledge of procedures, rules, and so on. The Fintech industry attracts and depends on people who enjoy creating and innovating rather than running current firms or working only within existing or traditional businesses. People who work in FinTech are entrepreneurs or intrapreneurs, not business operators, and they are more comfortable with risk.

Legal and Regulatory Framework of Fintech in Nigeria 

Fintech is governed by multiple regulatory frameworks due to its complex nature. The legal and regulatory framework can be viewed from both legal and institutional perspectives.

The laws and regulations applicable to fintech include:

• Central Bank of Nigeria Act, 2007
• Banks and Other Financial Institutions Act, 2020
• Nigerian Communications Act, 2003
• Business Facilitation Miscellaneous Provision, Act 2023
• Nigerian Exchange Technology Board Listing Rules, 2022
• Nigeria Startup Act, 2022
• NCC Value Added Services and Aggregator Framework, 2018
• SEC Crowdfunding Rules, 2021
• Moneylenders Laws of the respective states in Nigeria (this line item apart, all laws and regulations mentioned in this section are federal laws)
• NITDA Nigeria Cloud Computing Policy, 2019
• Companies and Allied Matters Act, 2020
• Investments and Securities Act, 2007
• Federal Competition and Consumer Protection Act, 2018 and Federal Competition and Consumer Protection Commission regulations
• National Insurance Commission Act
• Money Laundering (Prohibition) Act, 2011 (as amended)
• Corrupt Practices and other Related Offences Act, 2000
• Economic and Financial Crimes Commission (Establishment, Etc.) Act, 2004
• Terrorism (Prevention) Act, 2011 (as amended)
• Cybercrimes (Prohibition, Prevention, Etc.) Act, 2015
• Nigeria Data Protection Act, 2023
• Nigeria Data Protection Regulations, 2019
• NDPR Implementation Framework, 2020
• Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995
• Nigerian Investment Promotion Commission Act, 2004
• National Office for Technology Acquisition and Promotion (NOTAP) Act, 1992
• Finance Act, 2023 (as amended)
• Nigerian Deposit Insurance Commission Act, 2006
• Financial Reporting Council of Nigeria Act. 2011

As a primary regulator of Fintech in Nigeria, the Central Bank of Nigeria has established the following guidelines for its operations:

• CBN Operational Guidelines for Open Banking in Nigeria, 2023;
• CBN Framework for Regulatory Sandbox Operations, 2020 (“Sandbox Operations Framework”);
• CBN Guidelines on Mobile Money Services in Nigeria, 2015;
• CBN Guidelines on Operations of Electronic Payment Channels in Nigeria, 2020;
• CBN Guidelines for Licensing and Regulation of Payment Service Banks in Nigeria, 2018;
• CBN Regulatory Framework for the Use of Unstructured Supplementary Service Data Financial Services in Nigeria, 2018;
• CBN Regulation for Bill Payments in Nigeria, 2018;
• CBN Risk-Based Cyber-Security Framework and Guidelines for Deposit Money Banks and Payment Service Providers, 2018;
• CBN Microfinance Policy, Regulatory and Supervisory Framework, 2011;
• CBN Revised Guidelines for Finance Companies in Nigeria, 2014;
• CBN Guidelines on Operations of Electronic Payment Channels in Nigeria, 2016;
• CBN Guidelines on International Mobile Money Remittance Service in Nigeria, 2015;
• CBN Guidelines on International Money Transfer Services in Nigeria, 2014;
• CBN Regulation on Electronic Payments and Collections for Public and Private Sectors in Nigeria, 2019;
• CBN Regulation for Direct Debit Scheme in Nigeria, 2018; and
• CBN Regulatory Guidelines on the e-Naira, 2021.

Types of Fintech Licenses in Nigeria

There are various types of fintech licenses that a company can apply for in Nigeria. The nature of the company’s business determines this. These licenses include the following:

1. Payment Service Provider (PSP) License:

The Central Bank of Nigeria grants the Payment Service Provider (PSP) License, allowing companies to provide electronic payment solutions, internet banking, and mobile money.

To obtain a Payment Service Provider license, the following steps must be taken:

Incorporation and Legal Structure

• The applicant must be duly incorporated as a company in Nigeria.
• The legal structure and corporate governance must align with the requirements stipulated by the CBN.
• The objectives and authorized share capital of the company must fit into the exact category of license to be applied for
• Directors, shareholders, and key management personnel must meet the “fit and proper” criteria set by the CBN. This involves assessing their integrity, competence, and financial soundness. They may be interviewed by relevant security agencies for a background check.

