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HIGHER CAPITAL THRESHOLDS AND NEW VASP LICENCES: KEY TAKEAWAYS FROM THE NIGERIAN SECURITIES AND EXCHANGE COMMISSION’S JANUARY 2026 CIRCULAR

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BY ADERONKE ALEX-ADEDIPE AND OMODELE FATODU

Introduction

In January 2026, the Nigerian Securities and Exchange Commission (the “Commission”)  issued a circular that significantly increased the minimum capital requirements for Capital Market Operators (CMOs). The Commission has highlighted that these changes are intended to strengthen market resilience, protect investors, ensure capital adequacy reflects the risks of market activities, and confirm that regulated entities have sufficient financial capacity to meet their obligations sustainably.

Key Changes to Capital Requirements

The revised capital requirements introduce substantial increases across most operator categories. The circular further states that the Commission will issue further detailed guidance to capital market operators on compliance and capital verification processes.  In addition, the Commission has also introduced several new Virtual Asset Service Provider (VASP) license categories, reflecting the growing prominence of digital finance and fintech activities in Nigeria’s capital markets. The newly introduced categories are:

  1. Ancillary Virtual Asset Service Providers (AVASPs)
  2. Digital Assets Intermediaries (DAIs)
  3. Digital Assets Platform Operators (DAPOs); and
  4. Real‑World Assets Tokenization and Offering Platforms (RATOPs).

The formal inclusion of these new VASP license categories classes highlights an area where further regulatory clarity will be required. The circular does not expressly identify the types of activities that fall within each of the newly introduced VASP categories. In practice, this indicates that the Commission is likely to issue further directives, guidelines, and compliance requirements to clarify the scope, licensing thresholds, and compliance obligations applicable to operators who fall within these new categories. To provide a clear view of the changes, we have summarised some capital market operator license categories alongside the newly introduced VASP license categories in the table below:

OPERATOR CATEGORY PREVIOUS MINIMUM CAPITAL  NEW MINIMUM CAPITAL % INCREASE
Brokers (client execution) N200m N600m 200%
Dealers (proprietary trading) N100m N1bn 900%
Broker-Dealers N300m N2bn 567%
Full-Scope Portfolio Mangers N150m N5bn 3,233%
Limited-Scope Portfolio Managers N150m N2bn 1,233%
Robo-Advisers N10m N100m 900%
Ancillary Virtual Asset Providers New N300m New
Digital Assets Intermediaries New N500m New
Digital Asset Platform Operators New N500m New
Real-World Assets Tokenisation Platforms New N1bn New

Implications for Market Operators

The substantial increases in minimum capital requirements carry significant implications for market operators. Operators will need to review and potentially adjust their capital structures, raise additional funds where necessary, and explore partnerships or restructuring strategies to meet the new thresholds. Non-compliance could result in suspension or withdrawal of registration, making proactive planning essential. The Commission has provided an 17-month transitional period, giving operators until June 30, 2027, to comply with the new thresholds.

Conclusion

The Commission’s 2026 capital requirement revision is a significant development for Nigeria’s capital markets. Operators must assess their capital adequacy and compliance strategies, not only to meet higher capital thresholds, but also to prepare for potential upcoming directives relating to the newly introduced VASP categories.

 

 

Compliance in Nigeria: Data Protection Directives for Businesses

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BY SEUN TIMI-KOLEOLU AND EBIKENIYE BEST

Introduction

As businesses in Nigeria increasingly leverage technology including social media platforms such as LinkedIn, Instagram, and Medium; and Emerging Technologies including Artificial Intelligence to expand their customer reach both locally and internationally, such businesses must adhere to Data Protection provisions in Nigeria.

In view of the foregoing, it is important to note recent updates to the protection of Personal Data in Nigeria. The most recent update is the Nigeria Data Protection Act – General Application and Implementation Directive (the “GAID”) issued on March 20, 2025, by the Nigeria Data Protection Commission (the “Commission”).

In this newsletter, we have set out useful information on the GAID to guide businesses.

1.     What is the effect of the GAID on the Nigeria Data Protection Regulation (NDPR), 2019?

With the adoption of the GAID, the NDPR shall no longer regulate data in Nigeria. Data Protection in Nigeria is now regulated by the existing Nigeria Data Protection Act and the GAID.

Please note, however, n that any act done under the NDPR prior to the issuance of the GAID remains valid.

2.    What are the obligations under the GAID for data controllers and processors?

Under the GAID, data controllers and processors of major importance are required to adhere to certain obligations including:

a.    engaging a licensed Data Protection Compliance Organisation (DPCO) to carry out an audit of their business within 15 (fifteen) months of commencing business and subsequently annually before March 31 of each year;

b.    filing a compliance audit report not later than March 31 of each year through a DPCO;

c.     appointing associate/assistant Data Protection Officers (DPOs) and privacy champions to support the DPO where the data controller or processor interfaces with data subjects on multiple platforms;

d.    storing personal data for not more than 6 (six) months after the purpose of processing the data has been achieved. Please note that this would only apply where no existing law has specified a retention period.

3.   In what circumstances is explicit consent required under the GAID?

The GAID acknowledges that consent as a lawful basis for processing personal data could be constructive or implied. It, however, states that explicit consent is required for certain activities like – direct marketing, processing children’s data and sensitive personal data, automated decision making and cross-border data transfer.

