In light of the rapid
adoption of technology in the financial services sector, the Securities and
Exchange Commission (“the SEC” or “the Commission”) spearheaded the development
of a regulatory framework for the operation of FinTechs in Nigeria with the
inauguration of a FinTech Roadmap Committee (“the Committee”) at the 3rd
quarter meeting of its Capital Market Committee (“CMC”) in 2018.[2]

The terms of reference of
the Committee were as follows:

  • Develop a FinTech roadmap for the
    Nigerian Capital Market;
  • Inform the SEC on approaches to
    innovation within the Financial Services sector;
  • Promote access to capital in the
    Financial Services sector;
  • Enhance financial inclusion in our
  • Foster greater transparency within the
    Financial Services sector;
  • Enable more efficient compliance in
    regulator regime;
  • Serve as a think tank which will provide
    guidance on independent research for examining the role and value of
    FinTech in the financial ecosystem; and
  • Seek efficient and responsible policy
    regulatory regimes that balance financial innovation and consumer

The Committee submitted its
report titled “The
Future of FinTech in Nigeria”
(“the Report”)[3] which was formally launched by the SEC on
29th October 2019 at the Nigeria Fintech Week. The Report identifies
certain challenges against the growth of FinTechs in the Nigerian capital
market and proposes solutions.


The following are the
challenges identified by the Committee:


The existing regulatory
in the Nigerian capital market neither provides enough clarity on
the role of FinTech companies nor clearly articulates their licensing and
compliance requirements. In addition, there is uncertainty on how regulators
intend to treat certain FinTech products like crypto assets. This lack of
clarity creates uncertainty in the minds of innovators. Another regulatory
problem is the length of time it takes to register a FinTech company with the

Access to Data

The efficiency of every
FinTech company is dependent on access to data, and the limited data makes it
difficult to identify potential customers, develop applications to meet the
specific needs of investors and monitor competition. Access to data is also important
for regulators to adopt the use of supervisory technology (SupTech). The
Nigeria Data Protection Regulation 2019 will potentially affect FinTech’s
access to data, because of the requirement of lawful processing.[5]


FinTechs rely on data, which
is vulnerable to attack and misuse. The interconnected financial systems
further accentuate the threat of data theft and cybersecurity. If the risk of
cyber security is not curtailed, then it may lead to financial instability.[6]

Capital Market Liquidity

The Nigerian capital market
is overdependent on foreign capital for liquidity. Thus, there is a need to
grow the domestic contribution as a shock absorber to adverse changes in the
market and address the capital flight associated with foreign capital and the
dearth of liquidity in the market. Furthermore, the crowdfunding industry has
been stifled by regulation. While donation-based and reward-based crowdfunding
are permitted by extant regulation, equity crowdfunding is considered illegal.[7] This has curtailed the growth of the
retail market.

Lack of Market Confidence

FinTechs fall under
Non-Banking Financial Institutions (NBFIs), which are perceived as weaker
institutions compared to Banks. This causes a dip in the market’s confidence in
FinTechs. Other problems causing low market confidence are:

  • Low Investments participation;
  • Poor trading operations
  • Poor communication of value proposition;
  • Dearth of innovative solutions to bring
    FinTechs into the mainstream market and encourage retail and institutional
    participation in their funding.

Institutional Knowledge Gap

As a result of lack of
awareness, a typical retail customer would rather have his/her money in a bank
account or invested in land/property than the capital market. To achieve better
participation, capital market operators and FinTechs must collaborate to
educate the public about their service offerings.

Lack of Innovation

The industry is not dynamic
and innovative in providing solutions for retail investors. Government has to
offer incentives to encourage investment in FinTech innovation. Regulators must
adopt a more innovative approach and the operators need to deploy more
solutions to engage and encourage broad based participation. In addition, more
products and services must be designed around the investment needs of the
public, and not just High Net-Worth Individuals (“HNIs”).

Weak Digital Infrastructure

Infrastructures such as
power, high-speed broadband, cloud infrastructure, and IOT infrastructure are
lacking; and where available are not optimal. The cost of setting up
infrastructure required to power FinTech solutions is usually passed to the
final consumer. The right digital infrastructure will create safer, efficient,
and more transparent platform for financial services, building confidence, and
ensuring speedy services delivery and stability in the system.

Underdeveloped Venture Capital/Growth
Funding Structure

There is a low level of
participation of venture capital/growth funds in FinTech investments. The
non-existence of numerous marketplace platforms where FinTech startups can
demonstrate their innovative offerings to potential investors, and the absence
of developed platforms for alternative funding markets providing capital
formation for FinTech startups are challenges facing FinTech startups. In
addition, the absence of a single source of guidance or regulation around
funding for FinTechs through venture capitalists in Nigeria subjects the
process to variation and uncertainty.

