A Payment Solution Service Providers (PSSP) licence is a financial licence within the payments system which is issued by the Central Bank of Nigeria (CBN). A PSSP licence authorizes the licensee to provide and operate payment processing gateway and portals, solution/application development, and merchant service aggregation and collections services. A  PSSP license does not provide the authorization to hold customers’ funds or create and issue wallets. PSSPs are predominantly Financial Technology (FinTech) companies that enable  and facilitate  online and offline payments solutions which include collections, check-out, biller aggregation and payout services.

The CBN is the regulatory authority that issues PSSP licenses in Nigeria. The CBN also provides constant regulatory oversight over the activities of PSSP licensees in Nigeria.

Who can Apply for a PSSP Licence in Nigeria

Only a company that is duly registered with the Corporate Affairs Commission (CAC) in Nigeria and also meets the minimum share capital requirements and other regulatory requirements of the CBN can apply for a PSSP licence in Nigeria.

The Process of Obtaining a PSSP Licence from the CBN in Nigeria

A PSSP licence is processed in two stages viz:

• Approval-in-Principle (AIP): This is the preliminary stage of obtaining a PSSP license. During this stage, an application is to be made to the CBN for the grant of the license and they are expected to give an Approval-in-Principle or reject the application. Where an AIP is given, it is only valid for a period of six months. The AIP does not authorize the applicant to commence operation but only allows the applicant to take steps towards obtaining the final licence.
• Final Licence: The applicant is required to consolidate the AIP stage by taking steps to ensure its readiness for commencement of operation, notifying the CBN of its readiness to commence operation, by paying and applying for final licence. Upon the grant of the final licence, the applicant can commence its operations.

The process of obtaining a PSSP licence from the AIP stage to the final licence stage involves the following:

1. Write an application letter for a PSSP license which is addressed to the Director, Payments Systems Management Department of the CBN.
2. The application letter is accompanied with the required documents which include:

• Certificate of incorporation of the company with the Corporate Affairs Commission (CAC), with a share capital of N100,000,000 (One Hundred Million Naira)
• Memorandum and Articles of Association of the company
• Form CAC 2A (Return of Allotment of shares)
• Form CAC 7A (Particulars of Directors)
• Tax Clearance Certificate (TCC) and Tax Identification Number (TIN) of the Company
• Company’s profile
• Details of ownership
• Board structure
• Business plan
• Information Technology policy
• Dispute resolution framework
• Necessary certifications such as Payment Card Industry Data Security Standard (PCIDSS), Payment Terminal Service Aggregator (PTSA), etc.
• Evidence of payment of the non-refundable application fee of N100,000 (One Hundred Thousand Naira).
• Evidence of the deposit of the refundable minimum capital of N100,000,000 (One Hundred Million Naira). This is required to be made in full (one lump sum) and in the name of the applicant.

3. The CBN assesses the application for the PSSP licence and the accompanying documents and if it is satisfied with the application, it proceeds to grant an Approval-in-Principle.

4. Upon obtaining AIP from the CBN, the applicant then makes payment of the licence fee of N1,000,000 (One Million Naira) to the CBN designated account and proceeds to apply for a final licence within six months of obtaining AIP.

5. The CBN inspects the registered place of business of the applicant company and its readiness to commence operation and proceeds to issue the final licence if it is satisfied with the outcome of its inspection.

Validity and Renewal of PSSP Licence

PSSP licence validity period is as determined by the CBN and renewable if the operations of the PSSP licensee is satisfactory to the CBN. Recently, CBN renewed Cellulant’s PSSP licence and this shows the satisfaction of the CBN with the services of the company in providing payment solutions in Nigeria. Thus, the renewal of a PSSP licence by the CBN is a vote of confidence on the operation of a PSSP licensee.

Conclusion

A Payment Solution Service Providers (PSSP) licence is an important licence within the Nigerian payment systems which enables the provision of financial services such as the operation of payment processing gateway and portals which is utilized by merchants to accept debit or credit card purchases from customers. A PSSP licensee provides both online and offline payment solutions. A PSSP licence is obtainable from the CBN by submitting an application to the CBN and paying the required application and license fees within the stipulated timelines.