4.    Are there provisions for Emerging Technologies?

Yes, the GAID now provides explicit provisions on Emerging Technologies such as Artificial Intelligence, Blockchain, and the Internet of Things. It requires that any data controller or processor deploying or planning to deploy Emerging Technologies for personal data processing must adhere to the provisions of the NDPA, public policies, the GAID, and any other regulations issued by the Commission.

In addition, a data controller or processor must do the following:

a.    develop and implement technical and organizational frameworks for the design of Emerging Technologies tools, ensuring that these frameworks are properly documented and submitted to the Commission; and

b.    conduct a Data Privacy Impact Assessment, considering factors such as how data processing might unfairly affect different groups and the level of risk faced by vulnerable individuals, to access and reduce privacy risks effectively.

5.    Are there provisions on Data Ethics under the GAID?

Yes. In auditing data controllers and processors, DPCOs are required to confirm if data controllers and processors apply global best practices on Data Ethics when handling personal data. The DPCO must ensure that data controllers and processors possess: (i) organizational policy on ownership of data; (ii) demonstrable transparency and accountability; (iii) fairness of intention; and (iv) respect for data subjects’ rights to control the use of their personal data.

6.    What are the requirements for Cross-Border Data Transfer?

Under the GAID, a data controller or processor must obtain approval from the Commission before transferring personal data outside Nigeria. The Commission will grant approval based on an adequacy decision, which considers whether the receiving country has enforceable data subject rights; a robust data protection law; and a competent supervisory authority with sufficient enforcement powers.

In the absence of an adequacy decision, the data controller or processor will be required to prepare and submit a Cross-Border Data Transfer Instrument (the “Instrument”) for approval by the Commission. This Instrument may be in the form of (i) code of conduct; (ii) certification, (iii) binding corporate rules; or (iv) standard contractual clauses.

7.    Are data subject’s rights provided for under the GAID?

The GAID reinforces data subjects’ rights, including the right to access, right to rectification, right to data portability, right to be forgotten, right to lodge a complaint, and right to objection. Businesses are required to create transparent and easy to use processes to respond to these rights promptly.

8.    What is the procedure for lodging complaints under the GAID?

The GAID now allows data subjects who believe that their right to privacy has been violated to seek redress directly from data controllers by sending a document titled “Standard Notice to Address Grievance” to the relevant data controller or processor. A format of this document has been provided in the GAID. This action is to be taken without prior notification to the Commission.

9.    When will the GAID come into effect?

The Commission noted that for ease of doing business, the GAID shall take effect 6 (six) months from the date of publication, that is, September 2025.

Conclusion

To ensure compliance with Nigeria’s evolving data protection landscape, organizations should carefully review the key updates introduced by the GAID. To align with applicable data protection laws, organisations should engage the services of licensed DPCOs.

 

For more information on data protection compliance, please see our previous newsletter.

DATA PROTECTION IN NIGERIA – DRAFT GENERAL APPLICATION AND IMPLEMENTATION DIRECTIVE

Compliance with Nigerian Data Protection Laws – The Role of Data Protection Compliance Organizations

GUIDANCE ON FILING OF DATA PROTECTION COMPLIANCE AUDIT RETURNS IN NIGERIA

Renewable Energy: Requirements to Operate a Solar Business in Nigeria

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BY SEUN TIMI-KOLEOLU AND PROMISE ITAH

Introduction

Renewable energy is rapidly transforming the global power landscape, with solar energy emerging as a key solution to electricity challenges. In Nigeria, where millions of homes and businesses face unreliable power supply, the demand for alternative energy sources has surged. Among other renewable energy sources — such as hydropower, wind energy, and geothermal energy—there is a rapid and growing reliance on solar energy, which presents immense opportunities for businesses looking to provide sustainable power solutions. It is therefore essential, in order to navigate this expanding market in Nigeria, for businesses to understand the legal and regulatory framework governing operations in the solar energy sector.

In this newsletter, we highlight key regulatory considerations to operate a solar energy business in Nigerian.

Key Regulatory Considerations

For businesses looking to set up operations in Nigeria, the following key requirements must be met:

1. Business Registration

All businesses must first register with the Corporate Affairs Commission (CAC) to legally operate in Nigeria. This process includes choosing a name, submitting necessary documentation, and paying registration fees. The CAC issues a certificate evidencing registration, which is required to open a business bank account and for various other regulatory processes. For other considerations on business registration and available business structures, please see our newsletter on Frequently Asked Questions (FAQ) here. For foreigners intending to set up business in Nigeria, please see our newsletter providing guidance here.

2. Importer/Exporter Number from Nigerian Customs Service

To import or export solar products, businesses must register with the Nigerian Customs Service (NCS) and obtain an Importer/Exporter Number (IEN). This number is essential for proper documentation and clearance of goods through Nigerian ports.

Required documents to accompany application for registration with the NCS include: Certificate of Incorporation, Tax Identification Number (TIN) from the Federal Inland Revenue Service (FIRS), Bank Reference Letter, Identification of business owners or directors, and Company contact information.

The process typically takes 1-2 weeks, and the applicable fees may vary.

3. Standards Organisation of Nigeria Certification for Solar Products

Solar products must undergo certification by the Standards Organisation of Nigeria (SON) through the SON Conformity Assessment Programmes. This ensures the products meet local quality and safety standards.

