Doing Business in Nigeria: Lending Series.

Article 1: State Regulatory Requirements for Lending

Article 2: Federal Regulatory Requirements for Lending

Article 3: Lending Models

Article 4: Responsible Lending

Ever considered starting a lending business in Nigeria? There are a number of regulatory requirements that you will need to comply with in order to operate legally and ethically.

In this series, I will provide an overview of the key regulatory requirements for setting up a lending business in Nigeria, including obtaining necessary licenses and permissions, lending models, following responsible lending practices, and adhering to data protection and privacy laws.

Whether you are a seasoned entrepreneur or new to the world of finance, this information will help you navigate the process of setting up a successful and compliant lending business in Nigeria.

If all goes well, by the end of this series you will be ready to issue your first ethical loan as a business in Nigeria.

There are a few licenses which allow an entity to provide lending services in Nigeria. These licenses can either be procured at the state level (through the States Moneylending Licensing apparatus) or at the federal level (through the Central Bank of Nigeria).

Depending on the product offering, operations and deployable capital (amongst other factors to be considered by the business), a license from the Central Bank of Nigeria or a State Moneylender license may be advisable.

Article 1: State Regulatory Requirements for Lending

Moneylender certificate and license are issued by a State Government agency authorised to do so in all states of the federation. A company seeking to provide lending business within a particular state may approach the applicable agency within that state for a license.

State Requirements for registering and procuring a Moneylender Certificate and License

A. Corporate Registration

Setting up a corporate entity in Nigeria is within the exclusive preserve of the Corporate Affairs Commission ("CAC").

Requirements for incorporating a Corporate Entity for the purpose of providing lending services at the CAC include:

• Name reservation.
• Submission of all requisite information and documents.
• Registration with a minimum share capital of twenty million (20,000,000).
• Registration with at least two (2) Directors.
• The object clause of the Memorandum of Association must include provisions for money lending service.?
• Payment of all requisite fees and stamp duties.

Now that we have incorporated a company, we need to procure a State Moneylender Certificate and License.

B. Certificate And License Procurement (Lagos State as an example)

Granted that Lagos is the commercial hub of Nigeria, you will find that majority of the moneylenders license holders in Nigeria are registered within Lagos State.?The Lagos State Moneylenders Law CAP M7 2009 regulates money lending activities within the state.

To procure a Moneylender Certificate and License in Lagos State, we ("an/the applicant/company") will interface with the Police Force Headquarters, the administrative apparatus of the Magistrate Court and the Ministry of Home Affairs.

The required steps are detailed below:

1. Make a formal application on the applicant company's letter head to the Commissioner of Police of Lagos State, attaching the applicant company's Certificate of Incorporation, Memorandum and Articles of Association ("MEMART") and the CAC forms showing particulars of the shareholders and directors of the company.
2. The Police Force will require the thumbprints of two (2) directors of the applicant company for the purpose of issuing a Police Clearance Report.
3. Thereafter, the applicant company is required to make an application in a prescribed form to the Chief Magistrate of Lagos State. To achieve this, an application letter is drafted in the prescribed form on the letter head paper of the company and addressed to the Chief Magistrate of Lagos State.
4. If the application is successful, the applicant company is issued a Moneylender Certificate (Form B) by the Chief Magistrate along with a letter which would be addressed to the Permanent Secretary of the Ministry of Home Affairs, confirming due compliance, and recommending the issuance of the Moneylender License.
5. Thereafter, a further application for a Moneylender License shall be made to the Ministry of Home Affairs and Tourism through the Permanent Secretary attaching the underlisted documents:

• Certified True Copies (CTC) of the Certificate of Incorporation, MEMART and other CAC Forms showing the share capital of the company, the shareholder(s), the director(s), company secretary and other particulars. Please note that the MEMART must contain an object provision to the effect that the Company engages in the business of providing lending services to companies, individuals, etc.;
• Three (3) years Tax Clearance Certificate (TCC) of at least two (2) individual directors of the Company.
• Evidence of maintenance of a current account with a licensed bank in Nigeria;
• Evidence of payment of company income taxes for three (3) years (this requirement applies only to old companies);
• Passport photographs of the directors of the applicant company and their respective valid means of identification;
• Evidence of application for Tax Identification Number (TIN) (this requirement applies only to a newly incorporated company).
• A reference letter from the applicant’s bank.
• Forms B and C from the Magistrate’s Court.
• Police Clearance Report.

6. Officials of the Lagos State Ministry of Home Affairs and Tourism will conduct a physical inspection of the applicant company's place of business on an agreed date. The inspection may include a spot check of the books and records of the applicant company where such applicant has commenced operations.

7. Upon satisfaction by the officials of the Ministry that the applicant has complied with statutory requirements, the applicant company will be issued with a Moneylender license for a period of one (1) year only. The issued license must be renewed annually.

With these state regulatory requirements in mind, you're well on your way to setting up a successful lending business in Lagos State.

But the journey doesn't end here. In my next article, we will delve into the federal regulatory requirements for setting up a lending business in Nigeria, so stay tuned for more insights on how to navigate the world of financial regulation in this dynamic market. See you in the next one!