THE CBN’S DRAFT GUIDELINES ON ATM OPERATIONS: EMERGING COMPLIANCE AND REGULATORY TRENDS IN NIGERIA’S BANKING LANDSCAPE

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ADERONKE ALEX-ADEDIPE AND MARK IMONITIE
Introduction

The Central Bank of Nigeria (CBN) on Thursday, October 9 2025, issued draft guidelines for the operation of Automated Teller Machines (ATMs) in Nigeria (“Guidelines”).

In its circular to banks, other financial institutions and payment service providers, the CBN stated that the essence of the Guidelines is to review, improve and establish minimum standards for the deployment, operations and maintenance of ATMs. Therefore, improving access to ATM services in Nigeria, strengthening security protocols and enhancing consumer protection in line with global best practices.

In this newsletter, we examine some of the key provisions introduced by the Guidelines.

1.     REGISTRATION OF INDEPENDENT ATM DEPLOYERS (IADs)

Under the existing framework, Independent ATM Deployers (IADs) simply operate in partnership with banks and other financial institutions without the need for registration.

Under the Guidelines however, the registration of IADs with the CBN before deployment or operation of an ATM at any location in Nigeria is a mandatory requirement.

IADs are non-bank entities, licensed or registered by the Central Bank to install, own, and maintain ATMs, in various locations such as retail stores, shopping malls or underserved areas, subject to entering into agreement(s) with banks or card schemes for settlement and cash provisioning.

As part of the requirements for licensing and registration, IADs are to provide the CBN with their corporate profile, technical and operational capacity, evidence of partnership agreement with a bank for cash provisioning, and evidence of compliance with extant payment systems regulations.

2.     ATM TECHNOLOGY STANDARDS AND SPECIFICATIONS

According to the Guidelines, ATM systems shall have audit trail and logs capabilities, which are detailed enough to facilitate investigations, reconciliation and dispute resolution.

The Guidelines also maintain the existing regulatory standards for payment cards. It provides that all ATM deployers/acquirers shall comply with Payment Card Industry Data Security Standards (PCI DSS), developed and administered by the Payment Card Industry Security Standards Council, an independent body in the United States of America (USA).

Furthermore, card readers shall be identified by a symbol that represents the card; the direction in which the card should be inserted into the reader; and all ATMs shall accept cards horizontally with the chip upwards and to the right.

The Guidelines provides that at least 2% of ATMs deployed by each acquirer shall have tactile graphic symbols for the benefit of visually impaired ATM users. The locations of such ATMs are to be visibly publicized on the corporate website of the ATM acquirer.

3.     ATM DENSITY AND EXPANSION TARGETS

The Guidelines establish requirements for the deployment of ATMs by banks and IADs, particularly in respect of the location and density of ATM deployment.

Specifically, the Guidelines impose a requirement on card issuers to deploy at least 1 ATM for every 5,000 payment cards issued.  The Guidelines also establish a three-year timeline for full compliance with the staggered targets. To achieve this, the following incremental milestones should be met: 30% by end of 2026, 60% by end of 2027; and 100% by end of year 2028.

This development is intended to address ATM density and geographical distribution challenges, which often result in long queues and difficulties accessing cash, especially in underserved locations.

Ultimately, the requirement aims to revive and strengthen ATM infrastructure, ensure reasonable proximity of ATMs to users, maintain cash availability at all times, and enhance overall consumer access and operational efficiency in the payment network.

4.     MONTHLY RETURNS

Unlike the Electronic Payment regulations, the Guidelines introduce a deadline for filing monthly returns. ATM operators must submit their monthly returns by the 5th day of the following month. This compliance requirement enables effective monitoring of ATM transaction volumes by the CBN and enhances the efficiency of the ATM payment network.

Conclusion

The introduction of the Guidelines represents a significant step forward by the CBN in streamlining and improving the framework for the operation of ATMs in Nigeria.

If enacted and implemented, it will enhance financial inclusion, fortify operational integrity, advance consumer protection, and align Nigeria’s payment infrastructure with internationally recognized best practices.

Stakeholders are encouraged to seize the opportunity presented by the Central Bank of Nigeria to submit comments and feedback for the enhancement of the Guidelines before October 31, 2025.

The New Capital Gains Tax Regime in Nigeria: Key Considerations for Foreign Investors

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SEUN TIMI-KOLEOLU AND OMODELE FATODU

Introduction

Globally, jurisdictions such as Mauritius, Singapore, and the United Arab Emirates have built reputations as investor friendly hubs by maintaining transparent, predictable, and business-friendly tax systems. These environments offer clarity, reduce uncertainty, and provide incentives that make capital deployment more efficient.

Nigeria’s recent tax laws, namely the Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service Act, and the Joint Revenue Board Act, particularly the changes to the Capital Gains Tax (CGT) regime have been positioned as a step towards a fairer and more integrated tax framework that supports reinvestment.

Understanding Capital Gains Tax Reforms

CGT is a tax charged on the profit made from the sale of a chargeable asset, such as shares, real estate, or other investments.

CGT in Nigeria is currently charged at a flat rate of 10% on all chargeable assets, regardless of the taxpayer’s income level.

Under the new system, which takes effect from 1 January 2026:

  • CGT will now be a progressive tax, tied to a taxpayer’s income tax rate
  • The applicable rate will range from 0% – 30%, depending on total income (or profits in the case of a Company).
  • Individuals who earn N800,000 or less annually will be exempt from tax on their gains.

Key Reliefs of the New CGT Regime

The reform also provides for reliefs that make it more balanced and investment friendly:

  • Exemption thresholds – Individuals whose annual proceeds from asset sales do not exceed ₦150 million where the gains are under ₦10 million, will be exempt.
  • Institutional investors – Pension funds and other institutional investors remain exempt as well, preserving the depth and stability of the long-term investment capital in the market.
  • Reinvestment relief – Investors who reinvest proceeds from the sale of shares into Nigerian companies will not be subject to CGT on those gains.
  • Company restructuring – Companies undergoing reorganization, mergers, or restructurings will be exempt from CGT on those transactions.

These measures are designed to deepen the domestic capital market and encourage reinvestment rather than capital flight. They also protect small investors while ensuring that the system remains progressive and consistent with international best practice.

What This Means for Foreign Investors

For foreign investors, the reform presents both opportunities and adjustments. By linking CGT to income tax rates, Nigeria now offers a more transparent and globally familiar tax structure. The exemptions for reinvested proceeds may create an incentive for capital retention and local market participation. For long-term or strategic investors, this may present opportunities to optimise post-tax returns through reinvestment in productive sectors.

Foreign investors from countries that have double taxation agreements (DTAs) with Nigeria, such as the United Kingdom and the Netherlands, can generally offset the CGT paid in Nigeria against taxes due in their home country, thereby avoiding double taxation. However, investors from jurisdictions without DTAs may not enjoy the same reliefs and could face higher tax costs.