Certifications:

· Mandatory Conformity Assessment Programme (MANCAP): This is a quality assurance initiative established by SON to ensure that locally manufactured products meet the required quality and safety standards before introducing the product to the market. A MANCAP certificate and MANCAP logo is issued to a manufacturer by SON upon application, after formal inspection and product testing have been conducted by SON. A MANCAP certificate is valid for three years, after which the product will have to undergo recertification.

Required Documents for SON Registration include CAC certificate, picture of the product, power of attorney (if you are an importer), manufacturer’s agreement (if you are an importer), trademark certificate (if you have a brand name).

Fees and timelines vary based on product type and completeness of documentation.

· Product Certificate: For products to be imported into Nigeria, the first step to certification with SON in Nigeria is obtaining the product certificate from the manufacturing country. The product certificate confirms that the product meets the required quality standards. It contains information relating to the product, the testing and details of the product manufacturer.

· SON Conformity Assessment Programme (SONCAP): Upon arrival in Nigeria, imported products must be registered with SON. When the registration of the product is completed and successful, a SONCAP Certificate will be issued to confirm compliance with the required quality and safety standards.

Required Documents for SON Registration include: duly completed application form, valid product certificate, company certificate of incorporation, photographs of the product, manufacturer’s agreement, trademark certificate (if applicable), list of items to be imported and sample proforma invoice.

The SONCAP certificate is issued after product inspection and payment of fees. Fees and timelines vary based on product type and completeness of documentation.

4. Generating Set Import Clearance from the Nigerian Electricity Regulatory Commission

To be able to import solar-powered generators, clearance certificate must be obtained from Nigerian Electricity Regulatory Commission (NERC). The clearance certificate is valid for six months and can be renewed upon payment of renewal fees.

Required information and documents for obtaining the clearance certificate include: name of applicant and quantity of generators to be imported; noise level (not more than 35Db) and pollution control; make of generators as well as the technical and environmental rating, purpose of importation; country of origin and capacity of the generator; copy of the Certificate of Incorporation; three years Tax Clearance Certificate; Value Added Tax registration certificate, commercial invoice/proforma invoice; SONCAP Certificate; and proof of conformity with extant environmental regulations (emissions, noise etc).

The associated fees are dependent on the size (kVA) of the generating set. The timeline for the issuance of the clearance certificate is dependent on the availability of the required documents and NERC’s satisfaction with the application.

Other Regulatory Considerations

In addition to the key regulatory considerations outlined above, other regulatory factors to be considered include:

· Import Duty and Tariffs: While solar panels are exempt from import duties, other solar energy products may be subject to duties unless exempted.

· Customs Clearance: Imported solar products must undergo clearance at Nigerian ports. Documents required for customs clearance include Bill of Lading, Commercial Invoice, Certificate of Origin, and Packing List.

· Environmental Impact Assessment (EIA): For large-scale solar projects, an EIA must be obtained from the National Environmental Standards and Regulations Enforcement Agency (NESREA).

· Electrical Safety and Installation Standards: Businesses engaging in the installation and maintenance of solar energy products must have a qualified engineer who will oversee solar installations to ensure compliance with safety regulations.

· Electricity Licensing: NERC license must be obtained before businesses can generate solar power exceeding 1 MW.

Conclusion

As solar energy becomes a key solution to Nigeria’s power challenges, businesses in the sector must navigate essential regulatory requirements. By understanding and adhering to these legal frameworks, businesses can effectively tap into the potential of the solar energy sector and contribute to a sustainable energy future. The foregoing is, however, not exhaustive, and it is advised that businesses stay up to date on regulatory and compliance requirements for their operations.

REGULATION OF LENDING IN NIGERIA

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By Aderonke Alex-Adedipe and Eustace Aroh

 

Introduction

The business of lending in Nigeria has evolved from the traditional system to a more flexible and digitally enabled system for a faster and more convenient process. This evolution has attracted extensive participation in the lending sector spurring the growth of the Nigeria Domestic Credit by 16.2% YoY as at December 2021.[1]

In this article, we highlight the various regulations and licenses applicable to lending in Nigeria.

Money Lenders (ML) License

The Money Lenders (ML) license is issued and regulated by the money lenders laws of the various states in Nigeria. Given that Lagos is the commercial hub of Nigeria, majority of the money lenders license holders in Nigeria are registered within Lagos State.  The Lagos State Moneylenders Law[2] is the principal law which regulates money lending in the state and the office responsible for issuing licenses is the Lagos State Ministry of Home Affairs and Tourism. The ML license grants any individual or company the ability to carry on business of money lending in the state within which it is established.

Under the Law, entities such as cooperative societies, banks, insurance companies, pawnbrokers are exempted from obtaining the ML in Lagos State.

Licenses expire on the 31st of December of every year and are subject to renewal provided that the requirements for renewal are met.[3]

Microfinance Banks

Microfinance Banks (MFBs) are financial institutions licensed by the Central Bank of Nigeria (CBN) to provide financial services to microfinance clients (i.e. low-income earners, the un-banked and persons operating in the informal sector). MFBs are regulated by several laws including the Banks and Other Financial Institutions Act 2021 and the Guidelines for the Regulation and Supervision of MFBs 2020.