Lack of Incubator-accelerator
Entrepreneurial Support System

The report admits that while
there have been attempts by the innovative hubs to offer support to startups,
the effect has not been felt across the FinTech startups community. In
addition, the quality of the incubation/accelerator entrepreneurial support
system for FinTech in Nigeria is heavily reliant on foreign technical support
and investment. The need for these support systems is underpinned by the fact
that many local startup founders have a technical background in technology and
are not familiar with industry practices in capital markets and banking.


After identifying the
foregoing problems, the Committee recommended as follows:

1. Deepening Market

In order to improve the
penetration of investment products, the Committee

recommends that:

A. Collaboration

i. SEC should collaborate
with the CBN to streamline customer onboarding and simplify the process of new
product registration.

ii. SEC should collaborate
with Self-Regulatory Operators to provide access to information for FinTech
oriented public/startups.

iii. SEC should collaborate
with the National Pension Commission to ease tension between fund and pension
managers, share knowledge with the Commission to effectively allocate available
assets and revise regulations, such as the SEC Rules.

iv. SEC should collaborate
with the National Insurance Commission (NAICOM) to promote the adoption of
FinTech as distribution channels for the promotion and sales of insurance
products and educate consumers on how insurance works.

v. SEC should collaborate
with educational institutions to develop industry relevant curriculum, create
cross-country financial literacy programs and hold seminars and conferences on
financial literacy in capital market.

vi. The government should
collaborate with universities and other tertiary institutions to deepen
training and research in software skills and engineering, provide grants for
training prospective software developers to high globally recognised standards
and implement fiscal policies to provide tax breaks for institutions and
individuals investing in startups and FinTechs.

B. Fostering an Innovative

i. SEC should intensify its
efforts to raise awareness on the benefits of investing in the Nigerian capital

ii. SEC should encourage the
development and introduction of FinTech-led innovation in the market.

iii. SEC can collaborate
with Nollywood or leverage YouTube and Facebook to develop and disseminate
short videos on financial literacy, to educate the public.

iv. SEC should create a
sandbox and collection of Application Programming Interface (API) services that
can be made available to FinTech firms to create innovative solutions.

C. Invest in RegTech and
Process Improvement Technologies

RegTech platforms will
strengthen inspection and investigation processes and ensure transparent
enforcement and prosecution of digitized rules/codes.

2. Consumer Protection,
Security and Data Privacy

A. The Committee recommends
that SEC should collaborate with regulators and government agencies to develop
FinTech oriented privacy and security policies. Global privacy regulations,
such as the Convention No108,[8] the OECD Guidelines on the Protection of
Privacy and Transborder Flows of Personal Data,[9] and the EU General Data Protection
Regulation,[10] should be reviewed and adapted to
Nigerian startups. Competition rules should also be enforced to prevent
formation of data provider monopolies.

B. FinTechs should comply
with industry standards in data exploitation, data minimisation, information
security, responding to cyber incidents and periodically assess their security
posture for systemic vulnerabilities.

3. FinTech Friendly
Regulation/Policies and Compliance

To address the regulatory
challenges that FinTechs encounter, the following were recommended:

A. SEC to drive a harmonized
regulatory agenda by creating a centralised committee of all regulators (charged
with the responsibility of formulating and ratifying policies and regulations
for FinTechs) and allow different FinTech businesses to be regulated by
different bodies within the committee. Equity financing/crowdfunding are to be
regulated by the SEC, while payments and lending are to be regulated by the
CBN. In addition, SEC and other regulators in the industry should leverage on
the regulatory sandbox to be made available to FinTechs by the Nigerian
Inter-Bank Settlement Scheme instead of building individual ones. The
Commission should also work with other government agencies to provide
incentives to startups.

Due Date: Q4, 2020

B. Cryptocurrencies, Virtual
Financial Assets and Initial Coin Offerings (ICOs)

i. SEC should decide on the
preferred classification of cryptocurrencies; preferably as commodities or
securities but NOT as currency.

ii. SEC should be
responsible for regulating Virtual Financial Assets Exchanges.

iii. SEC should regulate
equity-based crowdfunding while the CBN should regulate interest-based

iv. SEC should issue
guidelines and standards for white papers and ICOs.

v. SEC should have clear
taxonomies of tokens based on their nature, characteristics, and economic
realities as their determining factors.

Due Date: Q1, 2020

C. Accelerating Investments
in FinTechs

i. SEC needs to establish a
clear FinTech vision and agenda.

ii. SEC should consider
creating “Speed Funds” where HNIs can invest in FinTechs through the capital

iii. SEC should shorten the
timeline for registration of FinTech companies.

iv. SEC, Self-Regulatory
Organisations and Exchanges should ensure that listing requirements are

Due Date: Q2, 2021.