Financial Requirements

• The cost of setting up a payment service provider company depends on the category of license.
• Major financial obligations include the shareholders’ funds, which must be deposited with the CBN during the pendency of the application.
• Once the application is approved, the funds are returned to the owner with any accruable interest.
• For example:
• PSSP or PTSP: Deposit NGN100 Million with the CBN.
• MMO and Switching Companies: Deposit a minimum of NGN2 Billion each with the CBN

Documentary Requirements

• Incorporation documents: Certificate of incorporation from the Corporate Affairs Commission (CAC).
• Tax clearance: 3 years of tax clearance certificates for the company.
• Share structure: Details of the shareholding structure.
• Board and management details: CVs of board and management members.
• Organizational structure: Organogram and number of employees.
• Business plan: A detailed 5-year business plan and financial projections.
• IT policies: Policies on privacy, data protection, backup, security, etc.
• Risk management framework: Enterprise Risk Management Framework.
• Disaster recovery plan: Contingency and Disaster Recovery Plan.
• Draft agreements: Draft agreements with technical partners, banks, merchants, telcos, etc.
• Application fee: Non-refundable application fee of NGN100,000 paid via RTGS

Application Process

• Pre-Application Engagement: Engage with the CBN or experienced consultants for clarification on requirements.
• Submission of Application: Submit the formal application, accompanied by all necessary documents, to the CBN.
• Payment of Shareholder Funds: Deposit the required shareholders’ funds immediately after submitting the application.
• Due Diligence and Background Checks: The CBN conducts due diligence and background checks on the directors, shareholders, and key management personnel.
• On-Site Inspection: The CBN may conduct an on-site inspection of the applicant’s premises.
• Review and Approval: The CBN reviews the application, taking into consideration all relevant factors, including the applicant’s financial stability, compliance with guidelines, and adherence to technology standards.
• Post-Licensing Obligations: License holders are required to comply with ongoing reporting requirements, risk management practices, and any additional guidelines issued by the CBN.

By meeting these requirements and submitting the necessary documents, entities can secure a Payment Service Provider license in Nigeria, facilitating their participation in the country’s growing fintech sector.

 Payment Service Provider license is divided into different categories which include:

1. Switching and Processing License:

A switching and processing license, issued by the CBN, allows companies to conduct activities like card processing, transaction clearing, and settlement agents, enabling them to run a payment gateway linking various payment channels in Nigeria. Example of switching and processing fintech companies in Nigeria include Flutterwave, Interswitch and Paystack.

To obtain a switching and processing license, the following steps must be taken:

Capital Requirements

• Minimum shareholders’ funds of ₦2 billion unimpaired by losses
• Refundable escrow deposit of ₦2 billion into the CBN PSP Share Capital Deposit Account, paid as a lump sum

Licensing Process

• A written application to the Director, Payments System Management Department, Central Bank of Nigeria, Abuja, together with proof of payment and other required documents.
• Application fee of ₦100,000
• Validity period determined by CBN upon satisfactory performance

Documentary Requirements

• Incorporation documents
• 3 years of tax clearance
• Share structure, number of employees, and organogram
• Functional physical and digital addresses
• Board composition and personal details of board members and top management
• 5-year business plan and financial projections
• Features of the switching and processing scheme, security architecture, and process flows
• IT policies (privacy, data protection, backup, security, etc.)
• Risk management, internal control, KYC/AML procedures, fraud detection plan, consumer protection policy
• Executed agreements with technical partners, banks, merchants, etc.

Permissible Activities

• Switching
• Card processing
• Transaction clearing and settlement agent services
• Non-bank acquiring services
• Activities of super-agents, payment terminal service providers (PTSPs), and payment system service providers (PSSPs)

2. Mobile Money Operator (MMO) License:

The Mobile Money Operator License, issued by the CBN, allows companies to offer mobile money services like electronic wallets, funds transfers, and bill payments.

To obtain a Mobile Money Operator license, the following steps must be taken:

Capital Requirements

• Minimum issued share capital of ₦2 billion unimpaired by losses
• Refundable escrow deposit of ₦2 billion into the CBN PSP Share Capital Deposit Account

Application Process

• Application letter to the Director, Payments System Management Department, CBN
• Non-refundable application fee of ₦100,000 paid via RTGS

Documentary Requirements

• Evidence of formation of the consortium/company (Certificate of Incorporation)
• Consortium/company profile and contact details
• Memorandum and Articles of Association
• Shareholding structure
• Forms C02 (Return on Allotment of Shares) and C07 (Particulars of Directors)
• CVs of board and management
• Organizational structure and organogram
• Business plan with details on:

• Nature of business
• Scheme features
• Security features
• 3-year financial projections
• Transaction/customer charges
• Profit sharing agreement

• IT policies (privacy, data, backup, security, etc.)
• Enterprise Risk Management Framework
• Contingency and Disaster Recovery Plan
• Draft agreements with partners (technical, banks, merchants, telcos, etc.)
• 3 years tax clearance certificates for consortium members
• Project deployment plan

The application process involves an initial Approval-in-Principle (AIP) stage, followed by the final license issuance within 2-3 months after meeting all requirements.