In addition to providing credit, MFBs are permitted to accept deposits from customers and provide other ancillary financial services.

The geographical operation of an MFB is dependent on the nature of the license obtained from the CBN. There are 3 major categories of MFB licenses to wit: (i) Unit MFBs, which are permitted to operate within certain local government areas; (ii) State MFBs which are licensed to operate within the state they are located; and (iii) National MFBs which are permitted to operate across all states within Nigeria.[4]

Finance Company (FinCo)

Finance companies (FinCos) are financial institutions also licensed by the CBN to provide financing services to micro, small and medium enterprises. They provide customer loans, fund management and credit facilities, asset finance, project finance, debt factoring, debt securitization and other forms of credit facilities, to individuals and companies. They were created to bridge the financing gaps and complement the roles of banks.

The table below highlights several major differences between the 3 major lending licenses in Nigeria.

  MFB FINCO MLs (LAGOS STATE)
Timeline for Registration Usually 10 – 15 months Usually 10 – 15 months Usually 8 – 12 weeks
Lending Limits 80% of the total loan portfolio must be Micro loans (not exceeding N1 million) Limited to 20% of the FinCo’s shareholders’ funds unimpaired by losses There is currently no lending limit.
Official Fees ·         N350,000 + 200 Million Naira (Escrow deposit) for Unit MFBs.

·         N700,000 + 1 Billion Naira (Escrow deposit) for State MFBs

·         N1,300,000 + 5 Billion Naira (Escrow deposits) for National MFBs

 N350,000 + 100 Million Naira (Escrow deposit) N400,000 to N500,000
Interest Rate Limits Nil (Key lending rate at 11.5%) Nil (Key lending rate at 11.5%) 5% monthly [5]
Operational Limitations Unit (Tier 1) -can operate 5 branches within  urban areas of a state.

 

Unit (Tier 2) – can operate 2 branches  in rural/underbanked areas within a state.

 

State MFB – can operate within an entire state.

 

National MFB –can  operate in all the states in Nigeria

 

 FinCos can operate across all states in Nigeria Operations are limited to Lagos State[6].

Conclusion

It is pertinent to note that no particular license is preferred over the other. The suitability of each license depends on the operations and the structure of the applicant and the requirement of the regulator. Applicants are advised to consult with professionals before commencing the application for any license.

 

 

[1] https://www.ceicdata.com/en/indicator/nigeria/domestic-credit-growth

[2] Cap M7 2009

[3] For more information on this, please read our article here.

[4] For more information on this, please read our article here.

[5] Under the Lagos State Ministry of Home Affairs regulations

[6] In practice, moneylenders are able to provide credit beyond Lagos state through the use of technology

NON-FUNGIBLE TOKENS (NFTs): REGULATORY CONSIDERATIONS IN NIGERIA

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By Seun Timi-Koleolu and Karo Isiorho

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A survey conducted by Finder.com in 2021 revealed that Nigeria ranked 6th amongst 20 countries in the world that have adopted Non-Fungible Tokens (“NFTs”). The reason for this is not far-fetched. As a result of the continued devaluation of Naira, Nigerians are constantly on the lookout for new ways to stay above inflation. One of such ways appears to be delving into the acquisition and sale of digital assets – NFTs.

Given the rapid growth of the NFT ecosystem in Nigeria, we have provided useful information to guide NFT transactions in Nigeria.

  1. What is a Non-Fungible Token?

An NFT, also known as a Non-Fungible Token is a digital asset that represents real-world objects like art, music, in-game items and videos which are typically logged and authenticated on cryptocurrency blockchains, primarily Ethereum.

  1. What is the difference between a Fungible Token and a Non-Fungible Token.

Fungible tokens or assets are divisible and non-unique assets that store value such as a $1 note or 1 Bitcoin whilst Non-Fungible Tokens are unique and non-divisible assets that store data like digital artworks, tweets, music composition, digital shots, etc. They are similar to a deed of title for assets. In 2021, Twitter CEO, Jack Dorsey, sold his first-ever tweet for $2.9 million dollars as an NFT.

  1. Who are those that can benefit from NFTs?

Artists, buyers, collectors and marketing platforms can benefit from NFTs.

NFTs create a medium for artists to showcase and monetize their work on a broader spectrum. Artists get to retain their intellectual property rights in the works after it is sold and receive royalties on subsequent sales of the digital works. For buyers/collectors, acquiring an NFT gives a right of ownership to a unique asset that cannot be easily replicated and holds the potential for good future profit where the NFT increases in value. NFT marketing platforms, where artists can offer their NFTs for sale, also provide good business opportunities.

