The startup scene in Nigeria is sizzling, and we at Acelera Law know you are constantly on the move. But with all that progress, staying on top of regulations can feel like running a marathon in blinders. This month's update is your one-stop shop for navigating May's regulatory twists and turns. From groundbreaking financial tech rules to the latest updates, we've got you covered.?
- The Cybersecurity Levy: Nigerians expecting a smooth start to May were met with a surprise – a new levy! On May 6th, the Central Bank of Nigeria (CBN) sent ripples through the financial sector with a circular mandating a cybersecurity levy on electronic transactions. This levy, applicable to banks, mobile money operators, and payment service providers, targets a broad range of electronic transfers with a 0.5% bite. This means for every 100,000 naira transaction made electronically, the sender would be charged N500. This levy hasn't exactly been embraced with open arms. Here's the rub: the circular remains unclear on the exact purpose of the levy, adding fuel to the fire of public discontent. Nigerians, already grappling with economic challenges, are understandably weary of yet another tax. The lack of transparency surrounding the levy's use has ignited a fierce debate, leaving many questioning its true impact. Thankfully, the CBN wasn't deaf to the public outcry. On the 19th of May, the circular that implemented the levy was withdrawn. Financial industry experts saw the cybersecurity levy as regressive and decided that they had to put a stop to it.
- Withdrawal of the Fintech Ban: Talking about putting a stop to things, the CBN prohibited money operators, including some fintech firms, from onboarding new customers. The move was linked to an ongoing audit of the Know-Your-Customer process which has been under scrutiny, The directive affected fintech companies such as OPay, Palmpay, Kuda, and Moniepoint. However, there's positive news on the horizon. The CBN announced on May 21st that these affected companies can expect to resume enrolling new customers within a few months.
- CBN Prohibition of Use of Foreign Currency Dominated Collateral For Naira Loans: The CBN released a circular to all banks putting a stop to using foreign currency as collateral for naira loans. This prohibition is exceptional to specific cases such as Eurobonds issued by the Federal Government of Nigeria, and Guarantees from foreign banks. This initiative may potentially contribute to economic stability and FX liquidity boost. The CBN has further directed banks to wound down all existing loans with foreign currency collaterals to 90 days.? Banks that fail to comply would face regulatory sanctions.?
- ?CBN Releases Approved Guidelines For BDCs: Still on releasing circulars, released the approved guidelines for operations of Bureau De Change in the Country. The Circular which is titled ‘Revised Regulatory and Supervisory Guidelines For Bureau De Change Operatives in Nigeria’ directs BDCs to apply for licensing in line with the new regulatory requirements in the next six months. The Guidelines also revise permissible activities, corporate governance, and Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT) provisions for BDC. According to the new guidelines, Tier-1 BDCs are mandated to have a minimum capital base of N2 billion while that of Tier-2 is set at N500 million. The CBN has also set the application fee for Tier-1 licence at N1 million and that of Tier-2 at N250 thousand. The licensing fee for Tier-1 is set at N5 Million while for Tier-2 is N2 Million. The mandatory caution fee which was in the old guidelines has been waived in the new regulation. According to the CBN, the reviewed guidelines will enhance the regulatory framework for the operations of BDC.?
May was a whirlwind month for Nigerian regulations, particularly in the financial technology space. While the surprise cybersecurity levy caused initial concern, its swift withdrawal demonstrates the power of industry collaboration and public discourse. The CBN's focus on Know-Your-Customer (KYC) compliance and its efforts to strengthen the Bureau De Change (BDC) sector highlight ongoing efforts to promote financial stability and transparency. However, the increase in the minimum share capital may significantly reduce the number of BDCs in operation.?
At Acelera Law, we understand staying informed can be a challenge. We'll continue to bring you clear and concise regulatory updates so you can navigate the constantly evolving landscape with confidence. Stay tuned for our June roundup!
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