3. Payment Solution Service Provider (PSSP) License:

The NCC and CBN issue the Payment Solution Service Provider License, allowing companies to provide payment processing and switching services for electronic transactions.

To obtain a Payment Solution Service Provider license, the following steps must be taken:

Capital Requirements

• Minimum shareholders’ funds of ₦100 million unimpaired by losses
• Refundable escrow deposit of ₦100 million into the CBN PSP Share Capital Deposit Account

Licensing Process

• Application letter to the Director, Payments System Management Department, CBN
• Non-refundable application fee of ₦100,000 paid via RTGS
• Validity period determined by CBN upon satisfactory performance
• Final license fee of ₦1 million to be paid before issuance of the commercial license

Documentary Requirements

• Certificate of Incorporation from the Corporate Affairs Commission (CAC)
• Memorandum and Articles of Association with the object clause limited to PSSP activities
• 3 years of tax clearance certificates for the company
• Company profile detailing current business operations, products, and services
• Shareholding structure and details of directors/management (CVs, Forms C02 and C07)
• Organizational structure and number of employees
• 5-year business plan and financial projections
• IT policies (privacy, data protection, backup, security, etc.)
• Enterprise Risk Management Framework
• Contingency and Disaster Recovery Plan
• Draft agreements with technical partners, banks, merchants, etc.

The application process involves an initial Approval-in-Principle (AIP) stage, followed by the final license issuance within 6 months after meeting all requirements and paying the final license fee.

Compliance with CBN regulations, including data protection, KYC/AML, and consumer protection, is also crucial for obtaining and maintaining the PSSP license in Nigeria.

4. Payment Terminal Service Provider (PTSP) License:

The Nigerian Communications Commission (NCC) in collaboration with the CBN grants the Payment Terminal Service Provider (PTSP) License, allowing companies to offer payment terminal and POS services. 

To obtain a Payment Terminal Service Provider license, the following steps must be taken:

Capital Requirements

• Minimum shareholders’ funds of ₦100 million unimpaired by losses
• Refundable escrow deposit of ₦100 million into the CBN PSP Share Capital Deposit Account

Licensing Process

• Application letter to the Director, Payments System Management Department, CBN
• Non-refundable application fee of ₦100,000 paid via RTGS
• Final license fee of ₦1 million to be paid before issuance of the commercial license

Documentary Requirements

• Certificate of Incorporation from the Corporate Affairs Commission (CAC)
• Memorandum and Articles of Association with the object clause limited to PTSP activities
• 3 years of tax clearance certificates for the company
• Company profile detailing current business operations, products, and services
• Shareholding structure and details of directors/management (CVs, Forms C02 and C07)
• Organizational structure and number of employees
• 5-year business plan and financial projections
• IT policies (privacy, data protection, backup, security, etc.)
• Enterprise Risk Management Framework
• Contingency and Disaster Recovery Plan
• Draft agreements with technical partners, banks, merchants, etc.
• Payment Card Industry Data Security Standard (PCI-DSS) certificate
• Payment Application Data Security Standard (PA-DSS) or compliance with CBN IT Standards for Solution Development certificate

The application process involves an initial Approval-in-Principle (AIP) stage, followed by the final license issuance within 6 months after meeting all requirements and paying the final license fee.

Compliance with CBN regulations, including data protection, KYC/AML, and consumer protection, is also crucial for obtaining and maintaining the PTSP license in Nigeria.

2. Payment Service Bank (PSB) License

PSBs are licensed by the Central Bank of Nigeria (CBN) to leverage technology and agency banking to provide financial services to the unbanked and underbanked population, especially in rural and hard-to-reach areas. The main objective is to enhance financial inclusion by increasing access to deposit products and payment/remittance services.

To obtain a Payment Service Bank license, the following steps must be taken:

Capital Requirements

• Minimum shareholders’ funds unimpaired by losses of ₦5 billion

Licensing Process

• Application made to the Director, Payments System Management Department, CBN
• Non-refundable application fee of ₦500,000
• Final license fee of ₦2 million to be paid before issuance of the commercial license

Documentary Requirements

• Certificate of Incorporation from the Corporate Affairs Commission (CAC)
• Memorandum and Articles of Association with the object clause limited to PSB activities
• 3 years of audited financial statements
• Shareholding structure and details of directors/management (CVs, Forms C02 and C07)
• Organizational structure and number of employees
• 5-year business plan and financial projections
• IT policies (privacy, data protection, backup, security, etc.)
• Enterprise Risk Management Framework
• Contingency and Disaster Recovery Plan
• Draft agreements with technical partners, banks, merchants, telcos, etc.
• Evidence of at least 25% of access points to be located in rural/underserved areas
• Proof of partnership with card scheme operators (e.g. Visa, Mastercard)

The application process involves an initial Approval-in-Principle (AIP) stage, followed by the final license issuance within 6 months after meeting all requirements and paying the final license fee.

