FINTECH IN NIGERIA

PROCEDURE FOR ESTABLISHING A

FINTECH COMPANY IN NIGERIA

Written by

Kofi Apori
FINTECH IN NIGERIA: ESTABLISHING A FINTECH COMPANY IN NIGERIA

INTRODUCTION

Nigeria has the most FinTech unicorns in Africa, with five out of the seven African unicorns being
Nigerian companies, and two of three Nigerian unicorns for 2021, being FinTech companies. This is
the direct result of many innovative founders who keep creating new approaches for improving
financial inclusion and solving the existing problems in financial services.1

What is a FinTech company and what do these companies do?

FinTech means financial technology, and it is used to describe any technology that is deployed to
assist financial service providers by automating the use and delivery of financial services. Originally,
(i.e., some 20 years ago) it meant the backend technology deployed by established financial
institutions.2 The definition has changed as FinTech services have become more consumer-oriented.
FinTech now includes sectors and industries such as retail banking, investment banking, education,
fundraising, investment management, non-profits etc.3

There are several Fintech companies in Nigeria and by a recent ranking of Fintech unicorns in Africa
Nigerian fintech companies lead the park.4

HOW DO I START A FINTECH COMPANY IN NIGERIA?

LICENCE

The most crucial part of starting a fintech company in Nigeria is obtaining a fintech license because
without one you cannot release a product to the public. There are different categories of licenses
based on the type of FinTech product/service that the FinTech company intends to offer to the
Nigerian populace. Therefore, a founder must determine the type of legal structure that will be
appropriate for the product/service that the FinTech will offer in Nigeria.

The following are the categories of fintech companies in Nigeria and the licensing/regulatory bodies:

• Payment service providers, mobile money operators, digital banks, switch companies -
Central Bank of Nigeria (CBN)
• Lending – CBN & State Ministry of Home Affairs
• Savings, stock trading, personal finance, asset management and Peer-to-peer
lending/Crowdfunding – CBN & Securities and Exchange Commission

1
Ebunoluwa Ladipo ‘Meet Nigeria’s 3 unicorns in 2021’ (BusinessDay, 23 Oct 2021)
<https://businessday.ng/technology/article/meet-nigerias-3-unicorns-in-2021/> 29 November 2021
2
Julia Kagan, ‘Financial Technology – Fintech’ (Investopedia, 27 August 2020)
<https://www.investopedia.com/terms/f/fintech.asp#:~:text=Financial%20technology%20(Fintech)%20is%20used,and%20use
%20of%20financial%20services.&text=Fintech%2C%20the%20word%2C%20is%20a,combination%20of%20%22financial%20tec
hnology%22> accessed 30 November 2021
3
Christine Hall “These Startups Want To Help Students Better Manage Their School Debt” (Crunchbase news, 1 April 2021)
<https://news.crunchbase.com/news/these-startups-want-to-help-students-better-manage-their-school-debt/> accessed 30
November 2021
4
Sharon Lewis ‘5 Out of 7 Tech Unicorns in Africa Come From Fintech’ (FinTech News Africa, 12 October 2021)
<https://fintechnews.africa/40003/fintech-nigeria/tech-unicorns-in-africa-come-from-fintech/> accessed on 30 November 2021
 • Blockchain & Cryptocurrency - currently, the CBN does not issue licenses to cryptocurrency
companies or permit banks to do business with cryptocurrency companies.
It is important to note that some regulators have cross-sectorial responsibilities, such as the National
Communications Commission, which governs FinTech companies providing value-added services and
the National Information Technology Development Agency, which governs data users.5

Cost of Obtaining a FinTech Licence in Nigeria

FinTech companies in Nigeria are generally regulated by the Central Bank of Nigeria (CBN). As the
primary regulator of FinTech, the CBN has set the minimum share capital requirement for different
classes of FinTech companies. Therefore, in addition to the application fees payable to the CBN and
incorporation fees payable to the Corporate Affairs Commission (CAC), any individual seeking to
incorporate a FinTech Company must deposit certain refundable sums (i.e., the minimum share
capital) into an escrow account with the CBN. These sums make up a huge part of the capital required
to start a FinTech company in Nigeria.

Here are some types of FinTech Companies, the initial share capital requirements and the application
and licences fees payable to the CBN:6