 

  1. What are the Regulations affecting NFTs in Nigeria?

Since NFTs are quite new in Nigeria, there has been no law or regulation specifically enacted in respect of it. There are, however, certain laws that might affect its operations in  Nigeria which are worthy of note as highlighted below:

  1. Copyright Act: Under the Copyright Act, literary works, musical works, artistic works amongst others are eligible for copyright. Accordingly, authors of digital works – NFTs will be deemed to have copyright in such works (unless as otherwise agreed in writing) and will therefore have the right to seek relief in connection with violation of their intellectual property rights in the NFT.
  2. Cybercrime (Prohibition, Prevention, etc) Act: Creators of NFTs can seek relief or claims over infringement of their NFTs under the Cybercrime Act where they are able to prove unauthorized use of their unique words or phrases that form the basis of their NFT. There are several penalties the law prescribes for those found guilty of these offenses.
  • The Securities and Exchange Commission: The Securities and Exchange Commission ( “SEC”) is the body empowered to regulate securities and investments in Nigeria. SEC through its statement on digital currencies suggests that virtual assets including blockchain based offers of digital assets- within Nigeria; or by Nigerian issuers; or sponsors; or foreign issuers targeting Nigerian investors- shall be subject to the regulation of  SEC. In view of this, it is likely that NFTs will be subject to the regulation of SEC unless issuers can prove otherwise.
  1. Central Bank of Nigeria (the “CBN”):The CBN is yet to release any circulars particularly on the use of NFTs. It has, however, repeatedly prohibited the use of virtual currencies as a legal tender by banks and other financial institutions in Nigeria. The fact that NFTs are traded using blockchain technology such as Ethereum, creates uncertainty as to whether the CBN will fully welcome its operations in Nigeria.  There is, however, no indication that Peer to Peer sale of NFTs will be affected by CBN regulations.

Other legal considerations also exist in areas such as taxation and data protection.

Conclusion

Despite the growth of the NFT amongst Nigerians, it remains a novel concept. A large number of the population are still unaware of its operations. Also, the government is yet to provide an elaborate and uniform regulation to guide its usage in Nigeria. It is important for current investors to stay vigilant in their dealings in NFTs in order to protect their assets.

A FOREIGNER’S GUIDE TO ESTABLISHING A BUSINESS IN NIGERIA

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Aderonke Alex-Adedipe and Oghenekaro Faith Isiorho

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INTRODUCTION

As the most populous African nation, Nigeria continues to attract an increasing number of foreign investments annually. In 2020, the United Nations reported that Nigeria’s inflow of Foreign Direct investments (FDI) increased by 4.3% despite the outbreak of COVID-19. As the market expands, the government continually issues policies aimed at creating a conducive business environment. As a result of the existence of multiple regulations, however, a potential foreign investor may require some guidance in relation to establishing a business and navigating the Nigerian business environment.

 

In this article, we highlight some crucial considerations for foreigners seeking to do business in Nigeria.

 

  1. Company Registration

Generally, any individual or company registered outside Nigeria and having the intention of carrying on business in Nigeria must be registered at the Corporate Affairs Commission(“CAC”), except such company is exempt by law.[1]  The company is permitted to have 100% foreign shareholders except it operates in specific sectors such as oil and gas, aviation, domestic coastal carriage, etc, which require local ownership and control. A foreign entity must also have a minimum of two shareholders and two directors. Other requirements for registration may vary from one sector to another.

  1. Nigerian Investment Promotion Commission (NIPC) Registration:

The NIPC is empowered by the Federal Government to promote foreign investments in Nigeria. Every business with foreign participation is mandated to register with the commission and obtain a certificate of registration. To obtain a NIPC certificate the evidence of registration at the CAC is required.

  1. Business Permit

A business permit is issued by the Ministry of Interior in Nigeria. Every company with foreign participation in Nigeria is required to apply and secure the permit before commencing business activities. The process for the application has now been fully automated, thus registration can be made online.

  1. Tax Registration

It is important that after incorporation a registered company registers with the Federal Inland Revenue Service (FIRS) and obtains a Tax Identification Number (TIN). The TIN is often required to secure other licenses and operate a bank account. It is also necessary to register with the State Inland Revenue Service located in the state in Nigeria where it wishes to carry on business.

  1. Trademark Protection/Registration

 Companies that already have an existing trademark in their home countries are encouraged to register such trademarks in Nigeria to secure their usage by the company. A search must be conducted at the trademark registry to determine if the trademark is already in existence before registration will be approved or rejected.

Note that approval for trademark registration will not be granted where the trademark is already registered by another company unless permission or assignment of that trademark has been granted by that company.

  1. Operating a Bank Account

 A company will generally require capital to set up its business in Nigeria. Commercial banks in Nigeria are appointed by the Central Bank of Nigeria as authorized dealers for the purpose of importing foreign exchange and guaranteeing repatriation of foreign capital which may have been imported through a Commercial Bank. Commercial banks also play a crucial role in facilitating the importation of goods into the country.

Generally, the requirements for operating a bank account vary from one bank to another. Evidence of company registration, identities of a company’s directors, TIN of the company, proof of registered address, are however standard requirements.

  1. Sector-Specific Licensing

 A foreign company must enquire about the licenses required to do business in its proposed sector of operation.  Some sectors may have special licensing requirements which must be fulfilled by operators. For instance, a foreign company interested in the sale of cosmetics in Nigeria must first obtain a permit from the National Agency for Food and Drug Administration and Control; a company seeking to import and distribute electronics must obtain a certificate from the Standard Organisation of Nigeria (SON); also, a company that wishes to provide logistics services must be licensed by the Nigerian Postal Service (NIPOST).

  1. Advertising

 It is worthy of note that a license to operate may not always confer permission to advertise. A foreign company must ensure it obtains the requisite advertising permit before advertising to its consumers.[2]

CONCLUSION

It is advisable that a foreigner interested in doing business in Nigeria engages the services of a business lawyer who will offer transactional guidance specifically tailored to the sector which it seeks to operate.