From a practical standpoint, investors may need to review reinvestment options to take advantage of exemptions. While long-term investors may benefit from reinvestment incentives, short-term or speculative investors may face higher CGT liabilities under the new system.

Conclusion

Nigeria’s capital gains tax reform represents a shift towards a more modern and integrated tax framework that seeks to retain capital locally and reinforce the domestic market. However, predictable foreign exchange policies, regulatory efficiency, and ease of repatriation remain critical for sustaining investor confidence.

For foreign investors, understanding these changes and aligning investment strategies accordingly will be key to maximising investment opportunities in Nigeria. Foreign and domestic investors alike are therefore advised to seek professional tax guidance to understand how the new rules affect their specific structures and transactions.

To read more on the latest Tax reform laws, please see our newsletter here and here.

REGULATORY UPDATE: KEY LEGAL AND COMPLIANCE CHANGES IN THE CBN GUIDELINES FOR THE OPERATIONS OF AGENT BANKING IN NIGERIA

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ADERONKE ALEX-ADEDIPE AND MARK IMONITIE

Introduction

The Central Bank of Nigeria (CBN) on Monday, October 6 2025, issued new operational guidelines for Agent Banking in Nigeria. The purpose of the Guidelines is to strengthen and secure the enabling environment for providing financial services to the underbanked regions in the country.

The Guidelines also aim to consolidate all existing policies related to Agent Banking and Agent Banking relationships into a single comprehensive set of rules that addresses emerging issues within the ecosystem. Accordingly, the Guidelines supersede all previous CBN guidelines on Agent Banking.

In this newsletter, we examine some of the key provisions introduced by the Guidelines which affect Agency Banking operations in Nigeria.

1.     AGENT EXCLUSIVITY

The Guidelines significantly changes the Agent Banking framework in Nigeria. Previously, Agents could operate across multiple platforms managed by various Principals—such as banks, microfinance institutions, payment service banks, or mobile money operators—to serve customers. Under the new Guidelines, Agents must now be exclusively tied to a single Principal.

In essence, an Agent can no longer provide services for multiple licensed deposit-taking financial institutions authorized to engage Agents. Additionally, Agents may belong to only one Super Agent’s network at the same time.

To formalize Agency relationships, Principals are required to enter into an Agreement with their Agents, which must, at a minimum, include terms on: duration; authorized services; applicable fees and charges; use of dedicated Agent accounts for all transactions; Agent remuneration; breach instances and penalties; business hours and geographic location; obligations of both parties; AML/CFT/CPF and KYC compliance requirements; confidentiality and non-disclosure; limitation of liability; dispute resolution; amendments; opt-in/opt-out rights; termination; and force majeure provisions.

According to the CBN, implementation of agent exclusivity will take effect from April 1, 2026.

2.     DEDICATED AGENT ACCOUNTS

As a measure for transaction oversight, the Guidelines mandate Agents to conduct all Agent Banking transactions exclusively through a dedicated account or wallet assigned by a Principal. Furthermore, Principals are responsible for ensuring that payment terminals used by Agents are connected solely to this dedicated Agent account or wallet.

Conducting any transaction outside the designated account will be deemed a violation of the Guidelines, with the Agent personally liable for any resulting fraud or illegal activity.

Principals are authorized to terminate the Agent Banking agreement with any Agent who breaches the provisions of the Guidelines and such Agents may also be blacklisted by the CBN or placed on a watchlist.

3.     OPERATIONAL AND TRANSACTIONAL LIMITS

The Guidelines establish additional operational and transaction limits for Agent Banking services, requiring Principals to ensure that these limits comply with the maximum regulatory thresholds set forth in the Guidelines.

Specifically, the Guidelines set a daily cash-in deposit limit of N100,000 and a weekly limit of N500,000. For cash-out withdrawals, Agents are restricted to a maximum of N100,000 daily and N500,000 weekly. Additionally, the Guidelines impose daily and weekly limits of N100,000 for utility and service bill payments.

Prior to the Guidelines, transaction limits only applied to withdrawals, and Principals were allowed to determine the limits for cash-in deposits and utility bill payments.

4.     LOCATION AND LIST OF AGENTS

Under the Guidelines, the physical address or location of an Agent’s business operations must be mutually agreed upon by the Principal and the Agent. Principals are required to publish an updated list of all their Agents and their respective locations on their websites.

Agents must provide their Principals with at least thirty (30) days’ prior notice, or any other period agreed upon in the Agent Banking Agreement, before relocating or shutting down operations. Furthermore, Agents are obliged to display a visible notice of their intention to relocate or shutdown at their business premises throughout the notice period to inform their customers and Principals before relocating. Principals are mandated to report to CBN the relocation or closure of Agent’s location.

As part of measures to prevent Agents from operating at multiple locations, the Guidelines require every PoS terminal to process real-time transactions and be geo-fenced to the Agent’s registered location. Devices used by Agents cannot be moved or shared without formal approval from Principals and the location of Agents is restricted.

The implementation of the provisions in the Guidelines on agent location shall be with effect from April 1, 2026.

5.     MANDATORY TRAINING FOR AGENTS

The Guidelines require Principals and Super Agents to ensure that their Agents complete training before onboarding. This training must, at a minimum, cover (i) Agent responsibilities and obligations, (ii) KYC regulations and customer registration requirements, (iii) transaction processes, (iv) prohibition of transactions on behalf of customers, (v) consumer protection laws and consequences of non-compliance, (vi) diversity and inclusion principles and their application, as well as basic financial literacy for both customers and Agents, amongst others.

This training requirement is commendable, as it ensures Agents remain well-informed of their legal and compliance obligations. However, the mandate on Principals increases their compliance responsibilities, which may lead to higher operational costs.

6.     ENHANCED ELIGIBILITY AND DUE DILIGENCE REQUIREMENTS

The Guidelines also enhance the appointment requirements for both individual and non-individual Agents, mandating the provision of detailed information to the Principal, including;

  • Name, residential address, sex, age, local government area (LGA), and state
  • Physical business address, postal address, and telephone numbers
  • Evidence of available funds to support Agency operations
  • Bank Verification Number (BVN) and National Identity Number (NIN) for individual Agents; and
  • Disclosure and evidence of termination of any previous Agent banking relationships for the prospective Agent and designated employees.

For non-individual Agents, additional documentation includes:

  • Certificate of incorporation or business name registration with the Corporate Affairs Commission (CAC);
  • Names of designated employees;
  • Three (3) years of Tax Clearance Certificates and Tax Identification Number (TIN); and
  • BVNs of promoters, directors, and signatories to the Agent’s bank accounts.

Principals or Super Agents must conduct thorough due diligence before appointing or onboarding Agents. This due diligence must, at minimum, comprehensively verify:

  • The background and professional suitability of the Agent or business operations for non-individual Agents, including promoters, directors, partners, and management;
  • Credit history from credit bureaus or other sources;
  • Criminal records related to fraud or dishonesty;
  • Sources of funds;
  • Business address or location submitted by the Agent; and
  • Any prior relationships with the Principal that may adversely affect the Agent Banking relationship.

