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

Introduction

A contract of employment can exist whether orally or in writing. It can arise out of any discussion, obligation or instruction to do an act as far as the elements of a contract are present. Agreements are made to be honoured. An unwritten contract is enforceable provided it complies with all the requirements of a valid contract. This article offers insights into the realm of employment contracts in Nigeria, particularly focusing on the enforcement and implications of unwritten contracts. 

Meaning and ingredients of a contract

A contract is simply a legally enforceable agreement, written or unwritten (oral), freely and voluntary reached between or entered by two or more persons with a clear intention to create a binding legal relationship. See, NURTW &Ors v. First Continental Insurance Co. Ltd (2019) LPELR-48005(CA). For there to be a valid, enforceable and binding contract between the parties, the following basic essential elements must be present.

1. A definite offer,
2. Unqualified acceptance,
3. Intention to create a binding legal relationship,
4. Consideration, and
5. Legal capacity to contract. 

The law requires that all these basic elements must be present or co-exist in order for a binding and enforceable contract to be reached and arise on the authority of Orient Bank Nigeria Plc v. Bilante Int. Limited (1997) 8 NWLR (515) 37 at 76. However, the recognised foundation of a legally binding and enforceable contract between parties is the meeting of the minds, the agreement or on consensus ad idem by them on the subject matter as well as terms and conditions agreed to. See, Sona Breweries, Plc v. Peters (2005)1 NWLR (908) 478 at 488.

Classification of contracts 

Contracts are typically classified into two types, formal contracts and simple contracts.

Formal contracts include sealed contracts, negotiable instruments, and judgments/recognisances. All other contracts are deemed simple contract.

Contracts may also be classified as written contracts and unwritten (or oral) contracts.

Written contracts are those where the terms of the agreement are reduced to writing, while unwritten contracts are those where the terms are not formally documented.

Unwritten contracts can take the form of oral agreements or contracts implied from the conduct and actions of the parties. Examples of unwritten contracts include employment contracts, purchase contracts, and other everyday agreements where the terms are not formally written down.

Unwritten contracts are equally legally legitimate and enforceable as written contracts, as long as the contract’s vital elements (offer, acceptance, and consideration) are present.

The major distinction is that unwritten contracts are more difficult to prove because they are based on evidence of the parties’ words and behavior rather than a formal written document.

What is a contract of employment? 

A contract of employment means any agreement, whether oral or written, express or implied, whereby one person agrees to employ another as a worker and that other person agrees to serve the employer as a worker. 

Who is a worker?

A worker is defined in section 91 of the Labour Act as any person who has entered into or works under a contract with an employer whether or written and whether it is a contract of service or a contract personally to execute any work or labour. This contract is commonly referred to as Contract of Service.

How can parties agree in the absence of a written agreement?

When there is no written agreement parties can be taken to agree either on the practice of the trade or by conduct. See, Shena Security Co.Ltd v. Afropak (nig) ltd&Ors (2008) LPELR-3052(SC)

Are parties bound by the terms of a contract of employment?

It is trite law that parties to a contract are bound by its terms. The express terms of a contract of employment govern any aspect of the relationship between the employer and the employee. See, Amodu v. Amode& Anor (1990) LPELR-466(SC)

What determines the nature of a contract of employment?

Generally, employment is a contract or an agreement between parties, In the case of Mainstreet Bank Registrars Ltd v. Ukandu (2017) LPELR-43646(CA), the court stated that contract of employment is founded on the twin pillars of services and wages, it is on these that a contract of employment rest. A contract of employment is either grounded in statute or common law in which case the employment letter stipulates the terms of contract. See, NELMCO Ltd v. Onifade& Anor (2022) LPELR-58118(CA)

If any question arises with respect to the contract entered into by the parties, the terms in any document which constitute the contract are invariably, the guide to its interpretation. So, in its construction of contracts, it is the duty of the Court not to look at a contract in a narrow manner for its interpretation. The entire documents must be looked into and in conjunction with the dealings of the parties to know what they meant. See, the case of New Nigeria newspapers Ltd v. Atoyebi (2013) LPELR-21489(CA). It should be noted that contracts of employment fall into three categories:

1. Master and servant, relationship;
2. Where a servant holds an office at the pleasure of master; and
3. Employment that is governed by statute. A contract is said to have statutory flavour where the contractual relationship between the employer and the employee is governed by a statute or regulations derived from statutes. See NEPA vs. Adesaaji (2002) 17 NWLR Part 797 page 578. 

What are the categories of contract of employment?