Please note that the contents of this article are for general guidance on the Subject Matter. It is NOT legal advice.

For further information or to see our other service offerings, please visit www.goldsmithsllp.com  or contact:

The post How to Obtain a Payment Solution Service Providers Licence in Nigeria first appeared on Goldsmiths Solicitors.

2022 has been an incredibly busy and exciting year in the Nigerian legal and regulatory environment. There were major and far-reaching changes ushered in by the regulatory authorities particularly the Central Bank of Nigeria (CBN). There were also major developments relating to Banking and Finance, Competition and Consumer Protection, Startups, Capital Markets, Insolvency, etc. In this article, we have highlighted some of the major legal, regulatory, and judicial changes that occurred in 2022. This article is divided into four parts representing four quarters of the year. In each quarter, we deal with all the major legal changes that occurred therein.

1^st Quarter (January – March 2022)

A remarkable feature of the first quarter was the issuance of regulations/guidelines by the CBN. Within this period, the Electoral Act 2022 was also signed into law by the President. The new Electoral Act introduced important changes to the conduct of elections Nigeria. Below are some of the highlights of the 1^st quarter:

• The Central Bank of Nigeria (CBN) Guidelines on the Introduction of E-evaluator, e-invoicing for Import and Export in Nigeria. Although the Guidelines were issued in January, it became operative on 1 February 2022 and requires the submission of an electronic invoice authenticated by the Authorised Dealer Bank for all import and export operations. The electronic invoice replaces the usual hardcopy final invoice.
• On 11 January 2022, President Muhammadu Buhari approved the establishment of the Nigerian Diaspora Investment Trust Fund, a private sector investment window for Nigerians in the diaspora to support direct investments in the country.
• On 18 January 2022, the Lagos State Government introduced the Consolidated Informal Transport Sector Levy to harmonize the taxes paid by transporters to the state government.
• On 26 January 2022, the Federal High Court in the case of Attorney General of Rivers State v. Attorney General of Federation and 3 Others, invalidated deductions by the Federal Government from the Federation Account for funding the Nigeria Police Trust Fund.
• The Central Bank of Nigeria Operating Guidelines for RT200 Non-Oil Export Proceeds Repatriation Rebate Scheme. This is a programme designed and introduced by the CBN to incentivize exporters in the non-oil export sector with the goal of raising $200 billion in FX over the course of the next three years.
• The Central Bank of Nigeria Guidelines for Regulation and Supervision of Credit Guarantee Companies in Nigeria. The Guidelines seeks to ensure a conducive environment for Micro, Small and Medium Enterprises (MSMEs) to be able to access credit at low interest rates from banks and financial institutions. The requirements for obtaining a license and also the activities which are permitted and not permitted by the license are contained in the Guidelines.
• On 7 February 2022, the Lagos State Governor signed the Lagos State Real Estate Regulatory Authority Bill into Law. The law introduced significant changes to the real estate landscape in Lagos State by mandating the registration of real estate practitioners.
• Electoral Act (Amendment) Act 2022 (the Electoral Act). The new Electoral Act was signed into law on 25 February 2022 by President Muhammadu Buhari. The Electoral Act empowers the Independent National Electoral Commission (INEC) to transmit election results electronically. Section 84 (12) of the Act, prohibits appointees of government, government officials from holding office while vying or contesting at party primaries.
• On 4 March 2022, the CAC stated in a circular that schools and other institutions would no longer be registrable as business names. This means they can now only be registered as a company pursuant to the Companies and Allied Markets Act 2020.
• On 23 March 2022, the Nigerian Communications Commission (NCC) issued the License Framework for the Establishment of Mobile Virtual Network Operators in Nigeria.