Conclusion

The CBN Guidelines for Agent Banking Operations represents a significant step forward in strengthening the integrity, security, and efficiency of Agent Banking in Nigeria.

By introducing stricter eligibility criteria, enhanced due diligence, robust transaction limits, and comprehensive training requirements, these regulations seek to protect consumers, promote financial inclusion, and build trust in the Agent Banking ecosystem.

Financial Institutions and Agents alike must prioritize compliance to fully realize these benefits while mitigating against operational risks. As Nigeria’s Agent Banking sector evolves, adherence to the Guidelines will be essential for sustainable growth, transparency and confidence among all stakeholders in the digital financial services landscape.

IP BACKED FINANCING: LEVERAGING INTELLECTUAL PROPERTY FOR INCOME GENERATION AND AS COLLATERAL

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SEUN TIMI-KOLEOLU AND HILLARY OKOROTIE

INTRODUCTION

Intellectual property (IP) assets such as trademarks, copyrights, or patents form a critical part of a company’s overall assets. Categorized as intangible assets, IP assets play a key role in defining a business’ competitive advantage, brand value and investment value amongst others. Traditionally, lenders have preferred tangible assets as collateral for financing because of their ascertainable value. However, with the ever-evolving economic landscape and the increasing importance of knowledge-based industries, there is a growing need to recognize and further leverage the value of IP assets as viable collateral.

IP-backed financing offers businesses such as startups, innovation-driven companies and creatives, the opportunity to access liquidity from their intangible assets without divesting ownership. By using patents, trademarks, copyrights, or even trade secrets as security, companies and individuals may access credit facilities.

In this newsletter, we will explore how businesses can leverage their IP assets as security for financing and key factors that should be considered in such transactions.

Three ways Businesses can Leverage their IP Asset

1. IP-Backed Financing (Loans & Collateralization)

IP is increasingly recognized as a valuable business asset that can be leveraged to access financing. It can be used as collateral to secure loan facilities. IP-backed loans enable businesses including startups and SMEs secure capital without diluting equity or divesting ownership. For instance, a technology company with patented technology or products may negotiate loan terms or leverage its IP by pledging its portfolio. This not only provides liquidity but also compels companies to properly register and protect their IP.

The Nigeria Startup Act also recognizes intellectual property (IP) as collateral. In addition, the Federal Ministry of Art, Culture, and the Creative Economy is working on establishing the Creative Economy Development Fund and the Intellectual Property Monetization Pilot. These initiatives aim to provide creatives with opportunities to leverage their IP as collateral, attract investment, and access broader financing options. You can read further here.

2. IP Licensing

Licensing of IP is an effective way to leverage IP and generate income from the IP. Companies can grant rights to a licensee through structured agreements that create royalties for the business. Such licensing may either be exclusive or non-exclusive.  An exclusive license gives the licensee the sole right to use an invention or other existing IP, while a non-exclusive license allows multiple licensees the use of the IP. While IP in this case is not used as collateral for a loan, the IP is able to generate financing and cash flow that would accrue to the business.

3. IP Commercial Exploitation via Franchising & Joint Ventures

Franchising and joint ventures enable businesses to leverage their IP for scalable growth. Franchising allows a business to license its brand, systems and IP assets to a franchisee in exchange for a fee or royalties. While joint ventures allow companies to pool resources and expertise, including value in the IP assets of the business for the purpose of achieving project goals and expansion plans. By partnering with others, businesses can expand into new markets and share financial risks. For instance, a company with patented technology can collaborate with a manufacturing partner to expand into new markets while sharing the financial burden of the expansion.

Key Factors to Consider

While the use of IP as collateral presents exciting opportunities, businesses must be mindful of several critical factors before using its IP as collateral. Unlike tangible assets, IP assets come with unique complexities. For lenders, the concern is enforceability and realizable value; for businesses, the challenge is retaining ownership. The following factors are central to determining the use of IP.

  1. Maintaining an IP Portfolio: It is important for businesses to maintain a portfolio of their IP assets, this will include trademark rights, copyrights, patent rights, design rights and trade secrets. The portfolio should comprise of the title document, evidence of registration of ownership and duration of the rights. It is equally important to monitor expiration of these IP rights as rights can elapse if not renewed upon expiration. For practical steps on protecting your IP, read our newsletter on enforcing your intellectual property rights.
  2. Valuation of IP: Determining the fair market value of an IP asset is often complex, as its worth may depend on factors such as brand recognition, market share, licensing potential, and enforceability. Unlike tangible assets, there is no universally fixed method for valuing IP, and its intangible nature makes it difficult to measure its exact value with accuracy. In valuing IP assets Parties may rely on various approaches, including income potential, or the goodwill associated with the asset, such as the reputation and consumer loyalty tied to a trademark to arrive at a reasonable valuation. It is also necessary to engage an independent valuator to properly assess and establish the fair value of the IP.
  3. Duration and Lifecycle of IP Rights: The lifespan of an IP asset directly impacts its financing potential. Businesses and individuals must carefully consider the period of enforceability of the IP when offering it as collateral, ensuring that it aligns with the terms of the financing arrangement. For example, patents typically last 20 years from the filing date, after which protection expires. Copyright protection extends for the author’s lifetime while trademarks are valid for a period of 7 years from the date of initial registration and is renewable upon expiration. It is therefore essential to ensure that the duration of protection corresponds with the period of an IP-backed loan, lease, or royalty assignment, and to take proactive steps such as renewing rights where necessary to preserve the value of the asset.
  4. Due Diligence: Prior to accepting an IP asset as collateral in a financing transaction, financiers should undertake proper due diligence to confirm the ownership of the IP asset. This process will assess whether the IP asset is owned by the party offering it, whether it has already been pledged as collateral in another transaction, and whether there are any existing or pending litigation proceedings that could affect its enforceability amongst others.

Conclusion

IP-backed financing is gradually redefining the financing landscape for startups and creative businesses in Nigeria. With the recognition of IP as collateral under the Nigeria Startup Act, the introduction of the Creative Economy Development Fund, and the Intellectual Property Monetization Pilot by the Federal Ministry of Art, Culture, and the Creative Economy, businesses and creatives will have more options for deriving value from their IP assets. To gain value from their IP assets, it is advisible that businesses build strong IP portfolios, value their IP assets, and take steps to highlight their value to financiers and investors.

THE PUBLIC PRIVATE PARTNERSHIP FINANCIAL MODEL GUIDE 2025; KEY TAKEAWAYS

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ADERONKE ALEX-ADEDIPE AND ENIOLA SOGBESAN

INTRODUCTION

Against the backdrop of limited public resources and Nigeria’s rising infrastructure demand, Public-Private Partnerships (PPPs) have become integral to bridging the investment gap. In Nigeria, the Infrastructure Concession Regulatory Commission (ICRC or the “Commission”) is responsible for establishing clear PPP frameworks for Federal Government projects.