1. Mobile Money Operators - N2,000,000,000.00 (two billion naira) is the minimum share capital
requirement. Payment of a non-refundable application fee of N100,000.00 (one hundred
thousand naira) and a licensing fee of N1,000,000.00 (one million naira) to the CBN.
2. Switching and Processing Companies - N2,000,000,000.00 (two billion naira) is the minimum
share capital requirement. Payment of a non-refundable application fee of N100,000.00 (one
hundred thousand naira) and a licensing fee of N1,000,000.00 (one million naira) to the CBN.
3. Payment Solution Service - N250,000,000.00 is the minimum share capital requirement.
Payment of a non-refundable application fee of N100,000.00 (one hundred thousand naira)
and a licensing fee of N1,000,000.00 (one million naira) to the CBN.
4. Payment Terminal Service Provider - N100,000,000.00 (one hundred million naira) is the
minimum share capital requirement. Payment of a non-refundable application fee of
N100,000.00 (one hundred thousand naira) and a licensing fee of N1,000,000.00 (one million
naira) to the CBN.
5. Payment Solution Service Provider - N100,000,000.00 (one hundred million naira) is the
minimum share capital requirement. Payment of a non-refundable application fee of
N100,000.00 (one hundred thousand naira) and a licensing fee of N1,000,000.00 (one million
naira) to the CBN..
6. Finance Companies – N100,000,000.00 (one hundred million naira) minimum share capital is
the minimum share capital requirement. Payment of a non-refundable application fee of
N100,000 (one hundred thousand naira) and a licencing fee of N250,000.00 (two hundred and
fifty thousand naira) to the CBN.
7. Payment Service Banks - N5,000,000,000.00 billion naira minimum share capital. Payment of
a non-refundable application fee of N500,000.00 (Five Hundred Thousand Naira and a
licensing fee of N2,000,000.00 (two million naira) to the CBN.

5
Seun Timi-Koleolu and Eustace Aroh ‘Nigeria: Setting Up A Fintech Company In Nigeria’ (Mondaq 10 August 2021)
<https://www.mondaq.com/nigeria/fin-tech/1099946/setting-up-a-fintech-company-in-nigeria> accessed 10 September 2021
6
The foregoing list does not cover all types of Fintech companies because there are many types of innovations that come up daily
to solve problems that may not fit into the traditional Fintech categories. It is therefore advisable to consult a lawyer to advise
on the legal structure and capital requirements for whichever company you intend to incorporate
 8. Digital Banks - There is no regulatory regime for digital bank. Hence they are usually
established as Microfinance Banks (MFB). The minimum capital requirement for MFBs is
N50,000,000.00 (fifty million naira) for Tier 2 Unit MFB, N200,000,000.00 (two hundred
million naira) for Tier 1 Unit MFB, N1,000,000,000.00 (one billion naira) for State MFB, and
N5,000,000,000.00 (five billion naira) for national MFB. Digital Banks can also be established
as Finance Companies, Payment Service Banks or Commercial Banks.7

INCORPORATION WITH THE CAC

Once the FinTech founder has decided on the type of FinTech company, gotten the Approval-in-
Principle which is issued upon payment of the application fee, the founder needs to incorporate the
company with the CAC in order to obtain the license.

INTELLECTUAL PROPERTY

Founders of FinTech companies should ensure that their intellectual property rights are protected.
There are three categories of intellectual property rights - copyrights, patents and trademarks.

Copyright protects original works of authors/software developers that have been fixed in any definite
medium of expression.8 For a work to be eligible for copyright protection, it must be in a tangible
medium like software codes, and cannot be abstract or an idea. Software codes enjoy automatic
copyright but it is advisabe to carry out registration of same at the Nigerian Copyright Commission.

Patents are forms of intellectual property rights that protect inventions. In contrast to copyright, a
patent protects ideas embodied in an invention that solves a problem. The requirements for
registering a patent are that: 1) the invention must be a new inventive step that is capable of
industrial application; or 2) an improvement upon a patented invention, that is new, results from
inventive activity and is capable of industrial application. 9

A trademark refers to any inscription or mark that is used by an individual or a company to distinguish
his/its products or services from those of other companies.10 In order to be registered as a trademark,
a mark must be distinctive, unique, and not descriptive of the product or service it identifies.

In contrast to copyright, which does not require registration, patent and trademark holders typically
need to register before they can enforce their rights.

CONCLUSION

Founders who wish to establish a FinTech company in Nigeria should engage the services of a lawyer
who can advise on the appropriate entity that should be incorporated.

7
Kofi Apori and Alyce Ebri ‘Digital Banking in Nigeria: Procedure for Establishing a Digital Bank in Nigeria’ (Acorn & Mustard,
November 2021) <https://www.linkedin.com/feed/update/urn:li:activity:6866683413588393984> accessed on 2 December
2021
8
Section 1(2)(b) of the Copyright Act Cap C28 LFN 2004
9
Section 1 of the Patents and Designs Act Cap P2 LFN 2004
10
Sections 9 and 10 of the Trade Marks Acts Cap T13 LFN 2004 provides for registration in Parts A and B of the Trademarks
Register. In order to qualify for registration in Part A, a trademark must have distinctiveness, that is, at least the name of the
applicant (represented in a special manner), or the applicant's signature, or an invented word (s), or a word (s) that has no direct
reference to the character, quality, or geographical origin of the goods. The registration under Part B of the Register is only
available if the mark can be used to distinguish between goods with which the proprietor has a business relationship and goods
in which no such relationship exists
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