D. Directory Services

i. SEC should create a
RegTech platform as a one-stop shop to manage registration, licensing and
approval of FinTechs, and a directory service where useful information about
FinTechs in Nigeria can be accessed.

ii. SEC should organise
hackathons to develop software solutions for automation of SEC’s regulatory

iii. SEC should create a
FinTech Office to manage investor relationships, engage and provide regulatory
clarifications to new entrants, facilitate
regulator-innovator-market-engagements, coordinate the communication
and dissemination of relevant industry information, and provide support and
advisory services to the industry.

Due Date: Q2, 2021.

E. Capacity Building

i. SEC should invest in
capacity building for its employees charged with regulation.

ii. SEC should look to
publish a report on FinTech in the Nigerian capital market, on an annual basis.

Due Date: Q1, 2021.

F. Engagement with FinTechs

i. SEC and other regulators
should cooperate more with FinTechs through forums and engagement sessions.

ii. SEC should create an
innovation Hub within the Commission.
Due Date: Bi-annually, Quarterly.


With the buzz in the
Nigerian FinTech space and the growing interest of entrepreneurs and foreign
investors in FinTech companies that solve problems in the financial industry,
the establishment of a Roadmap Committee and a blueprint for the development of
FinTech companies in Nigeria is a step in the right direction. It is our hope
that this Report will provide clarity to investors and entrepreneurs alike on
the policy plan of the SEC for the integration of FinTech companies into its
operations. The Committee provided a timeline for the implementation of its
recommendations between Q4 2019 and Q4 2021 and expressed its availability to
assist the Commission with the process of implementation.


For further information on
this article and area of law, please contact
Olayanju Phillips at:
S. P.A. Ajibade & Co., Lagos by
telephone (+234 1 472 9890), fax (+234 1 4605092)

mobile (+234.814.468.3333)
or email

    Olayanju Phillips, Associate, Corporate Finance &
Capital Markets department, SPA Ajibade & Co., Lagos, Nigeria.

    Held on the 14th of November 2018 at the Federal
Palace, Hotel, Victoria Island, Lagos. See ‘Notification for Third CMC Meeting
in 2018’ (SEC Nigeria, 19 October 2018)
(accessed 22 January 2020).

    Fintech Roadmap Committee of the Nigerian Capital Market,
‘The Future of Fintech in Nigeria’,
April 2019 
(accessed 22 January 2020).

    The registration process involves an application for
approval from the Commission by filling the FinTech assessment form The SEC engages the FinTech
company and registers it if it meets its requirements. The length of time it
takes to receive SEC’s approval to offer a FinTech product depends on the
nature of product and whether the SEC has existing Rules or Guidelines to
regulate them.

    Pursuant to Para 2.1 of the Nigeria Data Protection
Regulation 2019, data may no longer be collected, processed or shared with
third parties, except with the lawful consent of the data subject. Furthermore,
by the provisions of Para 2.2, the consent of the data subject must obtained
for each purpose the data will be processed, unless the processing is necessary
for compliance with a legal provision, performance of a contract to which the
data subject is a party, to protect the interests of the data subject or of
another person, or in the public’s interest.

    In a bid to curb these threats, the Cybercrimes Act
(Prohibition, Prevention, etc) Act, 2015 criminalizes unlawful access to a
computer with intent to obtain confidential information, unlawful interception
of communications, unauthorised modification of computer data, computer related
forgery, identity theft and impersonation (See sections 6,7,8,11 and 13 of the
Cybercrime Act, 2015). Significantly, there are no requirements for reporting
cyberbreaches and intelligence sharing across organisations to build cyber
resilience in the Act. Proactive safeguards to be put in place by data
controllers and data processors are also conspicuously absent.

    Section 22(5) of the Companies and Allied Matters Act CAP
C20 LFN 2004 prohibits private limited companies (which most FinTech companies
are registered as) from inviting the public to subscribe for any shares or
debentures of the company or deposit money to it. Section 67 of the Investments
and Securities Act also prohibits all persons from making invitations to the
public to acquire or dispose of any securities of a corporate entity or to deposit
money with any corporate entity for a fixed period or payable at call, unless
the body corporate is a public company. Furthermore, a public company may only
offer its shares to the public through a registered Exchange, subject to
certain restrictions placed by the Commission, including approval of the
Commission and registration of the securities.

    Council of Europe, Convention for the Protection of
Individuals with regard to the Automatic
Processing of Individual Data
, 28 January 1981, ETS 108, available at:
 (accessed 28 January

    Organisation for Economic Cooperation and Development
(OECD), Guidelines Governing the Protection of Privacy and Transborder
Flow of Personal Data
, 23 September 1980, available at:
 (accessed 28 January

   Regulation (EU) 2016/679 of the European Parliament and of the
Council of 27 April 2016 on the protection of natural persons with regard to
the processing of personal data and on the free movement of such data, and repealing
Directive 95/46/EC (General Data Protection Regulation)
(accessed 28 January 2020).

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