The release of the PPP Project Financial Model Guide (the “Project Guide”) by the ICRC in August 2025 marks a significant milestone in Nigeria’s PPP regulatory landscape. The Project Guide outlines the minimum benchmark for the preparation, testing, and presentation of PPP financial models in Nigeria.

This newsletter reviews the Project Guide, highlighting its scope and structure, revenue and cost assumptions, financing structure, and other related matters.

Project Scope and Structure

The Project Guide requires that every PPP financial model must begin with a clear project overview setting out the purpose, scope, and objectives of the project. This requirement provides clarity, strengthens the model’s credibility and gives regulators and investors a reliable basis for evaluating the viability of a project.

In addition, all principal stakeholders (government authorities, private financiers, contractors, and operators) in a project must be clearly identified and have their roles defined. The financial model should also specify the contractual structure of the project (e.g. Design-Build- Finance-Operate and Transfer, Build- Operate and Transfer etc) and define how risks, revenue, and responsibilities are distributed.

Finally, the Project Guide requires a complete project timeline, encompassing both the construction and operational aspects of the project. This is to ensure that the long-term financial obligations and service delivery goals can realistically be achieved.

Revenue Assumptions and Projections

The Project Guide underscores the critical importance of accurately identifying and projecting revenue assumptions, which is a core financial driver of any PPP project. The revenue assumptions should consider the following matters:

  1. Revenue Sources – All Financial models must clearly set out all revenue sources and classifying them under user-pay, government-pay, or hybrid models.
  2. Revenue Streams and Timing – Project sponsors must identify potential ancillary revenue streams, such as income from commercial facilities, advertising, or third-party activities to reflect the full revenue picture.
  3. Growth Assumptions – The Project Guide mandates disclosure of the expected timing and frequency of revenue inflows. These revenue inflows should incorporate assumptions on inflation, GDP, and other macroeconomic indicators.
  4. Sensitivity/Scenario Analyses – To improve project reliability, the Project Guide requires financial models to be tested under baseline, optimistic, and pessimistic scenarios. This helps show how robust the project is and supports better risk allocation.

Cost Assumptions and Projections

In a PPP project, carefully estimating costs is equally as important as projecting revenues. A good financial model should clearly show the capital and operational costs of building and maintaining the project. In this regard, the Project Guide lists the following matters which must be considered in any cost assumption and projection.

  1. Capital Expenditure (CapEx) and Operating Expenditure (OpEx) – The Project Guide requires all PPP financial models to provide a comprehensive assessment of both CapEx and OpEx. These must include obligations such as design, construction, land acquisition, maintenance and personnel costs.
  2. Fixed, Variable and Contingency Costs – All PPP financial models must distinguish fixed from variable costs and also include contingency cots to manage unexpected shocks or project overruns. This should be integrated into the financial models to mitigate against financial fluctuations and safeguard stability. These buffer mechanisms are designed to strengthen the financial resilience of PPP projects and provide certainty for public and private stakeholders.

Taxation and Accounting Assumptions

To ensure financial transparency, the Project Guide requires PPP financial models to detail how tax and accounting rules will apply to a project. This includes aligning asset depreciation with asset lifespan and factoring available tax incentives. The Project Guide requires all tax and accounting assumptions to reflect existing laws and be updated as regulations evolve.

Financing Structure

This section of the Project Guide makes detailed provisions on how the PPP project will be funded and the implications for risk allocation. The financial models of all PPP projects should integrate the following features;

  1. Equity/Debt – The capital structure of the PPP project must be determined by calculating the proportion of equity (provided by private investors) to debt (raised through loans, bonds, or other instruments). All PPP projects should be funded with an appropriate mix of equity and debt. The financial model should also include a detailed debt amortization schedule, showing principal and interest repayments within the contract term.
  2. Project Financing/ Corporate Financing – The PPP project must clarify whether the financing will be arranged with reference to the project’s Special Purpose Vehicle (SPV) (project financing) or the project sponsors’ balance sheet (corporate financing).
  3. Government Contributions –The Project Guide recognizes the importance of government support through provision of grants, guarantees, and viability gap funding to make projects more bankable and financially sustainable. In the Nigerian context, the recognition of government support mechanisms is significant, as it improves the attractiveness of PPP projects to investors.

Financial Metrics and Key Performance Indicators (KPIs)

In measuring the financial metrics and key performance indicators of a PPP project, the Project Guide requires every PPP financial model to determine whether the project can fulfill its debt obligation using the Debt Service Coverage Ratio (DSCR).

It also mandates the computation of the Weighted Average Cost of Capital (WACC) – which measures the cost of equity and debt in the project. The project must also determine its Return on Equity (ROE) and Payback Period to estimate reasonable project expectations and ascertain the duration within which the invested capital is recovered.

Cumulatively, these financial metrics and key performance indicators set out predetermined triggers for evaluating the profitability of a PPP project. They also help to set expectations, guide investment decisions, and provide a basis to measure the viability of a PPP project.

Government Revenue and ICRC Fees

The Project Guide provides that in user pay of hybrid PPP arrangements, the Federal Government will receive an agreed share of the revenue generated from the project.  However, in Government-pay PPPs, the Government will not be entitled to any revenue share. In addition, the ICRC charges regulatory fees on PPP projects. This fee includes a one-off charge of up to 5% of entry fees and a mandatory annual fee of 1% of the project’s gross revenues.

Reporting and Documentation

The Project Guide reiterates the need for clarity and transparency in all PPP financial models. It requires the sensitivity and scenario analyses to be shown in a way that is easy to understand and gives stakeholders a clear view of all risks and possible safeguards.

Also, every PPP financial model must include an executive summary that summarises its viability, returns, risks, and basis of assumptions. Also, all financial models must undergo an independent audit to confirm that it is accurate, logically sound, and complete before submission to the Commission.

Conclusion

With the launch of the Project Guide, the ICRC has taken an important step towards strengthening Nigeria’s PPP framework. By setting clear rules for how financial models should be prepared, tested, and reviewed, the Project Guide reduces uncertainty and builds trust among investors and lenders.

It also establishes a clear, reliable, and investment-ready framework for project development, underscoring the critical importance of PPP financial models in balancing public interest with private capital, and securing the sustainability of PPP projects. With consistent application and periodic updates, the Project Guide has the potential to deliver enhanced value to both public authorities and private stakeholders.

Nigerian Tax Reform Acts: Structuring for Efficiency in an Evolving Fiscal Landscape

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BY SEUN TIMI-KOLEOLU AND PROMISE ITAH
Introduction

On June 26, 2025, the Federal Government of Nigeria signed into law a suite of tax reform legislation that consolidates and replaces over a dozen laws. The reforms are anchored on four principal Acts: Nigeria Tax Act (Tax Act); Nigeria Tax Administration Act (Tax Administration Act); Nigeria Revenue Service Act (NRSA); and Joint Revenue Board Act (JRBA). While the NRSA and JRBA are already operational, the Tax Act and the Tax Administration Act will take effect on January 1, 2026. For a detailed overview of these reforms, please see our newsletter here.