The law is settled that there are now roughly three categories of contracts of employment viz:

1. those regarded as purely master and servant;
2. those where a servant is said to hold an office at the pleasure of the employer: and
3. those where the employment is regulated or governed by statute, often referred to as having statutory flavor, See, Olaniyan v. University of Lagos (1985) 2 NWLR (Pt. 9) 599.; CBN v Igwillo (2007) LPELR-835(SC)

Can an unwritten contract can be enforced?

It is settled that a Court of law will not allow the absence of writing to be used as an engine of fraud in a Court of justice. A Court will enforce the contract if it is found that there is an agreement from the fact before the Court. See, Ogundelu vs. Macjob (2006) 7 NWLR (pt. 973) 148 165. The law will not allow the absence of writing to be used as an engine of fraud unless it is a case where the law requires the transaction to be in writing. See, Lawal vs. Ejidike (1997) 2 NWLR (pt. 487) 319 at 331.

An agreement is made to be honoured. Consequently, an unwritten contract is legally binding and enforceable where it is breached. Enforceability of a contract is when a party to a contract can be compelled to observe or forced to obey the terms of the contract. An unwritten contract is enforceable provided it complies with all the requirements of a valid contract. See Jukok Int’l Ltd v. Diamond Bank Plc [2016] 6 NWLR (Pt. 1507) 73 at 26.

Legal Impact of an Unwritten Contract of Employment

Unwritten contracts can be lawful and enforceable even if they are not in writing. A contract must have an offer, acceptance, and consideration in order to be valid.

The burden of proof falls on the party arguing the existence of an unwritten contract to present credible evidence that a contract was formed as a result of the parties’ conduct and communications.

Unwritten employment contracts are believed to be “at-will,” which means that either party may end the agreement at any time without cause, unless implied provisions indicate otherwise. Implied terms might result from an employer’s conduct, policies, or statements that generate a reasonable expectation of job stability.

Breaches of unwritten employment contracts are treated the same as written contracts – the non-breaching party may sue for damages if the other party fails to meet their contractual responsibilities without explanation.

The severity of the breach impacts the potential remedies, such as permitting the non-breaching party to decline further performance.

Enforceability of an Unwritten Contract of Employment

It is a fundamental and well settled principle, that the terms and conditions of employment is the bedrock on which any claim predicated thereupon ought to squarely rest. Thus, where an employee complains of a wrongful termination of his employment, he has the onus:

1. To place before the trial court the terms of the contract of employment;

2. To prove the manner in which the said terms were breached by the employer thereof.

See U.T.C. Nigeria Ltd. v. Peters (2009) LPELR-8426(CA); JomboV. PEFM (2005).14 NWLR (Part. 945) 443

The question that necessarily follows is whether the Complainant has placed before the court terms of the contract of employment and whether he has shown the manner in which the terms were breached?

Where it is clear to both parties that the requirement to present such terms in the form of a document cannot be satisfied since no such express terms were at any time exchanged between the parties, that is, there was no written contract of employment between parties. The terms guiding the relationship between the parties are to be implied by the court in view of the circumstances of the case.

In view of the burden of proof placed on the Complainant and the circumstance of the suit wherein the employment relationship is largely undocumented, the court will take into cognizance the provision of section 12 (2) (b) of the National Industrial Court Act which provides that:

12 (2) Subject to this Act and any rules made thereunder, the Court:

(b) shall be bound by the Evidence Act but may depart from it in the interest of justice.

The effect of the forgoing is that the court has the discretion to depart from the rule of evidence as stipulated in the Evidence Act in the interest of justice where the occasion and circumstances of the case so demands.

It is pertinent to mention that the Nigerian Labour Law, through the provisions of sections 7 – 20 of the Labour Act prescribes matters that the employer ought to put in writing and given to the employee within three months of the employment. Such matters include the wages to be paid and the manner of payment and the appropriate period of notice to be given by the party wishing to terminate the contract. It must also be noted that where there is no written agreement as to the period of notice of termination of contract of employment, the notice to be given must be reasonable notice and same can be implied by the court. See Union Bank of Nigeria Plc v. Soares (2012) LPELR-8018(CA).

The forgoing provision aside, it must be noted that it is possible for parties to orally enter into a contract of employment as the court in Shena Security Company Ltd V. Afropak (Nigeria) Ltd &Ors. (2008) LPELR-3052(SC) held that a contract of employment means any agreement, whether oral or written, express or implied, whereby one person agrees to employ another as a worker and that other person agrees to serve the employer as a worker. That is by the definition of the Labour Act (Cap. 198) LFN, 1990 which applies to workers, strictly defined to the exclusion of the management staff.

