Written by: Chinedum Mbagwu
INTRODUCTION:
Fintech is a catch-all term referring to software, mobile applications and other technologies created to improve and automate the traditional form of finance for business and consumers alike. It is a computer program and technology used to support or enable banking and financial services.
The Fintech industry as we know it today did not exist before the late 1990s and 2000s. Nonetheless, Fintech’s origin can be traced back to the advent of the computer system and the growth of electronic banking in the financial service industry in the 1970s and 1980s.
The scope of the Fintech industry in Nigeria is widening. In the early days, the industry was filled with payment services, microfinancing and lending. However, since 2022 other specialized Fintech companies have been emerging and developing, including ‘buy now and pay later’ solutions like Easy Buy, Easy Care and Credpal. In the same vein, laws, policies and regulatory guidelines have also evolved over the years in the Fintech space.
Fintech has remained the biggest financial institution disruptor of our time and has the ability to alter people’s social and economic circumstances. It is distinguished by its efficiency and ease of use. Aside, from the immense benefits it offers, there are several risk factors that come with the usage. Such risk transverses data privacy and protection, cyber security and finance space. This therefore calls for adequate regulation of the Fintech industry.
Let look at the relevant laws, regulations and policies in Nigeria’s Fintech ecosystem.
EXISTING LAWS, POLICIES AND REGULATORY GUIDELINES
Though Central Bank of Nigeria vide Central Bank Act and other legislations is the main regulatory body with the primary responsibility of granting license and making policies and guidelines with respect to banks and other financial institutions including Fintech companies in Nigeria. There are other agencies, who through their extant laws play supporting and complementary roles in regulating Fintech’s operation. We shall be looking at these laws, policies and regulatory guidelines.
• PAYMENT SYSTEM VISION (PSV) 2025
The Central Bank of Nigeria made this known in its Payment Vision 2025 document. The country by this document aspires to have efficient and cashless electronic payment infrastructure that would facilitate financial services in all sectors of the economy.
• BANKS AND OTHER FINANCIAL INSTITUTIONS ACT 2020
This is the latest Act that regulates banking operations in Nigeria. For Fintech companies that may also carry on core banking-related businesses like cash savings and deposits, compliance with BOFIA’s provisions remains mandatory.
• FEDERAL COMPETITION AND CONSUMERS PROTECTION ACT
Under the FCCPC Act, Digital Money Lenders(DMLs) are requested to go through a registration process with the commission. The commission plays an investigative and enforcement role us its Joint Regulatory and Enforcement Task Force (JRETF).
• CBN FRAMEWORK FOR REGULATORY SANDBOX OPERATION 2020
The regulatory sandbox is a formal process for firms to conduct live test of new, innovative products, services, delivery channels or business models in a controlled environment, with regulatory oversight.
• NIGERIA STARTUP ACT, 2020
The Act contains various provisions ranging from introduction of labelling requirement for eligible startups to establishment of a special seed fund which is dedicated to financing labelled startups, technology accelerators, incubators and hubs among other things.
• THE EXCHANGE LIMITED RULES (Listing on Nigerian Stock Exchange Technology Board)
In a bid to attract tech companies operating in Nigeria to list on Nigeria Stock Exchange, The Nigeria Exchange Group(NGX) in February 2022 revised the listing rules to make them startup friendly.
• MONEY LENDERS LAWS
The Money Lenders Law (ML) license is issued by various states in Nigeria. Given that Lagos is the commercial hub of Nigeria, majority of Money Lenders license are registered within Lagos. The Lagos State Money Lending Law is the principal law which regulates money lending in Lagos.
• THE NIGERIA DATA PROTECTION ACT
The objective of Nigeria Data Protection Act amongst others is to safe guard the fundamental rights, freedom and interest of data subjects as guaranteed under the constitution of Nigeria. Data being the live wire Fintech, they therefore required to comply with the provisions of the Act.
CONCLUSION
Despite substantial potential and growth already witnessed in the Fintech sector in Nigeria, the avalanche of laws has remains a daunting maze for Fintech companies. Moreso, is the apparent overlaps in regulatory functions of some of these agencies. There is therefore a need to streamline some of the overlapping functions, without compromising the objectives. Such will definitely help in realizing the much needed economic benefit of Fintechs in Nigeria.
Chinedum Mbagwu is a Partner at Bucklers Law Firm.