In the light of these reforms, businesses must take a new look at their current structures and, where necessary, strategically restructure to prevent inefficiencies, ensure compliance, and capture available opportunities.

In this newsletter, we highlight key reforms and strategies that businesses can adopt to operate more efficiently.

How Businesses Should Restructure in Response to Key Reforms

1. Business Classification and Tax Exposure

The Tax Act classifies businesses by turnover and asset size.

a.     Small business: This refers to businesses (excluding businesses providing professional services) with annual turnovers not exceeding ₦100 million and fixed assets below ₦250 million – a significant increase from the previous turnover threshold of ₦25 million. Some of the benefits applicable to small businesses include:

  • exemption from Corporate Income Tax (CIT), Capital Gains Tax (CGT), and the Development Levy;
  • access to a start-up tax credit and temporary tax holidays for businesses in priority sectors such as agriculture, manufacturing, and technology, provided they formalize their operations with the Corporate Affairs Commission (CAC).

b.     Larger business: This refers to businesses with annual turnover exceeding ₦100 million and fixed assets above ₦250 million. Some key points to note are that:

  • larger companies are subject to payment of Corporate Income Tax (CIT), Capital Gains Tax (CGT), and the Development Levy;
  • larger companies may benefit from reduced CIT rate from 30% to 25%, but this applies only to qualifying entities in approved sectors and remains subject to presidential discretion.

Key Business Consideration: In view of the foregoing, businesses may wish to assess whether restructuring into smaller entities or special purpose vehicles could unlock these benefits. The Tax Administration Act, however, introduces strict anti-avoidance rules, and as such any restructuring must be carefully designed to withstand regulatory scrutiny.

2. Capital Gains Tax and Holding Structures

The Tax Act increases the CGT rate from 10% to 30%. The scope of CGT has also been expanded to cover indirect offshore transfers of Nigerian assets, including shares in Nigerian companies.

Key Business Consideration: In view of the foregoing, multinational and investment holding groups should carefully review their offshore structures. In some cases, shifting asset ownership to Nigeria or restructuring holdings may be necessary to reduce exposure under the new tax rules.

3. Digital Tax Infrastructure

The NRSA introduces mandatory e-invoicing and real-time VAT reporting, marking a shift to a fully digital tax administration system. These measures, designed to improve transparency and curb tax evasion, will significantly alter how companies manage their reporting obligations.

Key Business Consideration: Businesses should:

  • invest in compliant accounting software;
  • train their finance teams;
  • update invoicing and contracting frameworks; and
  • engage legal and tax advisors to review operational processes and confirm that systems are fully aligned with the new digital requirements.

4. Incentives for Economic Development

The Tax Act introduces a 5% annual tax credit for qualifying expenditure on long-term assets in key sectors such as agriculture, renewable energy, and manufacturing. This replaces the former Pioneer Status regime.

Key Business Consideration: Businesses planning to invest in these sectors may consider channeling their funding through eligible entities or joint ventures to maximize access to tax credits. It is important to conduct prior due diligence on the entities and maintain proper supporting documentation. This is essential not only to claim the credits but also to safeguard them during regulatory reviews.

5. Compliance and Banking Integration

The Tax Administration Act makes a Tax Identification Number (TIN) mandatory for all taxable persons. Banks are now required to verify TINs before opening or maintaining accounts, and failure to comply could restrict access to banking services.

Key Business Consideration: Businesses must immediately verify that all group entities, directors, and beneficial owners are properly registered with the Nigeria Revenue Service. A compliance audit at this stage will prevent operational disruptions and reputational risks once enforcement begins.

Conclusion

The 2025 tax reforms represent a shift in Nigeria’s fiscal landscape, reshaping compliance requirements and creating new opportunities for growth. Businesses that take early steps to review their structures and align with the new framework will be better positioned to stay compliant, efficient, and competitive. The content of this newsletter is, however, not exhaustive and should not be taken as legal or financial advice. Businesses are encouraged to seek tailored professional guidance to understand the specific impact on their operations.

For further information on any of the issues covered in this newsletter, please contact us at info@pavestoneslegal.com. At Pavestones, we deliver quality and innovative legal support across diverse industries, helping businesses operate in compliance with applicable laws and regulations to drive sustainable business growth.

FUTURE OF FINTECH AND DIGITAL PAYMENTS IN NIGERIA: CBN MANADATES THE ADOPTION OF ISO 20022 MESSAGING STANDARDS AND GEO-TAGGING OF POINT-OF- SALE TERMINALS

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BY ADERONKE ALEX-ADEDIPE AND OMODELE FATODU

INTRODUCTION

In a circular dated August 25,2025, the Central Bank of Nigeria (CBN) issued a directive mandating the geo-tagging of all Point-of-Sale (PoS) Terminals in Nigeria and that electronic payment messaging adopt the ISO 20022 standard by October 31, 2025. This means that every PoS device in Nigeria must be fitted with GPS capability so its exact, physical location can be identified, and that all electronic payment messages must follow a globally recognized standard for financial messaging (ISO 20022) that uses a single, structured data language to enable richer, interoperable and more accurate payment information.

This directive by the CBN aims to enhance transaction security, reduce fraud, and improve traceability. By linking each PoS terminal to precise geographic coordinates, the CBN ensures that every electronic transaction can be tied to a verifiable physical location.

This directive applies to financial service providers including commercial and microfinance banks that deploy or manage PoS networks, mobile money operators, payment service providers, merchants, agents, and retailers who accept card payments through PoS terminals.

Key Requirements

  1. PoS Registration – all devices must be registered with a Payment Terminal Service Aggregator with accurate latitude and longitude coordinates indicating the Merchant’s place of business and service status.
  2. Operational Radius – each PoS Terminal may operate only within a 10-metre radius of its registered location. Any activity outside this range will be flagged.
  3. Adoption of the ISO 20022 Standard – all domestic and international payment messages must conform to the ISO 20022 standard, a global financial messaging standard which provides for faster processing of payments, enables robust fraud-detection, and improves the traceability of transactions by the October 31, 2025 deadline.
  4. Geo-Tagging of PoS Terminals – All existing and newly deployed PoS Terminals must have native geolocation services enabled.
  5. Certification with the National Central Switch (NCS) – The NCS is the switching infrastructure operated by the Nigerian Inter-Bank Settlement System (NIBSS). It enables electronic payment interoperability and connectivity between various financial institutions, payment service providers, and payment terminals. All operators are to ensure that every PoS Terminal and its software is tested and approved on the NIBSS Central Switch to ensure that they meet the technical, security, and interoperability standards before they can go live. PoS Terminals are now mandated to include the NCS Software Development Kit for Geolocation monitoring and Geofencing implemented within its application libraries.
  6. Implementation timeline – All existing PoS Terminals must be geo-tagged within 60 days of the circular, while new PoS Terminals must be geo-tagged before certification and activation. Operators much update each PoS Terminal’s software to enable the automatic capture and transmission of location data and replace any devices which are not compatible with geo-tagging software.
  7. Mandatory Geo-reporting – The PoS Terminal itself must automatically capture and transmit the GPS location at the point a transaction is initiated, embedding it in the message payload for compliance monitoring

As the CBN will begin compliance checks on October 20, 2025, banks, fintech operators, and merchants are required to immediately audit their PoS Terminals and networks, upgrade or replace non-compliant devices. Merchants and agents should ensure that PoS Terminals stay within the permitted range at their registered address to avoid potential disruption of PoS Terminal operation by the CBN.

