FinTech companies in Nigeria continue to grow in numbers providing efficient solutions to the problems faced while conducting financial transactions.
To ensure that Nigerians are protected by these financial service providers, it is relevant that their operations are regulated.
Since they may serve as unsuspecting leverage for money laundry and similar activities. The regulatory environment acts in a crucial capacity that ensures FinTech solutions are safe, secure, and compliant with the law.
This article explores the different FinTech regulators in Nigeria and the important role played in keeping the industry protected.
Central Bank of Nigeria (CBN)
The Central Bank of Nigeria (CBN) is the primary regulator for all banking and financial services in Nigeria. Its responsibility is to implement monetary policies, ensure the stability and safety of the financial system, and supervise all financial institutions.
In 2018, CBN established a regulatory sandbox allowing FinTech companies to test their innovations in a controlled atmosphere that ensures stability. This sandbox provides the framework required to ensure they align with specific guidelines and regulations by the Bank.
Some of the regulatory guidelines include licensing requirements, capital adequacy, risk management, and consumer protection. CBN also has a FinTech and Innovation Office tasked with monitoring all FinTech activities and supporting the growth of the industry.
This Office works alongside other fintech regulators to ensure compliance with the law and safety for consumers.
Securities and Exchange Commission (SEC)
The commission was established in 1979 and is governed by the Investments and Securities Act (ISA) 2007. The Securities and Exchange Commission (SEC) plays a primary role in regulating the capital market in Nigeria. It is responsible for the issuance, trading, and registration of securities.
In September 2020, A statement was released stating that digital assets are securities and are, therefore, subject to regulation. Despite reactions from stakeholders, the agency has been active in regulating the FinTech industry, particularly the use of blockchain and cryptocurrencies.
Crowdfunding, online investment platforms, and robo-advisory services are also regulated by the agency. The regulatory framework outlines the requirements to operate a crowdfunding platform in the country.
SEC’s duty is to protect investors, promote transparency and accountability, and ensure the stability of the financial system. The SEC also has a sandbox for FinTech companies to test their products before launching to the market.
Nigeria Deposit Insurance Corporation (NDIC)
Established in 1988, to protect depositors’ interests and maintain confidence in the banking system.
As an independent financial institution under the Federal Government of Nigeria, It provides deposit insurance ensuring that depositors’ funds are protected. Depositors are reimbursed up to a specified amount in case of a bank failure
In addition, the NDIC regulates and supervises the activities of financial institutions, banks, micro-finance banks, and non-bank financial institutions. They have a FinTech and Innovation Office and partnered with the International Association of Deposit Insurers (IADI) to promote best practices.
The NDIC is also involved in capacity building and public education programs, increasing financial literacy and responsible financial behavior among Nigerians.
National Insurance Commission (NAICOM)
Established by the National Insurance Commission Act 1997.
The National Insurance Commission (NAICOM) is responsible for regulating the activities of insurance companies, particularly in the use of mobile technology and artificial intelligence.
NAICOM ensures that insurance companies in Nigeria are financially stable and able to meet their obligations to policyholders. Their guidelines for the operation of insurance companies include requirements for capital adequacy, solvency margins, and investments.
They are involved in the development of microinsurance products ensuring that they are accessible, affordable, and meet the needs of low-income households.
NAICOM is designed to promote transparency, fairness, and honesty in the insurance industry and ensure that insurance products and services offered in Nigeria meet the needs of consumers.
Nigerian Communications Commission (NCC)
Established in 1992, its mandate is to promote the development and use of telecommunications services
The Commission is responsible for regulating the telecommunications industry in Nigeria. Its activities impact the FinTech industry as mobile banking and other digital financial services rely on telecommunications infrastructure.
In 2018, the commission released guidelines for the regulation of mobile money services. The guidelines were aimed at ensuring that mobile money services are safe, secure, and comply with the law.
These digital financial services require reliable telecommunications infrastructure for the success of FinTech companies in Nigeria.
National Information Technology Development Agency (NITDA)
Established in 2001 as a regulatory body for the development and regulation of Information Technology (IT) in Nigeria.
NITDA is responsible for regulating the use of technology in Nigeria. The agency plays a role in promoting the growth of the FinTech industry and working with other regulators to ensure that the industry operates in compliance with the law.
The agency formulates and implements policies that drive the development as well as regulate the use of IT to ensure that it is aligned with national development objectives.
The agency takes several steps to support the development of the FinTech industry in Nigeria, including:
Funding and support for FinTech startups:
The NITDA Technology Innovation Support Scheme (TIS), provides funding for innovative IT projects, and the NITDA Technology Entrepreneurship Scheme (TES), provides funding and support for technology startups.
Conducive regulatory environment:
The agency collaborates with the Central Bank of Nigeria (CBN) to develop guidelines for the regulation of the FinTech industry, and with the Securities and Exchange Commission (SEC) to regulate the use of blockchain and cryptocurrencies in the country.
Promoting digital literacy:
The agency has the NITDA Academy, which provides training and capacity building for IT professionals in Nigeria.
Innovation and research:
NITDA established the National Innovation Summit, which brings together innovators, investors, and policymakers to promote innovation in Nigeria.
Federal Inland Revenue Service (FIRS)
The Federal Inland Revenue Service’s primary responsibility is the collection of taxes from individuals and companies in Nigeria.
The taxation of FinTech companies is different from other companies as they operate across borders and in multiple jurisdictions and
Certain guidelines include provisions for the taxation of digital services, such as mobile banking and e-commerce are in place.
They also have a dedicated tax office and their partnership with the CBN and NCC enables the agency to monitor the activities of FinTech companies more closely.
The various fintech regulators are essential to ensuring that the industry is safe, secure, and compliant with the law.
As the industry evolves, the regulars continue to remain vigilant, improving their code of conduct as well as guidelines in ways that help both the industry and protect consumers.
They also largely contribute to ensuring Nigeria remains at the forefront of FinTech innovation in Africa.