 

 

[1] S. 80 of the Companies and Allied Matters Act 2020, exempts foreign companies engaged in specific individual loan projects on behalf of the donor country or international organization, export promotion activities or engineering consultants or technical experts engaged in individual-specific projects with the government or any of its agencies, from registration at the CAC.

[2] In Lagos state, the agency empowered to issue advertising licenses is the Lagos State Signage and Advertisement Agency (LASAA).

 

REGULATORY REQUIREMENTS FOR FINTECH IN NIGERIA; CBN LICENCES

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Seun Timi-Koleolu and Eustace Aroh

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Introduction

On December 9, 2020, the Central Bank of Nigeria (CBN) issued a circular, recategorizing Payments System licensing in Nigeria into four major categories: Switching and Processing; Mobile Money Operations; Payment Solution Services; and Regulatory Sandbox. There was, however, no unified document containing the requirements for each of these licensing categories. This made gathering information on the licenses cumbersome for potential license applicants. To resolve this issue, the CBN recently released a compendium containing all the requirements for Payment System licenses.

We have provided in this article, a snapshot of the CBN requirements and gone a step further by setting out the activities permissible under each licensing category.

  NAME OF LICENSE ACTIVITIES THE LICENSE PERMIT LICENSING REQUIREMENT FEE AND CAPITAL REQUIREMENT
 
1 Switching and Processing Licence

 

 Switching; card processing; transaction clearing; settlement agents; and all activities permitted for Payment Solution Services (in 3 below). ·Corporate documents;

·Tax Clearance Certificate (TCC) for 3 years (if applicable) and Taxpayers Identification Number (TIN) of the company;

·Details of ownership and holding company structure (if applicable);

·Company details and profile;

·Bank Verification Number (BVN), Curriculum Vitae (CV) and means of identification (ID) for the directors and top management (including one independent non-executive director, chairman and managing director);

·Business plan and product deployment methodology;

·Requisite policies and framework;

·Signed agreements with sub-agents, financial institutions and business parties; and

·Evidence of payment card security certification and other relevant payment terminal certification.

 ·Application fee of N100,000;

·Payment of the refundable sum of N2 billion in escrow to CBN; and

·Licensing fee of N1 million to be paid before the issuance of the final licence.
2 Mobile Money Operator Licence

 

 E-money issuing; mobile wallet creation and management; pool account management; and all activities permitted for Super-Agent (in 6 below). ·Corporate documents;

·TCC for three years (if applicable) and TIN of the company;

·Details of ownership and holding company structure (if applicable);

·Company details and profile;

·BVN, CV and means of ID of the directors and top management (including one independent non-executive director, chairman and managing director);

·Business plan;

·Requisite policies and framework;

·Project deployment time; and

·Signed agreements with its partners.

 ·Application fee of N100,000;

·Payment of the refundable sum of N2 billion in escrow to CBN; and

·Licensing fee of N1,000,000 to be paid before the issuance of the final licence.
3 Payment Solution Services (PSS)

 

 It includes all the activities permitted for Payment Solution Service Providers (PSSP) (in 5 below); Payment Terminal Service Providers (PTSP) (in 4 below); and Super Agents (in 6 below).

 

Companies seeking to obtain the PSS license will have to select any one or combination of the following licenses: PSSP; PTSP; and Super-Agent.

 ·Corporate documents;

·TCC for three years (if applicable) and TIN of the company;

·Details of ownership and holding company structure (if applicable);

·Company details and profile;

·BVN, CV and means of ID of the directors and top management (including one independent non-executive director, chairman and managing director);

·Requisite policies and framework;

·Signed agreements with its sub-agents, financial institutions, and partners;

·Minimum of 50 agents;

·Evidence of payment card security certification and other relevant payment terminal certification; and

·Project deployment methodology.

 ·Application fee of N100,000;

·Payment of the refundable sum of up to 250 million (depending on which of the licenses the company wishes to obtain) in escrow to the CBN; and

·Licensing fee of N1,000,000 to be paid before the issuance of the final licence.
4 Payment Terminal Service Provider (PTSP) Licence

 

 POS Terminal deployment and services and POS terminal ownership. ·Corporate documents;

·Tax Clearance Certificate (TCC) of three years (if applicable) and TIN of the company;

·Details of ownership and holding company structure (if applicable);

·Company details, profile and business plan;

·BVN, CV and means of ID of the directors and top management (including one independent non-executive director, chairman and managing director);

·Requisite policies and framework; and

·Project deployment methodology.

 ·Application fee of N100,000;

·Payment of the refundable sum of N100 million in escrow to the CBN; and

·Licensing fee of N1,000,000 to be paid before the issuance of the final licence.
5 Payment Solution Service Provider (PSSP) Licence

 

 Payment processing gateway; payment solution development; and merchant service aggregation and collection. ·Corporate documents;

·Tax Clearance Certificate (TCC) of three years (if applicable) and TIN of the company;

·Details of ownership and holding company structure (if applicable);

·Company details, profile and business plan;

·BVN, CV and means of ID of directors and top management (including one non-executive director, chairman, managing director);

·Signed agreements with its partners;

·Requisite policies and framework; and

·Evidence of payment card security certification and other relevant payment terminal certification.