2^nd Quarter (April – June 2022)

This quarter witnessed a high level of enactment of laws and the issuance of regulations by the regulatory authorities. Importantly, three laws were passed to deal with the issues of corruption and terrorism in Nigeria. One of these laws (Money Laundering [Prevention and Prohibition] Act 2022) prompted the issuance of a guidelines by the CBN to bring its AML/CFT regulations in compliance with the requirements of the new law. The Securities and Exchange Commission (SEC) also issued a guideline to regulate digital and virtual assets. Below are some of the highlights of the 2^nd quarter:

• On 6 April 2022, the President signed Executive Order 11 which mandates government to institutionalize maintenance of public buildings. The National Biotechnology Development Agency Act, 2022 was also signed on the same day. The law provides the legal framework for the established agency to carry out research and create public awareness in biotechnology to encourage private sector participation.
• On 24 April 2022, the Corporate Affairs Commission announced the approval of the Insolvency Regulations 2022 by the Minister of Industry, Trade and Development. The regulations govern insolvency proceedings under the Companies and Allied Matters Act 2020.
• On 12 May 2022, the President signed the Money Laundering (Prevention and Prohibition) Act, 2022, the Proceeds of Crime (Recovery and Management) Act, 2022, and the Terrorism (Prevention and Prohibition) Act, 2022.
• The Central Bank of Nigeria Exposure Draft Guidelines for Open Banking in Nigeria. These Guidelines are aimed at enhancing competition and innovation in the banking system. It established the principles for data sharing across the banking and the payments system and broadened the range of financial products and services available to bank customers.
• The Central Bank of Nigeria Guidelines for the Registration and Operation of Bank Neutral Cash Hubs (BNCH) in Nigeria. The Guidelines are aimed at  reducing the risks and cost borne in the course of cash management and to also enhance cash management efficiency. The registration of a BNCH is to be undertaken in two stages of obtaining CBN Approval-in-Principle and final approval. The BNCH are to be licensed to take deposit and disburse high volume cash on behalf of financial institutions but cannot carry out lending activities, receive or disburse foreign currency or sub-contract their operation.
• Revised Guidelines for the Operation of Non-Interest Financial Institutions’ Instruments by the Central Bank of Nigeria. These Guidelines replaced the 2012 Guidelines and were issued to regulate the issuance of non-interest instruments by Non-Interest Financial Institutions (NIFIs) while also stipulating the requirements and terms of operation for NIFIs.
• The Central Bank of Nigeria (Anti-Money Laundering, Combating the Financing of Terrorism and Countering Proliferation Financing of Weapons of Mass Destruction in Financial Institutions) Regulations, 2022. The CBN issued the Regulations to bring its regulations on anti-money laundering and combatting the financing of terrorism to be in compliance with the Money Laundering (Prevention and Prohibition) Act, 2022 and safeguard the financial institutions from being used for financial crimes.
• The Securities and Exchange Commission issued the Rules on the Issuance, Offering Platforms and Custody of Digital Assets. The Rules were issued by SEC on 13 May 2022 and provide for the issuance of digital assets, registration requirements for Digital Assets Offering Platforms (DAOPS) and Digital Assets Custodians (DAC) among others.
• On 25 May 2022, the Federal High Court in the case of Femi Davies v. National Broadcasting Commission, nullified the National Broadcasting Code (6^th Edition) through which the National Broadcasting Commission (NBC) sought to regulate the practice of advertising in Nigeria. The court held that it was beyond the power of the NBC to regulate advertisement.

3^rd Quarter (July – September 2022)

The regulatory authorities in the banking and finance sector, particularly the CBN, were very active in issuing one form of guidelines or the other. The Federal Competition and Consumer Protection Commission (FCCPC) issued a guideline to regulate the activities of digital money lenders after a series of predatory practices by many digital money lenders. There was also a judgement of the Court of Appeal which re-affirmed the power of the Federal Inland Revenue Service to collect VAT from hoteliers. Below are some of the highlights of the 3^rd quarter:

• The Central Bank of Nigeria Review of the Industry Quick Response (QR) Code Presentment Options. The review was done by the CBN to enhance the flexibility offered by the use of QR codes in payments. The review provides that the implementation of the QR code for payments shall be based on either merchant-presented or consumer-presented modes.
• The Central Bank of Nigeria Exposure Draft on the Digital Financial Services Awareness Guidelines. This was developed to address gaps in consumer knowledge and practices with Digital Financial Services (DFS). The Guidelines provides for a set of principles and expectations for financial service providers to integrate in the provision of DFS to ensure consumer understanding, good treatment and positive outcomes.
• On 1 July 2022, the Court of Appeal set aside the judgement of the Federal High Court in the case of The Registered Trustees of Hotel Owners and Managers Association of Lagos v. Attorney General of Lagos State which invalidated the powers of the Federal Inland Revenue Service (FIRS) to collect Value Added Tax (VAT) from hoteliers and held that the collection of the tax is in the purview of the state government. The Court of Appeal has now held that it is the FIRS that has the authority to collect VAT. See Federal Inland Revenue Service v. The Registered Trustees of Hotel Owners and Managers Association of Lagos.
• Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending 2022. The regulations were issued by the FCCPC on 18 August 2022 to provide the FCCPC’s approach to regulating the digital lending space and makes provisions for the requirements for approval/registration to carry out the business of digital lending in Nigeria. Thus, by this Framework and Guidelines, institutions engaged in digital lending activities are to be registered with the FCCPC.
• The Revised Handbook on Expatriate Quota Administration 2022 (the Revised Handbook). On 31 August 2022, the Federal Ministry of Interior announced the issuance of the Revised Handbook. The Handbook increased the minimum share capital requirement of a company wishing to apply for business permit from N10,000,000 to N100,000,000. It also reduced the lifespan of Expatriate Quotas (EQs) from ten to seven years. However, the provisions of the Handbook are yet to be operational.
• The Advertising Regulatory Council of Nigeria (ARCON) banned the use of foreign voice-over artists and models on any advertisement which targets the Nigerian advertising space. The ban took effect on 1 October 2022.

4^th Quarter (October – December 2022)

The Nigeria Startup Act was enacted during this quarter, and it represents a remarkable achievement towards incentivizing startups in Nigeria through the incentives and programmes dedicated to spur the growth of startups in Nigeria. A sport policy was also developed and approved with the motive to position the sport sector to generate revenue while standardizing it. The CBN was also active with the issuance of several guidelines and regulations to regulate players in the Nigerian financial services sector. Below are some of the highlights of the 4^th quarter:

• Exposure Draft Guidelines for the Regulation of Representative Offices of Foreign Banks in Nigeria. The Guidelines stipulate how a representative office of foreign banks can be licensed in Nigeria. It enumerates the activities they can validly engage in in Nigeria such as marketing the products and services of their foreign parent or affiliate and states that they cannot engage directly in any financial transaction.
• Exposure Draft Guidelines on Contactless Payments in Nigeria. The Guidelines provide the minimum standards and requirements for the operation of contactless payments and specified the roles of stakeholders such as acquirers, issues, payment schemes, merchants, etc.
• Nigeria Startup Act 2022. On 19 October 2022, the Nigeria Startup Act, 2022 was signed into law. The law aims to provide an enabling environment for the establishment, development, and operation of startups in Nigeria and to position Nigeria’s startup ecosystem as the leading digital technology centre in Africa.
• National Sports Industry Policy (NSIP) 2022 – 2026. On 2 November 2022, the Federal Executive Council (FEC) approved the National Sports Industry Policy (NSIP) 2022 – 2026. The policy contains provisions on governance regulations, infrastructure development plans, incentives for private investors, etc. aimed at standardizing the Nigerian sport sector and thereby generating revenue.
• CBN Naira Redesign Policy – Revised Cash Withdrawal Limits. Citing the need to combat fraud, corruption, terrorism and to ensure that most of the money in circulation are within the banking vault, the CBN issued the policy document on 6 December 2022 to reduce the daily and weekly cash withdrawal limit and also to introduce certain requirements for withdrawing across the counter beyond the set limit at the rate of 5% fee for individuals and 10% for corporate organizations. The revision of the cash withdrawal limits was done by the CBN pursuant to the recent redesign of the Nigerian currency i.e. N200, N500 and N1,000 notes. Coming less than three months before the next general elections in Nigeria, this policy has received a lot of resistance from the political class.

Conclusion

2022 has been a remarkable year in the Nigerian legal and regulatory space and saw the enactment of the Start Up Act, the redesign of the Naira and the introduction of far-reaching regulations especially by CBN aimed and tackling corruption, fraud and financial crimes.