It is not entirely out of place for parties not to have their contract of employment in writing but failure to express certain terms would leave the court with the responsibility of implying same as guided by the statute.  In the case of Afrab Chem Ltd v. Owoduenyi (2014) LPELR-23613(CA), the court held that in an employer-employee or master-servant relationship, in addition to or to the exclusion of the express terms of the contract, the law imposes certain implied terms into the contract. These implied terms may either be founded on statute, by custom, by practice, public policy or such terms as to ensure that the master does not subdue the servant to a condition of servitude or slavery or like terms. 

While the court should not concern itself with the reasonableness or otherwise of the contractual terms between the contracting parties, the law would not allow the imposition of servile conditions on an employee. Any such contract which tends to impose servile obligations upon any person would not be enforceable, see Davies v. Davies (1887) 36 Q – D 359. Where a term is permitted to be implied into a contract, the implied term has the same binding effect on the parties.

The court has the power to imply terms which the parties have themselves failed to agree upon but are necessary and would have been stated had the parties adverted their minds to it. See Lister v Romford Ice and Cold Storage Co. Ltd. (1959) WLR 555 at 594.

In Shena Security Company Ltd v. Afropak (Nigeria) Ltd &Ors. (2008) LPELR-3052(SC), the court posited that where there is no mode of termination of the contract of service by any form of notice, the common law rule will apply. That rule is that the court will imply a presumption that contract of service is to terminate by reasonable notice given by either party. What amounts to reasonable notice will depend on the intention of the parties as revealed by the terms of the contract.

Furthermore, the court in Akumechiel v. B. C.C. Ltd. (1997) (Pt.484) 695 at 703, stated that where the contract of employment is silent as to the required notice of termination, the court will imply that a reasonable notice is necessary. And it is within the province of the Judge acting as a jury to decide what is reasonable notice, having regard to the following factors:

1. the nature of the employment
2. the length of service, and
3. other circumstances of the case.

In giving effect to the implied term as to notice of determination, the court relied on the provisions of the Labour Act of which section 11 stipulates the various length of notice for the determination of an employment with regards to various periods in employment. Section 11 provides that:

1. Either party to a contract of employment may terminate the contract on the expiration of notice given by him to the other party of his intention to do so.

2. The notice to be given for the purposes of subsection (1) of this section shall be-

1. one day, where the contract has continued for a period of three months or less;
2. one week, where the contract has continued for more than three months but less than two years;
3. two weeks, where the contract has continued for a period of two years but less than five years; and
4. one month, where the contract has continued for five years or more.

The court found that the implied term as to notice of termination of employment of the Claimant was breached in the absence of the any reasonable notice given to the Claimants before their employment was terminated.

Conclusion

Unwritten employment contracts are legally valid and enforceable in Nigeria. Their enforceability is dependent on the claiming party’s ability to establish the existence of a valid contract by convincing proof of the parties’ actions and communications. The assumption is that these contracts are at-will, however implied clauses can cause exceptions to this rule. Breaches of unwritten employment contracts can be remedied by legal action, with the possible remedies depending on the gravity of the breach.

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 in Nigeria. 

Need help? Kindly contact us using the details below:

Email: [email protected]

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

Introduction

Surrogacy is often discussed in the media from a scientific, social, legal, and policy perspective. Although surrogacy is widely accepted as a kind of assisted reproduction for those who would otherwise be unable to have children, it can elicit strong feelings, particularly when there is a risk of exploitation. As a result, there is dispute over how it should be governed. Surrogacy is illegal in many nations, but people nonetheless do it. In some jurisdictions, surrogacy is unregulated while in certain countries, it is guided by a ‘commercial’ or ‘altruistic’ framework.

Although Nigeria does not prohibit surrogacy, it has not established a legal framework for regulating the surrogacy procedure. The lack of formal legislation governing the practice places both the couple and the intended surrogate mother in a legal limbo, exposing the parties to legal dangers. This article examines the enforceability of surrogacy contracts and agreements in Nigeria.

What is surrogacy?

Surrogacy is a procedure in which a woman, known as the surrogate or gestational carrier, agrees to carry and give birth to a child for another individual or couple, known as the intended parent(s). The surrogate carries the pregnancy and gives birth to the child, with the intention of passing it on to the intended parent(s) following delivery. Surrogacy can be either altruistic, in which the surrogate receives no financial compensation beyond reasonable expenses, or commercial, in which the surrogate is compensated for her role. 