 ·Non-refundable application fee of N100,000;

·Payment of the refundable sum of N100 million in escrow to the CBN; and

·Licensing fee of N1 million to be paid before the issuance of the final licence.
6 Super-Agent Licence Conducting certain banking activities such as cash deposit and withdrawal; bill payments; local fund transfer; balance enquiry etc. ·Corporate documents;

·TCC for three years (if applicable) and TIN of the company;

·Details of ownership and holding company structure (if applicable);

·Company details, profile and business plan;

·BVN, CV and means of ID of the directors and top management (including one independent non-executive director, chairman and managing director);

·Minimum of 50 agents;

·Reference letter from a financial institution and signed agreement with the sub-agents, financial institution, and business partners;

·Must have existed for over 12 months;

·Requisite policies and framework; and

·Payment Terminal Service Aggregator of Payment Terminal Application Certification.

 ·Non-refundable application fee of N100,000;

·Payment of the refundable sum of N50 million in escrow to the CBN; and

·Licensing fee of N1 million to be paid before the issuance of the final licence.
7 Regulatory Sand Box As may be determined in the Sandbox.

 

The regulatory Sandbox is aimed at stimulating innovation and deepening financial inclusion. To this end, the CBN will review the products during the implementation.1

 ·Corporate documents including shareholding structure;

·Company details and profile;

·Project plan, business proposal and outline of the strategy of the sandbox trial;

·Evidence of patent rights (if applicable);

·CV of directors and top management; and

·Requisite policies and framework.

 Not applicable.

 

HOW TO SET UP A TECH ORGANISATION FOR SOCIAL IMPACT IN NIGERIA

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By Seun Timi Koleolu and Praise Adetunmibi

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INTRODUCTION

In Nigeria, technology plays a prominent role in driving the growth and development of the society. In recent times, several tech startups/tech hubs have been established to solve social, cultural, environmental, and even religious matters (“Social Impact Startups”). It is, however, important for these Social Impact Startups to understand what legal structures are most suitable for their operations under Nigerian law.

In this article, we have highlighted the legal structures provided under the Companies and Allied Matters Act 2020 (“CAMA”) and other legal issues to be considered by a Social Impact Startup.

LEGAL STRUCTURES UNDER CAMA

A Social Impact Startup can acquire legal status in Nigeria by registering either as a company limited by guarantee or an incorporated trustee. In determining the most suitable structure, it is important to consider the differences between both structures, as set out below.

 

S/N CRITERIA COMPANY LIMITED BY GUARANTEE INCORPORATED TRUSTEE
1. Profit-making A company limited by guarantee is permitted to make profit. Such profit must however be applied solely towards the objects of the company. An organisation registered as an incorporated trustee is not permitted to make profit in any way. It is to depend on grants and donations.
2. Tax Liability A company limited by guarantee would be required to pay tax on its profits. As organisation is not expected to make profit, it is exempted from paying tax.
3. Registration process The registration process takes at least 3 (three) months as a result of the requirement to obtain the consent of the Attorney General of the Federation (“AG”). CAMA has now provided an alternative which involves the publication of the application for registration in 3 (three) daily newspaper by the Corporate Affairs Commission (“CAC”), where the AG’s consent is not obtained after 30 days. This typically takes a shorter period as only the consent of the Registrar General of the CAC is required.
4. Liability of members in the event of winding up/dissolution In the event of winding up of a company limited by guarantee, the members are required to contribute to the outstanding liabilities of the company. The members of the organisation are not required to make any contributions in the event of its dissolution.

 

In addition, the type of structure to be adopted by the Social Impact Startup is largely dependent on its goals or objects. For instance, where the Social Impact Startup would be making profit through the sale of its products or offering services for a fee, a company limited by guarantee is the most suitable structure.

OTHER LEGAL CONSIDERATIONS

Upon incorporation, there are certain issues to be considered by the Social Impact Startup. Below are some of the issues.

1.Protection of Intellectual Property Rights

In Nigeria, where a software is developed, the copyright in a software automatically vests in the developer. If a Social Impact Startup would prefer that the copyright be vested in them, an agreement that assigns the copyright to the Social Impact Startup would have to be entered into with the developer. This assignment can be done through an employment agreement or a separate copyright assignment agreement. Additionally, it is important that the name and logo of a Social Impact Startup be registered at the trademarks registry.

2. Agreements with Employees, Software Developers etc.

A Social Impact Startup may choose to have both paid and voluntary staff. It is therefore advisable for them to enter into suitable agreements with each staff, such as employment agreements, software development/license agreements, independent contractor agreements etc. As earlier stated, where the Social Impact Startup requires ownership of intellectual property rights, the agreements must expressly provide for the assignment of these rights to the Social Impact Startup.

3. Data Protection Audit

Where the operations of the Social Impact Startup would involve the collection of personal information of members of the public either for training purposes or for grant of access to their technological products, an annual audit must be conducted on their data processing activities by a licensed Data Protection Compliance Organisation (DPCO). Such an organisation is also required to employ a Data Protection Officer (DPO) to ensure compliance with Nigerian data protection laws.

For more information on setting up businesses in Nigeria, please visit https://pavestoneslegal.com/news-publications/

NIGERIAN COMPANIES AND ALLIED MATTERS ACT 2020 -DOES THE REMOVAL OF A DIRECTOR RESULT IN HIS OR HER DISQUALIFICATION AS A DIRECTOR OF OTHER COMPANIES?

