The digital economy in Nigeria, although still emerging is fast becoming a sector with immense possibilities for the future of Nigerian economy as ICT now represents 13% of Nigerian GDP. The three prong road leading to this destination is Law, Finance and Technology. These three are independent concepts in different sectors that have come together to form what we today know as digital economy. Digital economy is a broad and rapidly growing global industry serving both consumers and businesses. To define these three concepts briefly; Laws are the system of rules which a particular country or community recognizes as regulating the actions of its members and which it may enforce by the imposition of penalties as defined in Oxford dictionary. Investopedia defines Finance as a term for matters regarding the management, creation, and study of money and investments. Lastly, technology is defined by Wikipedia as the sum of techniques, skills, methods, and processes used in the production of goods or services or in the accomplishment of objectives, such as scientific investigation.
CONCEPT OF FINTECH
Having taken a sneak peak at the independent definitions of Law, Finance and Technology let’s bring them together, shall we? Fintech is a portmanteau of the terms “finance” and “technology” and refers to any business that uses technology to enhance or automate financial services and processes. While “Law” is the oil for which Fintech businesses operate. The term Fintech stems from mobile banking and insurance to cryptocurrency and investment apps, it has broad applications.
In January 2012, the CBN, in a bid to promote financial inclusion, introduced the cashless policy, which has led to a surge of FINTECH startups offering solutions to make banking accessible to remote areas of Nigeria. Every financial service in Nigeria has incorporated and integrated the use of Fintech in their services to improve customer experience and to remain competitive in the financial services ecosystem. This includes the traditional financial service providers such as banks.
FINTECH has very rapidly changed the way and manner banks provide their services to customers, especially banking services. This can be seen in the way most banks in Nigeria now operate and strongly encourage the use of mobile and online banking platforms and applications that enable their customers to access banking services virtually.
Alternative lending and digital credits are not left out of the evolution. A lot of these Alternative lending services also known as Moneylenders have been springing up in recent years in different parts of Nigeria. These platforms enable customers to quickly access unsecured credit facilities at attractive rates and repayment periods online and are more convenient for borrowers when compared to borrowing from the traditional commercial banks due to the reduced documentation requirements.
Succinctly pinpointing the regulatory regime applicable to Fintech companies in Nigeria has proven to be a herculean task over the years due to the proliferation of regulators. The main regulatory bodies in relation to the Fintech sector are the CBN, the Nigerian Deposit Insurance Corporation, the Security and Exchange Commission, National Insurance Commission Act, 1997 (NAICOM), the Corporate Affairs Commission (CAC), the Nigerian Communications Commission (NCC), National Information Technology Development Agency NITDA, the Federal Competition and Consumer Protection Commission (FCCPC) and the Magistrate Courts of various states.
LAWS THAT REGULATE FINTECH IN NIGERIA
Laws are important in the survival of anything; Fintech in Nigeria is no exception. There are several existing laws (including circulars and guidelines issued by the regulators) which apply to Fintech players as set out below:
1. CBN Guidelines on Mobile Money Services in Nigeria, 2018;
2. CBN Guidelines for Licensing and Regulation of Payment Service Banks in Nigeria, 2018;
3. CBN Regulatory Framework for the Use of Unstructured Supplementary Service Data (USSD) Financial Services in Nigeria 2018;
4. CBN Regulation for Bill Payments in Nigeria, 2018;
5. CBN Risk-Based Cyber-Security Framework and Guidelines for Deposit Money Banks and Payment Service Providers 2018;
6. CBN Microfinance Policy, Regulatory and Supervisory Framework, 2011;
7. CBN Revised Guidelines for Finance Companies in Nigeria, 2014;
8. CBN Guidelines on Operations of Electronic Payment Channels in Nigeria, 2016;
9. NCC Value Added Services and Aggregator Framework, 2018;
10. CBN Guidelines on International Mobile Money Remittance Service in Nigeria, 2015;
11. CBN Guidelines on International Money Transfer Services in Nigeria, 2014;
12. CBN Regulation on Electronic Payments and Collections for Public and Private Sectors in Nigeria, 2019;
13. CBN Regulation for Direct Debit Scheme in Nigeria, 2018, and
14. Moneylenders Laws of the respective states in Nigeria.
From the above laws it’s clear that CBN regulates the majority of the finance community. The finance community regulated by the CBN includes the traditional banks, Finance institution, Micro-finance Banks, Bureau-de-Change, Development Finance institutions, Discount houses, Finance Companies, Holding Company, Merchant Banks, Non-interest Banks, Primary Mortgage Banks, Payment Service Banks. The Moneylenders on the other hand are the sole finance community regulated by the Magistrate Court of different states under the Moneylender Act and Laws of the respective states in Nigeria.
Other generally applicable laws and regulations include the:
a. Companies and Allied Matters Act, 1990;
b. Investment and Securities Act, 2007,
c. Federal Competition and Consumer Protection Act, 2018;
d. National Insurance Commission Act;
e. Money Laundering (Prohibition) Act, 2011 (as Amended);
f. Corrupt Practices and other Related Offences Act, 2000;
g. Economic and Financial Crimes Commission (Establishment, Etc) Act, 2004;
h.Terrorism (Prevention) Act, 2011 (as Amended);
i. Advance Fee Fraud and other Fraud Related Offences Act, 2006;
j. Cybercrimes (Prohibition, Prevention, Etc) Act, 2015, and
k. Nigeria Data Protection Regulations, 2019.
In the three-way traffic that makes up digital economy, Law as pointed out earlier is the oil that guides and ensures the smooth operation of Finance and Technology (Fintech). The world is becoming more and more digitalized by the day and Nigeria is not allergic to this change. The industry is huge. According to CB Insights, there are “41 VC-backed fintech unicorns worth a combined $154.1B.” One driving factor is that many traditional banks are supporters and adopters of the technology, actively investing in, acquiring or partnering with fintech startups because it is easier to give digitally-minded customers what they want, while also moving the industry forward and staying relevant. The Money lending licence on the other hand regulated by the Magistrate courts of various states ensures that SMES constrain from obtaining lending licence from CBN due to financial constraint can still operate Fintech services and run money lending businesses in Nigeria. Furthermore, due to the economic downturn in Nigeria, money has become critical requirement to survival. This is reason why digital economy has become pivotal to our very existence.
ABOUT THE WRITER
IFEANYI CLEMENT NWEKE is a Lawyer, Writer, Finance and Media Consultant. He holds a Bachelor in law ( LLB) from Nnamdi Azikiwe University, a Law School Qualification Certificate from Nigerian Law School, Lagos Campus, a Post Graduate Diploma (PGD) in Journalism from International Institute of Journalism and Associate of the institute of Chartered Secretary, Nigeria (ACIS) (in view).