Compliance with CBN regulations, including data protection, KYC/AML, consumer protection, and financial inclusion targets, is crucial for obtaining and maintaining the PSB license in Nigeria.

3. Alternative Lending/Digital Credit Licenses

Alternative lending or digital credit refers to fintech-based lending platforms that provide quick, non-collateralised micro-credit facilities, as opposed to traditional loan application processes. These platforms are commonly known as “loan apps” and can be operated by licensed moneylenders, banks, and finance companies.

To obtain an Alternative Lending/Digital Credit license in Nigeria, the requirements are:

For Money Lenders License

• Application to the Home Affairs Ministry in states like Lagos through the state Moneylenders law
• Fill Moneylenders Ordinance Form B and pay application fee
• Yearly renewal process required

For Finance Company License

• Application to the Central Bank of Nigeria (CBN)
• Minimum share capital of ₦100 million
• Submit comprehensive IT policy, 5-year business plan, Enterprise Risk Management plan, and Dispute Resolution Framework
• Detailed information about technical/IT service providers

Additional Requirements

• Compliance with Nigeria Data Protection Regulation (2019) for data protection
• Registration with Federal Competition and Consumer Protection Commission (FCCPC) under their Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending, 2022
• Robust cybersecurity measures to protect customer data
• Thorough customer due diligence to prevent fraud

The key documents required include:

• Certificate of incorporation
• Tax clearance certificates
• Shareholding structure and CVs of directors/management
• Organizational structure and number of employees
• Business plan and financial projections
• IT policies (privacy, data protection, security, etc.)
• Risk management and compliance frameworks

Meeting these capital, regulatory, and operational requirements is essential to obtain an Alternative Lending/Digital Credit license from either the state government or the Central Bank of Nigeria. The license allows companies to legally provide digital lending services in Nigeria.

4. Digital Crowdfunding Intermediary License

A Digital Crowdfunding Intermediary is an entity that facilitates transactions involving the offer or sale of securities through a crowdfunding portal or platform.

Licensing Process

• Minimum paid-up share capital of ₦100,000,000 (One Hundred Million Naira) 
• Application to the Securities and Exchange Commission (SEC) using the appropriate forms.
• Non-refundable application fee and final license fee to be paid as prescribed by the SEC.

Documents Required

• Certificate of Incorporation from the Corporate Affairs Commission (CAC)
• Memorandum and Articles of Association
• Audited accounts of the applicant
• Company profile, business plan, and operational manual
• Details of the crowdfunding system to be adopted
• Proposed brand name and domain names
• Fidelity Insurance Bond covering at least 20% of the minimum capital

Additional Requirements

• Compliance with the Federal Competition and Consumer Protection Commission (FCCPC) guidelines for digital lending.
• Compliance with the Nigeria Data Protection Regulation (2019) for data protection

The application process involves an initial Approval-in-Principle (AIP) stage, followed by the final license issuance within 6 months after meeting all requirements and paying the final license fee. Compliance with these regulatory requirements is crucial for obtaining and maintaining the Digital Crowdfunding Intermediary License in Nigeria.

5. Regulatory Sandbox

A Regulatory Sandbox is a controlled environment where fintech companies can test innovative products, services, delivery channels or business models under the supervision of the regulator. It allows for live testing of new financial technologies and services in a live environment, with appropriate safeguards and oversight.

Application Process

• Applications are made on invitation from the Central Bank of Nigeria (CBN)
• Applicants submit the following documents:
• Board approval (where applicable)
• Incorporation documents, company profile and contact details
• CVs of board members and management
• Project plan, business proposal and outcomes
• Strategy for sandbox trials and AML/CFT policy
• Proof of intellectual property rights
• The CBN reviews applications and informs eligible applicants within 45-60 working days
• Successful applicants receive a Letter of Approval to test their innovation in the sandbox

Participants must comply with the CBN’s operational requirements, including:

• Filing requirements
• Reporting requirements during the sandbox testing
• Exit conditions and approval for expiration
• Evaluation and review of the license

• The CBN may relax specific regulations during the sandbox period
• Upon exit, participants must meet all relevant legal and regulatory requirements

Conclusion

The requirements across these licenses include minimum capital, application and licensing fees, incorporation documents, financial statements, IT policies, risk management frameworks, and regulatory compliance. Obtaining the appropriate fintech license is crucial for companies to legally operate in Nigeria’s growing fintech sector.

Note: The content of this article is anticipated to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstance.

By Adeola Oyinlade & Co.

Adeola Oyinlade & Co.; a leading full-service law firm in Nigeria provides help and offers advisory to both local and foreign clients in the fintech sector and other related matters in Nigeria. 