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By Seun Timi-Koleolu and Eustace Aroh

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The Nigerian Companies and Allied Matters Act, 2020 (“CAMA 2020”), introduced various changes to the law governing companies in Nigeria, most of which are positive changes.[i]

There is, however, a revision in CAMA 2020 to the grounds for the disqualification of directors (section 283), that has resulted in ambiguity with respect to the implication of the removal of a company director prior to the end of his or her term. In this article, we highlight this ambiguity.

What are the grounds for the disqualification of directors under CAMA 2020 vis-a-vis CAMA 1990?

Below we have compared the grounds for the disqualification of a person from being a director in the Companies and Allied Matters Act 1990 (“CAMA 1990”) vis-a-vis the grounds set out in CAMA 2020.

   

Grounds for disqualification

 Contained in
Section 257 CAMA 1990 Section 283 CAMA 2020
The following persons shall be disqualified from being a director    
(a) an infant, that is, a person under the age of 18 years Yes Yes
(b) a lunatic or person of unsound mind; Yes Yes
(c) a person suspended or removed under section 288 of the Act No Yes
(d) a person disqualified under sections 279, 280, 284 of the Act (sections 253, 254 and 258 of CAMA 1990) Yes Yes
(e) A corporation other than its representative appointed to the board for a given term. Yes Yes

 

How does this affect the provisions on the removal of a director?

Under Section 262 of CAMA 1990, a company could by ordinary resolution remove a director prior to the expiration of his or her term as a director, provided a special notice is issued and the director is given the opportunity to make representations to the shareholders on the removal.

Although CAMA 2020 has a similar provision for removal in section 288, by the inclusion of section 283(c) detailed in the table above, there is now an impression that where a director has been removed under section 288 (i.e. prior to the end of his term or prior to a rotation), regardless of the reason for the removal, he will be disqualified from being a director in any other company.

This is because the prevalent view is that, a director who fits within any of the grounds in CAMA for disqualification is not permitted to be a director in other companies.

 

Analysis

In our view, the interpretation of section 283(c) to mean that a director removed before his term would be disqualified from being a director anywhere else is illogical, particularly as a director may be removed by the company for any reason and such reason might not be as a result of a fault or misdeed by that director.

It is likely that the intention of the lawmakers by introducing 283(c) was to limit the disqualification of the director to the particular company removing the director and not all companies. Consequently, if Mr. A is removed by the shareholders from being a director in company X, Mr. A is only disqualified from holding the position of a director in company X.

Conclusion

The foregoing ambiguity would need to be clarified to avoid differing interpretations of section 283(c). In the meantime, directors may wish to consider resigning instead of being removed under section 288 to avoid being deemed as a disqualified director under CAMA.

 

[i] See our article on The Nigerian Companies and Allied Matters Act https://pavestoneslegal.com/the-nigerian-companies-and-allied-matters-act-2020/

 

Regulation of Collective Investment Schemes (CIS) in Nigeria

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By Aderonke Alex-Adedipe and Omotola Abudu

  1. Introduction

Recent reports by the Securities and Exchange Commission (SEC) show that there has been an increase in the total net asset value of CIS in Nigeria, from N782.64 billion in May 2019, to N1.322 trillion in May 2020. This is a clear indication that despite the coronavirus pandemic, investments made via CIS have maintained their profit yield. In today’s newsletter, we provide a cursory overview of CIS in Nigeria.

  1. What is a CIS?

According to the Investment and Securities Act, a CIS is a scheme or a company which invites members of the public to invest money or other assets in a portfolio and share the risk and benefit of investment in proportion to their participatory interest in the portfolio of the scheme.  It is essentially a joint investment vehicle which allows investors to pool funds to invest in select securities, boost returns and minimize risk.

  1. What types of CIS are available in Nigeria?

Under Nigerian law, there are five recognised types of CIS. They are Unit Trust Scheme, Venture Capital Funds, Open-ended Investment Companies, Real Estate Investment Schemes and Specialized Funds, with the most common type being Unit Trust Scheme. A Unit Trust Scheme is a fund into which individual investors or subscribers contribute small sums of monies to form a pool and enable professional fund managers invest in money market instruments, shares and stocks on their behalf.

  1. How are Investors protected?

The provisions of the Securities and Exchange Commission 2013 Rules (“the Rules”) along with the recently released Amendment to Rules on Collective Investment Schemes 2019 (“the Amendment”) jointly ensure the protection of investors who wish to pool their funds into CIS and the accountability of fund managers. The Rules and the Amendment contain provisions which prevent self-dealing and ensure that interests of the investors are placed above those of the fund managers.

  1. Who are the relevant parties to a CIS?

For every CIS, there is a relationship between key parties, which promotes a strong level of accountability and clarity.

  1. The Unit Holder/Subscriber
  2. The Fund Manager
  3. The Trustee
  4. The Custodian
  5. The Registrar

6. Conclusion

While the SEC has gone through commendable lengths to ensure proper accountability and transparency of the parties involved in CIS, attention should also be placed on the actions of digital players who operate CIS related platforms, in order to regulate them and ensure due process is followed in the handling of customers funds .