Surrogacy is frequently attempted by individuals or couples who are unable to conceive or carry a child due to infertility, pregnancy-related health problems, or other causes. It is a practice involving sophisticated medical procedures, emotional difficulties, and legal consequences that necessitate thorough understanding and adherence to applicable laws and rules. Surrogacy laws and regulations differ widely among jurisdictions, creating complex legal, ethical, and medical issues.

Types of surrogacy

Surrogacy is usually divided into two types, traditional surrogacy and gestational surrogacy.

Traditional surrogacy: This involves using the surrogate’s egg for conception, mainly by intrauterine insemination (IUI). It is less popular because of its legal and emotional difficulties.

Gestational surrogacy: It involves a woman carrying and giving birth to a child generated by in-vitro fertilization with the gametes of one or both intended parents, without the gestational surrogate’s genetic contribution. A woman’s consent to have a child which is then transferred to others upon birth. Gestational surrogacy involves creating an embryo using an infertile woman’s egg and sperm and implanting it in a surrogate mother. 

Who are the intended parents? 

Intended Parents are individuals or couples who are unable to conceive naturally and opt for surrogacy to start a family. 

Who is a surrogate mother? 

A “surrogate mother” is a woman who, for financial or other reasons, agrees to bear a child for another woman who is unable to conceive. She is a “substitute mother” who conceives, gestates, and delivers a child on behalf of another woman, who is then considered the child’s “real” mother (social and legal).

What are the legal frameworks governing surrogacy in Nigeria?

There is no broad legal framework regulating surrogacy in Nigeria, causing uncertainty and hurdles in surrogacy arrangements. The lack of surrogacy-specific laws in Nigeria raises concerns about the validity and enforcement of such contracts in court.

Some argue that since surrogacy is not explicitly prohibited, surrogacy contracts can be enforceable based on general contract law principles of offer, acceptance and consideration. However, others contend that unregulated surrogacy violates section 30 of the Child Rights Act which prohibits buying, selling or dealing in children. Section 13 of the Trafficking In Persons [Prohibition] Enforcement And Administration Act (TIPPEA Act) criminalizes all types of human trafficking and section 50 of the National Health Act which prohibits manipulation of any genetic material.

Although Nigeria lacks a legal framework for surrogacy, there are professional rules and standards that regulate the practice. Order 23 of Code of Medical Ethics in Nigeria make provisions for assisted conception and related practices. It provides to the effect that high-technology based human reproductive processes are now being employed by registered practitioners in Nigeria. These techniques embrace wide professional practices that include in-vitro fertilization, sperm donor and egg donor techniques, embryo donation, gestational surrogacy, full surrogacy and other emerging procedures. 

While the necessary statutes to govern these desirable practices in the society are yet to be enshrined, ethical considerations show the essence for care and attention to the several needs of donor, recipient, and offspring at every step in these practices. While the Council is devoting particular attention to necessary and continuous development of the ethical guidelines in assisted conception and all its professional practice implications, practitioners are expected to resolve certain matters of ethical significance that may arise. While both sperm and egg donations in in-vitro fertilization are accepted as ethically sound practices, in embryo donations, gestational surrogacy or full surrogacy, the practitioner will need to resolve ethical matters in respect of the following:

(A) Counseling and Consent of the donor in respect of:

• The willingness to donate
• The desire to help infertile couples

(B) The gamete or embryo processing

• There must be the screening of family history for genetic diseases, HIV and other infectious diseases including rescreening for HIV.
• In situations where embryos are mixed, genetic ancestry may only be determinable by DNA testing.

(C) The recipient is:

• Screened for uterine fitness and gestational capability
• Screened-for psychological stress
• Counseled that birth may not occur,
• Informed on the extent of screening done, particularly in case rescreening for HIV is omitted
• Made to give informed consent on psychological uncertainties
• Told of limit of information given to donor on the out come

(D) The Offspring

There are options on the need for openness or secrecy with regard to full disclosure. For now, in Nigeria, the principles applied in child adoption are best in the present circumstances.

(E) Monetary compensation for embryo

There are ethical considerations on monetary payments in view of connotations of selling and commercialising in the early form of human life.

It has become necessary that the Laws of the country should make the provisions for resolving this. Meanwhile the Medical and Dental Council of Nigeria advises that gamete or embryo donation should be made as a voluntary service and not commercialised.

(F) Embryo donation for research

There is the ethical risk of trading in embryos that are neither used to – initiate pregnancy nor discarded. Such issues as donor recruitment methods, monetary transactions, and types of researches to be applied to embryos certainly need statutory regulation. The Medical and Dental Council of Nigeria calls for appropriate legislation on the matter.