MERGERS & ACQUISITIONS IN NIGERIA IN VIEW OF RECAPITALIZATION IN THE BANKING AND INSURANCE SECTORS- KEY CONSIDERATIONS

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BY SEUN TIMI-KOLEOLU AND MARK IMONITIE
Introduction

Mergers and Acquisitions (M&A) play a crucial and strategic role in enabling companies to drive growth, foster innovation, and sustain a competitive edge. In Nigeria, a growing number of businesses are restructuring and consolidating their assets and resources through mergers and acquisitions, with the aim of expanding their market share and complying with recapitalization requirements set by industry regulators.

In this newsletter, we highlight the potential for M&A in Nigeria necessitated by the ongoing recapitalization in the country’s banking, insurance and finance sectors while advocating for observance of data governance practices in M&A deals.

A.   REGULATORY REFORMS DRIVING M&A IN NIGERIA

Sector regulatory reforms often drive M&A as companies respond to changes in policies. Such reforms can create new compliance requirements and open opportunities that prompt businesses to merge for strategic alignment and regulatory compliance.

The CBN in its March 28, 2024 circular announced an upward review of the minimum capital requirements of banks in Nigeria, mandating banks to raise their minimum paid-up capital by March 2026 as follows: ₦500 billion for international banks; ₦200 billion for national banks; ₦50 billion for regional banks; ₦20 billion for national non-interest banks; and ₦10 billion for regional non-interest banks.

To meet these capital thresholds, banks are leveraging mergers and acquisitions. An example is the concluded merger between Union Bank of Nigeria and Titan Trust Bank. The ongoing merger between Providus Bank and Unity Bank which commenced in 2024 is a prospective M&A deal in response to the CBN recapitalization requirements.

With the deadline of March 31, 2026 fast approaching, banks have either met or seek to meet the new minimum capital requirements through M&A strategies and more deals are anticipated.

Similarly, the insurance industry is in a transition phase resulting from the Nigerian Insurance Industry Reform Act 2025 (NIIRA) which mandates recapitalization of insurance entities operating in Nigeria. Life insurance companies must have at least ₦10 billion; Non-life insurance companies at least ₦15 billion; and Reinsurance companies are mandated to have at least ₦35 billion.  In view of this, there is good possibility that a few mergers would occur in the insurance industry.

B.    PROCESS FOR M&A TRANSACTIONS

The key requirements for M&A in Nigeria are primarily regulated by the Federal Competition and Consumer Protection Act 2018 (FCCPA) with additional regulations by other relevant laws depending on the sector. The process includes:

1.     Preliminary Planning

Preliminary planning represents the crucial first phase in any successful merger process. The party seeking to merge must clearly define the primary objectives driving the merger and identify the ideal target company. The acquiring party may initiate the deal by sending a Letter of Intent (LoI) to the target company. The LoI generally outlines the main terms and provides an initial overview of the proposed merger.

2.     Due Diligence

Conducting due diligence is a vital requirement in the M&A process, involving a detailed evaluation of the target company. Key elements examined during due diligence include: the target’s corporate structure and governance; outstanding debts; information technology systems; intellectual property; real estate; ongoing or potential litigation; human resources; insurance coverage; and regulatory compliance.

3.     Negotiation

In undertaking an M&A transaction, parties are required to negotiate and agree on the key terms of the merger. This includes deciding purchase price, payment method, assets to be acquired, and how the company will be managed after the merger. Parties would use reports from due diligence and company valuations to help make informed decisions during this stage.

4.     Corporate Approvals

Securing the necessary corporate approvals is a crucial step in an M&A transaction. The rights of minority shareholders must be carefully considered in this process. Under the Companies and Allied Matters Act, there are specific provisions that govern the acquisition of shares from minority or dissenting shareholders, and meeting these requirements is often a prerequisite for completing the transaction.

Shareholders also hold certain protections, such as pre-emption rights, which gives existing shareholders the opportunity to purchase existing or newly issued shares. These rights are typically checked and addressed before closing the transaction.

In addition to shareholder approvals, board approvals may also be required. Both parties must obtain all necessary corporate consents, as failure to do so could grant either party the right to terminate the deal.

5.     Regulatory Approvals

Depending on the industry, sector-specific regulatory approvals are required for M&As in Nigeria. For example, mergers involving banks need approval from the Central Bank of Nigeria (CBN), while insurance company mergers require authorization from the National Insurance Commission. These regulators oversee compliance with relevant laws during the merger.

Mergers with a combined annual turnover of ₦1 billion, or where the target’s turnover exceeds ₦500 million, must be notified to and approved by the Federal Competition and Consumer Protection Commission (FCCPC). Notification includes submitting Notification Form (Form 1), audited accounts, details of the parties, and the merger’s impact on competition.

For small mergers below the set threshold with potential to reduce competition, notification to the FCCPC is still required, though formal approval may not be mandatory. Failure to notify or secure approval before completing a merger (“gun-jumping”) can result in fines of up to 10% of the company’s annual turnover.

The Securities and Exchange Commission (SEC) regulates mergers involving public companies in Nigeria. Therefore, public companies must also notify the SEC before undertaking a merger. The Corporate Affairs Commission (CAC) regulates schemes of arrangement used by companies to implement mergers and supervises all related filings and resolutions.

6.     Execution and Closing

Parties to a merger are required to finalize and agree on all terms, conditions, and responsibilities related to the merger by negotiating and signing a definitive agreement, setting out the terms of the merger. Once all necessary legal and regulatory conditions are satisfied, ownership and control of the company is officially transferred according to the final agreement.

7.     Post-Merger Integration

This requirement marks the concluding phase of the merger process. It involves the unification of the merging entities into a single entity. It also involves the consolidation of personnel, systems, and operations leading to the establishment of the new entity’s corporate culture, practice and processes.

C.   DATA GOVERNANCE CONSIDERATIONS IN M&A

With increased emphasis on data protection in Nigeria under the oversight of the National Data Protection Commission (NDPC), the role of Data Governance in M&A transactions has become even more vital.

Alongside the M&A process set out above, it is essential for each company to appoint skilled representatives and professionals to ensure proper data handling and to mitigate regulatory risks throughout the transaction.