Need help? Kindly contact us using the details below:

Email: [email protected]

Mobile: +234 803 826 7683 / +234 802 686 0247

Introduction

A law firm is a business that offers legal representation and advice to clients. It can assume a variety of organisational forms, including partnership, limited liability partnership, professional corporation or sole proprietorship. A law firm’s major duty is to practice law by employing lawyers that specialise in various legal fields such as corporate and commercial law, litigation and dispute resolution, intellectual property, and so on.

The legal sector has grown substantially and selecting the best law firm requires careful consideration of a variety of features. In this thorough guide, we provide an updated and exhaustive analysis of the key elements to consider when selecting a law firm in the competitive legal market, together with relevant facts and statistics to assist you in making an informed selection.

Factors to Consider When Choosing a Law Firm

Here are some tips for choosing the best law firm for your business in Nigeria:

Identify your legal needs: Determine which areas of law your business requires expertise in, such as corporate, taxation, intellectual property, and so on.

Research law firm specialisations:  Look for firms with a track record of success and extensive knowledge of the legal issues that are of greatest significance to your company’s success or legal concerns.

Consider firm size and resources: In terms of talents and resources, consider if a large, full-service business or a boutique specialist firm is more appropriate for your needs.

Assess the firm’s reputation and credentials: Check the firm’s standing with the Nigerian Bar Association and client references to gauge its credibility and trustworthiness.

Evaluate the experience and qualifications of the lawyers: Ensure the firm has a team of highly skilled and experienced lawyers who can provide high-quality legal counsel.

Analyze the firm’s client portfolio: Review the types of clients the firm represents, including any businesses similar to yours.

Consider the firm’s location and accessibility: Choose a firm that is conveniently located and responsive to your needs.

Examine the firm’s communication and responsiveness: Ensure the firm is proactive in communicating and addressing your questions and concerns in a timely manner.

Understand the firm’s billing practices and costs: Get quotes from multiple firms and compare the costs and value of services offered.

Assess the firm’s technological capabilities: Determine if the firm utilises modern tools and technologies to efficiently manage legal matters.

Evaluate the firm’s diversity and inclusion efforts: Look for a company that values diversity and inclusion among its employees and leaders.

Consider the firm’s pro bono and community engagement: A firm’s commitment to social responsibility can reflect its ideals and culture.

Analyse the firm’s growth and stability: Ensure that the law firm has a solid financial foundation and a clear vision for the future.

Seek referrals and recommendations: Request referrals from other firms, entrepreneurs, or industry contacts who have previously dealt with the firm.

Network and Connections: Look for a firm that has a large network of contacts and can help you connect with other companies and entrepreneurs. This extended network can be beneficial to your expanding business.

Trust your instincts: After evaluating the law firm based on the qualities listed above, choose the one with whom you feel most comfortable and confident working.

The following are some of the leading law firms in Nigeria listed in Legal 500, IFLR 100, The Lawyers Global, and Chambers and Partners with track records of quality legal services in Nigeria:

• Adeola Oyinlade & Co

Website: https://adeolaoyinlade.com

• Aluko & Oyebode

Website: https://www.aluko-oyebode.com

• G Elias & Co

Website: https://www.gelias.com

• Olaniwun Ajayi

Website: https://www.olaniwunajayi.net

• Resolution Law Firm

Website: https://www.resolutionlawng.com

• SPA Ajibade & Co

Website: https://spaajibade.com

Conclusion

By carefully researching law firms based on the important characteristics discussed in this article, you will be able to pick the law firm that is most suited to your company’s legal needs in Nigeria. The ideal firm will have the knowledge, reputation, and resources to help you navigate the legal system and achieve your objectives.

The Central Bank of Nigeria (CBN) has launched a new online platform for submitting microfinance bank (MFB) license applications, known as the CBN Licensing, Approval, and Other Requests Portal. The new online platform replaces the previous laborious approach of physically submitting MFB license applications to the CBN. These are the steps to apply for an MFB license online.

• Open a browser, input the URL https://larp.cbn.gov.ng/to access the application. On the navigation bar below, click on “Register”.
• Select an “application type”, from the drop-down list above and then enter the proposed institution name (as reserved by CAC).
• Enter the CAC Reservation Code.
• Enter the Applicant details and submit the registration details. NOTE: If the proposed application name is already an existing financial institution, the system will not accept the name.
• If the LGA of the proposed application is in a Tier 1 LGA location, you will be required to pay the minimum deposit based on the location of the proposed MFB.
• If the LGA of the proposed MFB is not in a Tier 1 LGA location, you may select the Tier of the application you want to register the application.
• The applicant’s email address must be verified. This will involve an OTP being sent to the applicant’s email address. After the verification, the user can continue with the registration process.
• The applicant would be required to input the OTP that was sent to their email to complete verification to proceed.
• The applicant would be required to check the “I agree with the terms of use” and click on register to complete the registration process.
• Once the registration is completed, an email will be sent, and the applicant will be required to make payments for the Application Fee and the Minimum Capital Deposit at his preferred Bank within 72 hours.
• Then see screenshot for the mail received upon registration:
• Once the Bank has made your payment, they will give the applicant a printout. The applicant is expected to wait for 24 – 72 hours for the payment to be verified and approved by CBN. When the payment process has been completed, an email with the applicant username and default password will be used to log into the system.
• Thereafter, the applicant will be prompted to change your password. Ensuring that the password consists of Uppercase, Lower Case, Number, Special Character, and it must be a minimum of 8 characters.