The country has attempted to regulate surrogacy, most notably with the presentation of the Assistive Reproductive Technology (Regulation) Bill in 2016. However, this bill is yet to be passed, leaving a substantial vacuum in the legal protection and regulation of surrogacy contracts. Lagos State stands out as an exception, having issued guidelines on Assisted Reproductive Technology in 2019, a trailblazing action that is yet to be emulated in Nigeria’s other states and the Federal Capital Territory. This legislative void encourages informal agreements, which can lead to conflicts and exploitation, stressing the vital need for regulatory guidance and legal protection for all parties involved.

It is evident that the absence of surrogacy regulations in Nigeria puts all parties in a vulnerable position. To create a transparent, ethical, and legally sound approach to surrogacy, Nigeria must enact comprehensive legislation. Such regulations would handle the intricacies of surrogacy, protect against exploitation and disputes, and ultimately prioritise the well-being and rights of the children born as a result of these arrangements, as well as the rights of other parties involved.

Until such rules are in place, the emphasis will be on creating thorough, legally binding surrogacy contracts. These contracts constitute an essential tool for people considering surrogacy as a path to parenting.

What is a surrogate agreement?

A surrogate agreement, also known as a surrogacy contract, is a legal document that states all parties’ rights, obligations, and expectations in a surrogacy relationship. Some key elements that may be contained in the Surrogate Agreement include:

• Accuracy of information by parties to the Agreement
• Evaluations, examinations, screening, medical procedures and instructions 
• Release of information by gestational carrier or surrogate mother
• Sexual activity of the gestational carrier or surrogate mother
• Medical instructions, diet and prenatal vitamins of the gestational carrier or surrogate mother
• Restrictions regarding the use of substances; harmful exposure by gestational carrier or surrogate mother
• Strenuous activity, travel, residence by gestational carrier or surrogate mother 
• Payment and reimbursement
• Gestational carrier’s medical expenses
• Possession of child after delivery and breast milk
• Termination of pregnancy
• Parent-child relationship
• Confidentiality
• Change of circumstances
• Termination of agreement
• Breach of agreement and remedies
• Governing Law

Surrogacy contracts must carefully protect the interests of all parties involved, particularly the intended mother and surrogate. In traditional surrogacy arrangements, it is critical to include clauses that protect the intended mother and parents against disputes over parental rights. Contracts for all surrogacy kinds should clearly stipulate that any unauthorised keeping of the child by the surrogate is considered abduction, stressing the gravity of such actions and ensuring legal protection for the intended parents.

Is a surrogacy contract enforceable under Nigerian law?

The Nigerian legal system permits the enforcement of contracts that meet certain essential requirements. As a result, despite the lack of particular legislation governing surrogacy, surrogacy contracts are considered with the same respect and consideration as other legally binding transactions.

Surrogacy contracts are based on mutual consent and the exchange of value, which are essential for their validity and enforceability. Even though there are no specific surrogacy laws in Nigeria, these agreements are recognised under general contract law principles, which mean that once the contract includes a clear and definitive offer, acceptance, and consideration, it becomes valid and enforceable. 

A surrogate contract entered into through threat, coercion, or deception, or terms that are impossible to fulfill by either party, like any other contract, will not be enforced by the court. It is important to note that commercial surrogacy contracts, in which the surrogate is compensated, are seen differently across jurisdictions, with some equating them to the sale of children, which is both legally and ethically objectionable.

Despite the fact moral and public policy debates may indicate a reluctance to enforce surrogacy contracts, it is important to note that surrogacy agreements are legally enforceable once they meet the requirements of a valid contract. If there are any complications with a surrogacy contract, the parties involved have the right to seek legal redress and possibly have their case heard and decided in court.

After the birth of the child through surrogacy, the intended parents must get a custody order in Nigeria. This legal procedure is vital for ensuring that their parental rights are completely and legally recognised and protected. Obtaining a custody order confirms the intending parents’ legal status as the child’s parents, offering peace of mind and legal protection for the family’s future.

Conclusion

Despite the fact that research indicates that there is no single rule governing surrogacy that has become widely practiced among Nigerians, it does not mean that the concept is outlawed in Nigeria. 

Surrogacy contract is enforceable in Nigeria. The notion is based on agreement, which means that it is a contract that includes the fundamental parts of an offer and acceptance. A contract becomes enforceable after all of the requisite criteria have been met. Thus, in the event of a violated surrogacy arrangement, the parties may seek legal redress in a court of law.

A surrogate agreement is a complex legal instrument that requires the skills of an experienced fertility lawyer to ensure compliance with local regulations and tailoring to the parties’ individual needs.

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 in Nigeria. 

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