Effective Data Governance prevents a range of common pitfalls that often arise during M&A transactions. These pitfalls include:

i. Due Diligence Failures

Failure to take into consideration the level of data compliance of the merging entities during the due diligence phase, can result in incorrect valuations or expose a company to hidden liabilities.

ii. Regulatory and Compliance Risks

Data privacy regulations are critical in M&A transactions, as violations can result in fines and legal consequences. During a merger, entities must ensure that data exchanges or transfer comply with the Nigeria Data Protection Act 2023 (NDPA) and the guidelines set out by the NDPC, so that the rights of data subjects are protected against risks such as breach of sensitive personal data, data inaccuracies, unauthorized access, improper data sharing, and lack of consent. Effective Data Governance ensures compliance with these requirements, thereby mitigating regulatory risks and safeguarding the integrity and confidentiality of all data.

iii.  Data Integration Issues

During the integration phase, merging data from entities with differing structures can lead to data inaccuracies, potentially violating the rights of data subjects. Robust Data Governance ensures that data is clearly mapped and harmonized. Thereby sustaining data integrity and compliance throughout the post-merger process.

Conclusion

In view of the ongoing recapitalization in the banking and insurance sector, it is expected that there would be more mergers and acquisitions. Companies seeking to embark on M&As to achieve recapitalization must pay close attention to the processes and recommendations set out in this newsletter.

 

About us:

Pavestones is a full-service legal practice, registered with the Securities and Exchange Commission as a Capital Market Solicitor and is licensed by the Nigeria Data Protection Commission as a Data Protection Compliance Organization. Pavestones deliver quality and innovative legal support across diverse industries, helping clients operate in compliance with applicable laws and regulations to drive sustainable business growth.

 

DIGITAL LENDING REGULATIONS 2025: FCCPC OVERSIGHT

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BY ADERONKE ALEX-ADEDIPE AND HILLARY OKOROTIE
Introduction

The Federal Competition and Consumer Protection Commission (the “Commission”) on July 24, 2025 introduced the Digital, Electronic, Online, or Non-Traditional Consumer Lending Regulation 2025 (the “Regulation”).

In 2022, the Commission had issued the Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending which sought to regulate the affairs of all digital lenders via registration with the Commission. Subsequently, the Commission issued the Regulation, which applies to consumer lending transactions involving cash, airtime, data, and other forms of barter in exchange for specific or verifiable monetary value. The Regulation provides comprehensive guidance on the requirement for registration of lending service providers, consumer protection measures and penalties for default or unethical practices.

In this newsletter, we highlight some of the key provisions of the new Regulation and their impact on consumer lending.

What is the Scope of the Regulation?

This Regulation applies to all transactions involving the provision of unsecured loans whether in the form of airtime or data advances, cash, cashback, or other services exchanged for specific or verifiable monetary value through any digital, electronic, online, or other non-traditional channels. It further extends to entities or individuals who derive, or undertake to derive, a share of the revenue generated from such consumer lending services, whether as primary or secondary lenders, partners, service providers, collaborators, or vendors.

More specifically, the Regulation requires that the following persons intending to provide or participate in a lending transaction, as described below, shall obtain the approval of the Commission:

  • Any entity providing consumer lending services directly to consumers, or offering ancillary services in support of such transactions, must register with the Commission.
  • Entities intending to partner for the purpose of offering consumer lending services, the proposed partnership agreement must be submitted to the Commission for prior review and approval.
  • Entities providing or intending to provide consumer lending services are prohibited from entering into any agreement, joint venture, or similar arrangement with an entity regulated by another regulator, except where such entity holds a valid license or approval authorizing it to carry out such activities.
  • Where collaboration involves fee-sharing, joint operations, strategic alliances, or similar arrangements with an entity licensed by another regulator for the purpose of consumer lending, the parties must execute a Consumer Lending Service Agreement and obtain the Commission’s approval before commencing operations.

In addition, the Regulation exempts Banks and other financial institutions licensed under the Banks and Other Financial Institutions Act from its scope.

Registration by Providers of Consumer Lending Services

Under the Regulation, entities to which the Regulation applies are required to register with the FCCPC within 90 days from its commencement date.

To register with the Commission, an entity is required to submit the following documents:

  1. consumer lending service agreement or other ancillary agreements;
  2. completed application forms as prescribed by the Commission;
  3. incorporation documents;
  4. details of directors and key management personnel;
  5. list of shareholders, including beneficial owners;
  6. financial statements for at least the three (3) years preceding the application;
  7. standard terms for the provision of lending services to borrowers;
  8. proof of payment of the applicable fees, including a non-refundable application fee of ₦100,000 and an approval fee of ₦1,000,000 payable upon the Commission’s approval, or such other amounts as the Commission may prescribe from time to time; and
  9. any other documents as may be requested by the Commission.

An approval issued by the Commission shall expire on December 31 of the third year from the date of issuance and must be renewed no later than March 31 of the following year. Subsequent renewals shall be carried out 36 months from the date of the first renewal.

Consumer Protection

The Regulation contains some salient provisions which seek to protect consumers of lending services. Some of the key provisions are highlighted below;

  • Lending service providers are required to clearly display the terms of their services on their apps, websites, or other digital platforms. These terms must expressly disclose to borrowers the applicable interest rates, repayment conditions, and any other applicable fees.
  • With respect to advertising, the Regulation mandates that all promotional content must be factual and free from misleading claims or exaggerated representations of the benefits of the lending service.
  • In delivering their services, providers must adhere strictly to the terms offered and may not vary these terms from one borrower to another, except where such variations are expressly provided for. The Regulation further prohibits unfair contract terms particularly those that create a significant imbalance between the rights of the provider and the borrower.
  • As is now standard practice, lending service providers must ensure full compliance with the Nigeria Data Protection Act when processing customer data.

Reporting Requirement by Lending Service Providers.

Once registered and approved by the Commission, lending service providers are required to comply with the following reporting requirements:

  • Maintaining comprehensive records of all consumer lending transactions, including complaints of consumers received and their resolution.
  • Submitting biannual reports to the Commission detailing consumer transactions, transaction values, interest rates charged, and records of complaints and their resolution.
  • Filing annual returns with the Commission no later than March 31 of each year, covering the provider’s lending activities, consumer complaints, and audited financial statements.

Penalties for infringement of the Provision of the Regulation.

The Regulation has also introduced clear and standardized sanctions for unethical practices and non-compliance with the provisions of the Regulation.

For instance, any entity found in breach of the Regulation shall be subject to penalties, which may include monetary fines, revocation of approval, or suspension of operations. Where a fine is imposed, the defaulting entity shall be liable to pay ₦100,000,000 or 1% of its annual turnover, whichever is greater. In addition, each director of a defaulting lending service provider shall be liable to pay a fine of ₦50,000,000 and/or disqualification from serving as a director for a period of five (5) years.