A Microfinance Bank in Nigeria is a specialized financial institution dedicated to providing affordable and accessible banking services to the unbanked and underserved portions of the population, particularly micro-entrepreneurs and small enterprises.

Microfinance Bank (MFB) is any company licensed by the Central Bank of Nigeria (CBN) to carry on the business of providing financial services such as savings and deposits, loans, domestic funds transfer and non-financial services to microfinance clients.

What are the specific objectives of the new microfinance policy?

The specific objectives of the microfinance policy are to: 

1. Make financial services accessible to a large segment of the potentially productive Nigerian population which would otherwise have little or no access to financial services.
2. Provide synergy and mainstreaming of the informal sub-sector into the national financial system.
3. Enhance service delivery by microfinance institutions to micro, small and medium entrepreneurs (MSMEs).
4. Contribute to rural transformation by mobilizing savings.
5. Promote linkage programme between microfinance institutions (MFIs), Deposit Money Banks (DMBs), Development Finance Institutions (DFIs), specialized Funding institutions.
6. Create employment opportunities and increase the productivity and household income of the economically active poor in the country, thus enhancing their standard of living.
7. Promote a platform for microfinance service providers to network, exchange view and share experience.

Who can establish a Microfinance Bank?

Microfinance bank can be established by individuals, groups of individuals, community development associations, private corporate entities or foreign investors.

What are the regulatory and operational framework for microfinance banks?

Microfinance banks are among the specialised banks and other financial institutions governed by the CBN’s supervisory guidelines outlined in Sections 61-63 of the Banks and Other Financial Institutions Act, 2020 (BOFIA) (as amended) and Section 33(1)(b) of the CBN Act 7 of 2007. The following regulations govern the operation of Microfinance Banks in Nigeria.

• Central Bank of Nigeria (CBN) Act 2007;
• Bank and Other Financial Institutions Act 2020;
• Central Bank of Nigeria Guidelines for the Regulation and Supervision of Microfinance Banks in Nigeria, January 2020.

How many categories of MFB licences are available?

There are four (4) categories available to promoters based on geographical spread:

1. Tier 1 Unit Micro Finance Bank (with urban authorization): They are licensed to operate in banked and high-density regions, with a maximum of four (4) branches outside the main office within five (5) contiguous Local Government Areas recognized by the CBN. The minimum share capital for this type of licensing is N200,000,000 (Two Hundred Million Naira).

2. Tier 2 Unit Micro Finance Bank (with rural authorization): They are licensed to operate solely in rural, unbanked, or underbanked areas and may open one (1) branch outside the main headquarters within the same Local Government Area. A Tier 2 Unit Micro Finance Bank has a minimum share capital of N50,000,000 (fifty million naira).

3. State Microfinance Bank: This type of Microfinance Bank is permitted to operate in a single state or the Federal Capital Territory. It is permitted to open branches within the same state or FCT, subject to prior written approval from the CBN for each new branch or cash center. It may not open more than two branches in the same Local Government Area (LGA) unless it has established at least one branch or cash center in each LGA in the State. A newly licensed State Microfinance Bank cannot begin operations with more than ten (10) branches. State microfinance banks must maintain a minimum capital of one billion naira (₦1,000,000,000).

4. National Microfinance Bank: This Microfinance Bank is authorized to operate in multiple states, including the Federal Capital Territory. A newly licensed National Microfinance Bank is prohibited from commencing operations with more than ten (10) branches. National microfinance banks must have a capital barrier of five billion naira (₦5,000,000,000).

What are the permissible business activities of the Microfinance Bank?

