Fintech Half-Year Review 2021 – Recent Regulatory And Legal Developments In Nigeria –



Since the beginning of 2021, there has been significant
regulatory and legal developments in the framework for financial
technology (“FinTech”) in Nigeria. Regulators have been
keen on engaging with the FinTech ecosystem and have released
several circulars, guidelines, regulations, etc. regulating FinTech
entities and setting licensing determinations. These include the
Regulatory Framework for Open Banking in Nigeria, the new licensing
requirements for payments service providers, the framework for the
regulatory sandbox for payment systems and other significant

In this report, we examine the developments in the first half of
2021 and consider the impact these regulations have had on the
FinTech Ecosystem.


Further to its mandate to regulate the financial system in
Nigeria, the Central Bank of Nigeria (“CBN”) has issued a
number of guidelines implementing its policies for the regulation
of FinTech related services in the Nigerian financial sector.

The CBN’s aim remains to facilitate an enabling environment
for the delivery of financial services in an effective, efficient
and sustainable manner while ensuring financial stability in


Regulatory Guidance: The Regulatory Framework for Open Banking
in Nigeria

In February 2021, the CBN released its Regulatory Framework for
Open Banking in Nigeria (the “Open Banking Framework”),
establishing Nigeria as Africa’s Open Banking pioneer -being
the first country on the continent to address Open Banking in its
Regulatory Framework.

The Open Banking Framework adopts a supportive approach to open
banking and establishes principles for data sharing across the
banking and financial services ecosystem. It envisages the
development of a common Banking Industry Application Programme
Interface (“API”) standard within 12 months of the
Framework’s release and centres the security and protection of
customers’ data.

The Framework aims to promote innovation, improve competition,
broaden the range of financial services/products, and deepen
financial inclusion in Nigeria. It is understandable that the CBN
is taking steps to regulate Open Banking in Nigeria considering
developments in the area.

Our Davidson Oturu, Head of our FinTech Practice Group, had
previously examined the provisions of the Open Banking Framework
and the opportunities for the Financial Technology (FinTech)
industry and Financial Institutions in his article earlier this
year. Please read here.

Deals: Okra and Mono fundraises

The core idea around Open Banking is that the entire banking
industry should become integrated, and APIs are key to achieving
this. Accordingly, in the first half of the year, some start-ups
building the infrastructure to power this idea recorded the
following developments:

  1. Okra – A FinTech start-up providing full API access to
    bank accounts across Africa raised $3.5 million in a seed round in
    April 2021 to help expand its data infrastructure across Nigeria
    and further execute its expansion to Kenya and South-Africa.
    Notably, Okra is connected to every bank in Nigeria and its
    customers include Interswitch, Renmoney and Carbon

  1. Mono – A Nigerian FinTech API start-up launched in
    2020 providing businesses and individuals access to financial
    information such as account statements, identity data and balances,
    closed a $2 million in seed investment in May 2021. Earlier in the
    year, the company also received $125,000 from American seed money
    start-up Ycombinator. Mono has also announced plans to expand to
    Kenya and Ghana by Q2 2021.2


1.2.1 Regulatory guidance – New Licensing Requirements for
Payment Service Providers

On 24 May 2021, the CBN released new licensing requirements for
payment systems, consolidating its earlier release in December
2020. Notably, the release brought changes to the capital
requirement of Payment Solutions Service Providers (PSSPs) and
Payment Solutions Services (PSSs) while the capital requirement for
Switching and Processing, Mobile Money Operator and Super Agent
licences remain unchanged. Payments service providers have been
ground-breakers in the FinTech ecosystem in Nigeria.

Our FinTech Team had examined the different licences introduced
by the CBN, their requirements and changes introduced to the
existing licensing regime in an article published on 26th May 2021,
accessible here.

Deal – Flutterwave raises $170 million and achieves Unicorn
status with over $1 billion valuation

In March 2021, Flutterwave, the Nigerian payment solutions
start-up raised $170 million in a Series C fundraise that valued
the start-up at over $1 billion.3 This came only five
months after its fellow Nigerian payment solutions start-up,
Paystack got acquired by Stripe for over $200 million.4
Furthermore, Flutterwave’s CEO, Olugbenga Agboola has indicated
that a public listing in the US is being explored.5

1.2.2. Regulatory Sandbox for Payments System

The CBN had earlier released a draft framework for the
regulatory sandbox in July 2020. On 13 January 2021, the final
version of the framework was released and the regulatory sandbox
was created.

Through this regulatory sandbox, the CBN aims to control
innovation in the FinTech sector as it presents a formal process
for firms and start-ups to conduct live tests of all-new,
innovative products, services, delivery channels or business

Importantly, the regulatory sandbox is open to both CBN
licensees (financial institutions regulated by the CBN) and other
Nigerian companies or enterprises not regulated by the CBN but who
wish to test their innovative products.

1.2.3. The Framework for QR Code Payments in Nigeria

The CBN released the Framework for QR Code Payments in Nigeria
(the QR Framework) in January 2021 to regulate the use of QR codes
as a payment means in Nigeria. The QR Framework sets out the
obligations of the categories of persons identified as
participants, acceptable QR code standards for implementing QR
payments in Nigeria, interoperability of QR payments in Nigeria,
risk management principles for QR code payments in Nigeria etc.

Our Senior Associate, Frances Obiago, wrote an article examining
the Regulatory Sandbox Framework and QR Frameworks, and their
potential impact for the FinTech industry in Nigeria which can be
read here.

NIBBS launches the NQR Code

The Nigeria Inter-Bank Settlement System Plc (“NIBSS”)
announced the launch of the New Quick Response (“NQR”)
payment solution; an innovative payment platform implemented on
behalf of all financial service providers and aimed at unifying the
QR code experience for financial services users in Nigeria.

The NQR is in line with the CBN’s QR Framework and will be a
consolidation of the fragmented ‘Pay by QR’ method each
service provider offered its merchant while retaining the
swiftness, seamlessness and contactless ability of QR codes.

1.2.4. CBN and NCC Intervenes – Dispute Between Financial
institutions and Telecommunication Companies.

Unstructured Supplementary Service Data (“USSD”)
services by financial transactions are majorly regulated by the
CBN’s Regulatory Framework for the Use of Unstructured
Supplementary Service Data for Financial Services in Nigeria, 2018
and the Nigerian Communications Commission (“NCC”)
Guidelines on Short Code Operation in Nigeria, 2011.

The dispute between banks and telecommunication companies over
who should pay for USSD sessions resurfaced on the 12th March 2021,
when the Association of Licensed Telecommunication Operators of
Nigeria (“ALTON”) threatened to withdraw USSD services
from deposit money banks until the ?42 billion debt they allegedly
owed was settled.6

USSD is important for banks to provide a range of banking
services to their customers but it is powered by telecommunication
companies and the ongoing dispute is as a result of who should pay
for the millions of transactions happening via USSD (over $100
million as at first half 20217). The question of who
should pay has been at the center of a dispute between banks and
telecommunication companies since 2019.

After two years of negotiations, the price for USSD was pegged
at N6.98 per transaction with the CBN and NCC deciding to pass on
the fees to users. According to the regulators, the new USSD
charges will be collected on behalf of telecommunication…


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