Conclusion

The introduction of the Digital, Electronic, Online, or Non-Traditional Consumer Lending Regulation 2025 marks a significant step in strengthening oversight of Nigeria’s fast-growing digital lending sector. However, the Regulation is notably silent on the status of approvals previously granted under the 2022 Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending. It is unclear whether such approvals will automatically transition into the new regime or if affected entities will be required to undergo a fresh application process.

At its core, the Regulation seeks to promote transparency, curb unethical practices, safeguard consumers and provides clarity for service providers by setting standardized compliance obligations.

REGULATORY UPDATE: THE NIGERIAN INSURANCE INDUSTRY REFORM ACT 2025 – NAVIGATING COMPLIANCE

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BY SEUN TIMI-KOLEOLU AND ENIOLA SOGBESAN

Introduction.

On Tuesday, August 5, 2025, the Nigerian President, Bola Ahmed Tinubu signed into law the Nigerian Insurance Industry Reform Act (NIIRA or the “Act”) 2025. The Act represents a significant milestone in the development of a robust regulatory framework designed to support the goal of growing the Nigerian economy to the tune of one trillion US dollars by 2030. The Nigerian Insurance sector faces a historic transition as the Act replaces old regulations and unifies disparate insurance laws into a single, contemporary framework.

This newsletter highlights key provisions of the Act such as scope and license categorization, capital requirements, consumer protection and regional policy integration through the introduction of the ECOWAS Brown Card Scheme.

A. Scope & License Categorization

The Act is applicable to all insurance businesses and insurers in Nigeria except:

  1. an association of persons with no share formed for the purpose of aiding its members or their dependents;
  2. a corporate or unincorporated body whose business is established outside Nigeria and engaged solely in re-insurance transactions with insurers licensed under the Act;
  3. deposit insurance carried out by the Nigerian Deposit Insurance Corporation under the Nigerian Deposit Insurance Corporation Act.

Furthermore, the Act broadly provides for two (2) license categories – life insurance and non-life insurance. While the life insurance license category is divided into four (4) classes which are: individual life assurance, group life assurance, annuity and health insurance businesses’, the non-life insurance license include: fire insurance, general accident insurance, motor vehicle insurance, marine and aviation insurance, energy (oil, gas and power) insurance, engineering insurance, bonds credit guarantee and suretyship insurance and agricultural insurance other than those covered by the Nigerian Agricultural Insurance Corporation Act.

Notwithstanding the above, the Act authorizes the National Insurance Commission (the “Commission”) to publish additional insurance classes in the Federal Government Gazette.

B. Capital Requirements

To improve operators’ financial stability, the Act stipulates the minimum share capital requirement for insurers licensed under the Act. This new share capital requirement is the first recapitalization in over two decades in the insurance industry.

The minimum capital requirements are listed below:

  1. Non-Life Insurance Business: The higher of fifteen billion naira (N15,000,000,000) or the risk-based capital determined by the Commission.
  2. Life Insurance Business: The higher of ten billion naira (N10,000,000,000) or the risk-based capital determined by the Commission.
  3. Reinsurance Business: The higher of thirty-five billion naira (N35,000,000,000) or the risk-based capital determined by the Commission.

Also, the Act requires all insurers registered before the commencement of the Act to comply with the minimum share capital requirements within 12 months of the commencement of the Act. Furthermore, the Act empowers the Commission to require an insurer to increase its capital beyond the minimum capital requirement where the Commission considers appropriate having regard to the nature, size and complexity of the insurance business of the insurer.

C. Regulatory Filings

The Act requires every insurer not later than June 30 of each year, to submit in writing to the Commission its duly audited financial statements, revenue account and statement of investments before presentation at its annual general meeting. Following the approval of the Commission; the insurer must publish its general annual statement of financial position, statement of profit or loss and other comprehensive income in at least two widely circulated newspapers in Nigeria. The Act also requires all insurers to submit quarterly returns in the form prescribed to the Commission not later than 10 days after the last day of each quarter or such other interval as the Commission may specify.

D. Consumer Protection Mechanisms

Section 212 of the Act introduces the Insurance Policyholders’ Protection Fund (the “Fund”) to give policyholders financial security in the event that an insurer goes bankrupt or is unable to fulfill its responsibilities.

The Fund shall comprise of:

  1. 0.25% of the gross premium of income of every insurer and reinsurer; and
  2. 0.25% of the balance standing in the Security and Insurance Development Fund as of December 31 of the preceding year.

The goal of the Fund is to safeguard consumers, preserve stability in the insurance sector, and boost public trust by ensuring that legitimate claims are paid in the event of an insurer’s default. Other funds in the Act include Fire Services Maintenance Fund and Road Accidents Victims Compensation Fund.

E. ECOWAS Brown Card Scheme

To ensure Nigeria’s seamless integration into the Economic Community of West African States Brown Card Scheme (the “Scheme”), the Act creates the National Bureau on the ECOWAS Brown Card Scheme (the “Bureau”). The Scheme is a motor insurance scheme that provides prompt and fair compensation to victims of motor accidents caused by visiting motorists. In line with objectives of the Scheme, the Bureau is responsible for maintaining claims for cross-border auto accidents in West Africa, ensuring adherence to ECOWAS procedures and implementing the Scheme.

F. Quicker Claim Assessment and Disbursement

The Act aims to improve the responsiveness of insurers in claims disbursement by setting out strict deadlines to ensure that policy holders promptly receive financial relief, which is often critical in emergencies such as accidents or property losses. In more specific terms, Section 210 of the Act requires all insurers to settle all claims in writing by the insured or entitled parties within the timelines specified in the Commission’s Service Charter, not later than 60 days of notification. The failure by any insurer to comply with these requirements will attract a penalty in addition to compound interest on the claim amount.

G. The Insurtech Guidelines and the Act.

In our newsletter on the Guidelines for Insurtech Operations in Nigeria, we highlighted the regulatory framework governing insurtech operations in Nigeria. While the Guidelines set out the minimum requirements for insurtechs’, the Act expands their regulatory compliance obligations. Therefore, both regulations serve as the regulatory framework for Insurtech’s in Nigeria.

H. Sanctions

Where a person transacts insurance business without holding a valid license, the Act prescribes a penalty of twenty-five million Naira (N25,000,000), two years imprisonment or both for individuals.  While in the case of companies, firms or such other combination of persons, each principal officer of the company, firm or such other combination of persons responsible shall be sanctioned to pay a fine of fifty million Naira (N50,000,000), two years imprisonment or both.

Conclusion

With the enactment of the Nigerian Insurance Industry Reform Act 2025, the Nigerian insurance industry is about to experience a massive transformation. The Act provides the much-needed regulatory clarity by establishing comprehensive consumer protection procedures, precise claim processing timelines, and stricter regulatory standards. However, the onus of compliance and enforcement of the Act rests with insurers and the Commission

Their ability to enforce compliance, embrace innovation, and deliver on the overarching objectives of the Act will ultimately determine whether the Act achieves its goal of building a stronger, more inclusive, and trustworthy insurance sector in Nigeria.