A Microfinance bank is allowed to offer the following services to its clients:

• Acceptance of various types of deposits including savings, time, target and demand deposits from individuals, groups and association;
• Provision of credit to its customers;
• Provision of housing micro loans;
• Provision of ancillary services such as capacity building on record keeping and small business management and safe custody;
• Issuance of debentures to interested parties to raise funds from members of the public with the prior approval of the CBN;
• Collection of money or proceeds of banking instruments on behalf of its customers including clearing of cheques through correspondent banks;
• Act as agent for the provision of mobile banking, microinsurance and any other services as may be determined by the CBN from time to time, within the geographic coverage of its licence;
• Appoint agents to provide financial services on its behalf in line with the CBN Agent Banking Guidelines, within the geographic coverage of its licence;
• Provision of payment services such as salary, gratuity, pension for employees of the various tiers of government;
• Provision of loan disbursement services for the delivery of the credit programme of government, agencies, groups and individual for poverty alleviation on non-recourse basis;
• Provision of banking services to its customers such as domestic remittance of funds;
• Maintenance and operation of various types of account with other banks in Nigeria;
• Investment of its surplus funds in suitable money market instruments approved by the CBN;
• Operation of micro leasing facilities, microfinance related hire purchase and arrangement of consortium lending;
• Participate in CBN Intervention Fund and funds other sources;
• Provision of microfinance related guarantees for its customers;
• Financing agricultural inputs, livestock, machinery and industrial raw materials to low- income persons;
• Investment in cottage industries and income generating projects for low-income persons as may be prescribed by the CBN from time to time;
• Provision of professional advice to low-income persons regarding investments in small businesses;
• Issuance of domestic commercial paper subject to the approval of the CBN;
• Provide financial and technical assistance and training to microenterprises; and
• Any other permissible activity as may be approved by the CBN from time to time.

What are the non-permissible business activities of the Microfinance Bank?

Microfinance banks are forbidden from providing the following financial services:

• Foreign currency transactions, except foreign currency borrowings;
• International commercial papers;
• International corporate finance;
• International electronic funds transfer;
• Clearing house activities;
• Collection of third-party cheques and other instruments for the purpose of clearing through correspondent banks;
• Dealing in land for speculative purposes;
• Dealing in real estate except for its use as office accommodation;
• Provision of any facility for speculative purposes;
• Leasing, renting, and sale/purchase of assets of any kind with related parties and/or significant shareholders (five per cent or more of the equity) of the MFB, without the prior written approval of the CBN;
• Financing of any illegal activities; and
• Any activity other than those permitted as stated above or as may be prescribed by the Central Bank of Nigeria from time to time.

What are the procedures and requirements for obtaining a Microfinance Bank Licence?

The application for a Micro-Finance Bank license will be made in three (3) phases, as follows:

• Pre-licensing Presentation
• Approval-in-Principle
• Final License

1. Requirements for Pre-licensing Presentation

Prior to submitting a formal application for a license, promoters and investors must provide the CBN with a pre-licensing presentation on the proposed microfinance bank’s business case.

2. Requirements for Approval-in-Principle

Before submitting an Approval-In-Principle (“AIP”) application to the CBN, promoters and investors must first reserve the name of their prospective MFB with the Corporate Affairs Commission (“CAC”).

A formal application for the grant of Approval-in-Principle shall be made to the Governor of the Central Bank of Nigeria. The following documents must be submitted alongside the application:

• Evidence of payment of non-refundable application fee to the Central Bank of Nigeria;
• Evidence of capital contribution made by each shareholder;
• Evidence of minimum capital deposit in line with Section 4.2.7 of this Guidelines, to be verified by the CBN;
• Evidence of name reservation with the Corporate Affairs Commission (CAC);
• Detailed business plan or feasibility report which shall, at a minimum, include:
• Objectives of the Microfinance Bank;
• Justification for the application;
• Ownership structure in a tabular form indicating the name of proposed investor(s), profession/business and percentage shareholdings;
• Sources of funding of the proposed equity contribution for each investor;
• Where the source of funding the equity contribution is a loan, such shall be a long-term facility of at least 7-year tenor and shall not be taken from the Nigerian banking system;
• Organizational structure, showing functional units, responsibilities, reporting relationships and grade of heads of departments/units;
• Schedule of services to be rendered;
• Five-year financial projection of the proposed bank indicating expected growth, profitability and the underlying assumptions; and
• Details of information technology requirements and facilities.

For institutional investors, promoters shall forward the following additional documents:

• Certificate of Incorporation and certified true copies of other incorporation documents.
• Board resolution supporting the company’s decision to invest in the equity shares of the proposed bank;
• Names and addresses (business and residential) of owners, directors and their related companies, if any
• Audited financial statements & reports of the company and Tax Clearance Certificate for the immediate past 3 years.
• Draft copy of the company’s Memorandum and Articles of Association (MEMART). At a minimum, the MEMART shall contain the following information:
• Proposed name of the MFB
• Objects clause
• Subscribers to the MEMART
• Procedure for amendment
• Procedure for share transfer/disposal
• Appointment of directors
• A written and duly executed undertaking by the promoters that the bank will be adequately capitalized for the volume and character of its business at all times;
• For regulated foreign institutional investors, an approval or a ‘no objection letter’ from the regulatory authority in the country of domicile;
• Shareholders’ agreement providing terms for disposal/transfer of shares as well as authorization, amendments, waivers, and reimbursement of expenses;
• Statement of intent to invest in the bank by each investor;
• Technical Services Agreement, where applicable;
• Detailed Manuals and Policies covering:
• Credit Policy Manual;
• Internal Audit Manual;
• Asset/Liability Management Policy (ALM Policy);
• Accounting policies and principles;
• Roles and responsibilities of the senior management officials responsible for financial management;
• Treasury operations, including funds management, vouchers, payroll and procurement;
• Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT) Policy;
• Enterprise-Wide Risk Management Framework;
• Whistle Blowing Policy;
• Code of Ethics and Business Conduct;
• Bank Verification Number (BVN) and Tax Clearance Certificate of each member of the Board and significant shareholders.
• Duly signed resume and valid means of identification for proposed shareholders of proposed MFB;
• Criteria for selecting board members;
• Board composition, directors’ duly signed resumes and valid means of identification. The size and composition of the board shall comply with the provision of the CBN Code of Corporate Governance for MFBs;
• Consolidated statement of account showing the capital contribution for all shareholders;
• Completed Fitness and Propriety Questionnaire; and sworn declaration of net worth executed by the proposed shareholders, directors and management personnel;
• Any other information that the CBN may require from time to time.

It is worthy of note that the minimum and maximum number of Directors on MFB boards are five (5) and seven (7) for Unit MFBs; five (5) and nine (9) for State MFBs; and seven (7) and twelve (12) for National MFBs.

Also, take note that at least two (2) members of the Board of Directors, other than the Executive Directors, must have banking or comparable financial industry experience.

Upon receipt of an application, the CBN must convey its decision to the applicant within 90 days. If the CBN is pleased with the application, it will give an Approval-in-Principle (AIP) to the applicant.

Registration with the National Association of Microfinance Banks (“NAMB”) is required after acquiring an AIP.

3. Requirements for granting of final license

The CAC will finalise the incorporation of the MFB after the AIP is granted.

Then, promoters of a proposed microfinance bank shall file an application with the CBN for the issuance of a final licence, addressed to the Governor of the Central Bank of Nigeria, no later than six (6) months after receiving the AIP. The following documents must be included with the application.

• Evidence of payment of non-refundable licensing fee to the Central Bank of Nigeria;
• Certified true copy (CTC) of the Certificate of Incorporation of the bank;
• CTC of MEMART;
• CTC of Form CAC 1.1 (Application for Registration of Companies);
• Evidence of the location of the Head Office (rented or owned) for the take-off of the business;
• Schedule of changes, if any, in the Board, Management and Shareholding after the grant of AIP;
• Evidence of ability to meet technical requirements and modern infrastructural facilities such as office equipment, computers, and telecommunications, to perform the bank’s operations and meet CBN and other regulatory requirements;
• Copies of letters of offer and acceptance of employment in respect of the management team;
• List of proposed top management staff and duly signed resume stating their qualification (including photocopies of academic and professional credentials), experience, records of accomplishments and valid means of identification;
• Comprehensive plan on the commencement of the bank’s operations with milestones and timelines for roll-out of key payment channels; and 
• Board and staff training programme.

Before obtaining a final license, the Central Bank of Nigeria must conduct an inspection of the proposed bank’s facilities and premises, which include:

• Checking the physical structure of the office building and infrastructure provided for the take-off of the MFB;
• Sighting the original copies of the documents submitted in support of the application for license;
• Meeting with the Board and Management team whose resumes had earlier been submitted to the CBN;
• Verifying the capital contributions of the promoters; and
• Verifying the integration of its infrastructure with the National Payments System.

If the CBN approves the Application for Final Licence, it may award Final Licence to the Microfinance Bank.

Also, shareholders must deposit the Minimum Share Capital with the CBN when submitting an application for AIP. This amount may or may not be invested by the CBN, but it is refundable (with or without interest) at the end of the process.

What is the estimated timelines for granting licence?

The estimated timeline for granting an AIP is 3 to 6 months after submitting an application.

Likewise, the projected timeline for granting a Final Licence is 3 to 6 months after submitting an Application for Final Licence.

The CBN reserves the right to oversee, regulate, or even revoke a registered MFB’s license in accordance with the authority granted to it by the Banks and Financial Institutions Act 2020, so anyone interested in establishing a microfinance bank in Nigeria should proceed with caution and demonstrate competence and professionalism.

Note: The content of this article is anticipated to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstance.

By Adeola Oyinlade & Co.

Adeola Oyinlade & Co.; a full-service law firm in Nigeria provides help and offers advisory to both local and foreign clients on banking related matters including how to process microfinance bank licenses in Nigeria. 

Need help? Kindly contact us using the details below:

Email: [email protected]

Mobile: +234 803 826 7683 / +234 802 686 0247