We use this opportunity to wish all our clients a very Merry Christmas and best wishes for the New Year 2023. Thank you all for your support.

Please note that the contents of this Article are for general guidance on the Subject Matter. It is NOT legal advice.

For further information or to see our other service offerings, please visit www.goldsmithsllp.com  or contact:

The post Goldsmiths Solicitors – Legal Recap for the Year 2022 first appeared on Goldsmiths Solicitors.

On 28 March 2022, the Central Bank of Nigeria (CBN) issued the Guidelines for the Regulation and Supervision of Credit Guarantee Companies (CGCs) in Nigeria. The Guidelines are expected to create a conducive environment for Micro, Small and Medium Enterprises (MSMEs) to access credit at low interest rates from banks and financial institutions. The Guidelines also stipulate the activities that CGCs are permitted to undertake while outlining the non-permissible activities, application process for obtaining Approval-in-Principle and final licence as well as the corporate governance structure of CGCs.

The post Overview of the Central Bank of Nigeria (CBN) Guidelines for the Regulation and Supervision of Credit Guarantee Companies in Nigeria first appeared on Goldsmiths Solicitors.

Definition of Credit Guarantee Companies

According to the Guidelines, a CGC is an institution licensed by the CBN with the primary objective of providing guarantees to banks and other lending financial institutions against the risk of default by obligors.

An example of a Credit Guarantee Company in Nigeria providing guarantees for MSMEs to access credit is Impact Credit Guarantee Limited.

Objectives of the Credit Guarantee Scheme

The objectives of the scheme include the following:

1. Improve access to credit for MSMEs
2. Reduce credit risk in lending by providing guarantees to PFIs
3. Stimulate lower interest rates on loans
4. Promote flexible collateral requirements
5. Encourage new business formation, development and expansion
6. Foster sustainable and inclusive growth
7. Improve risk management in the financial sector.

Powers and Duties of the Central Bank of Nigeria

The Central bank of Nigeria shall have regulatory and supervisory powers and duties over CGCs in addition to the following:

1. Grant and revoke licence.
2. Determine minimum capital requirements.
3. Approve the appointment of board members and senior management staff.
4. Remove board members and senior management staff.
5. Approve the appointment of external auditors.

Permissible Activities

The activities which CGCs may legally engage in include:

1. Provide guarantee for risk assets.
2. Render advisory services for financial and business development.
3. Invest surplus funds in government securities.
4. Maintain and operate various types of accounts with banks in Nigeria.
5. Engage in the recovery of guaranteed sum from defaulting borrowers post claims payment.
6. Other activities as may be prescribed by CBN from time to time.

Non-permissible Activities

The non-permissible activities for CGCs include the following:

1. Provision of guarantee to entities outside Nigeria.
2. Provision of credit to customers.
3. Acceptance of demand, savings and time deposits or any other deposits.
4. Management of pension funds or schemes.
5. Foreign exchange, commodity and equity trading.
6. All forms of trading in derivatives and swaps, etc.

Licensing Procedure and Requirements

The application for licence is made by the promoters of the CGC and addressed to the Governor of CBN. The application for licence shall be processed in two stages namely: Approval-in Principle and final licence.

Requirements for Approval-in-Principle

The requirements for obtaining Approval-in-Principle for CGC include:

1. Apply to the Governor of the CBN in writing together with the following:
2. A non-refundable application fee of N100,000.
3. Evidence of the deposit of the specified minimum capital requirement of N10,000,000,000 into a CBN designated account.
4. Evidence of capital contribution made by each shareholder.
5. Evidence of name reservation with Corporate Affairs Commission.
6. Detailed business plan or feasibility report.
7. Draft copy of the Memorandum and Articles of Association of the company.
8. Shareholders agreement.
9. Detailed manuals and policies.
10. Upon receipt of the application and satisfactory documentation, the CBN shall verify the capital contributions of the promoters of the CGC.
11. Where CBN is satisfied with capital contribution of the promoters, it shall issue Approval-in-Principle to the promoters of the CGC.
12. The CBN shall communicate its decision to the promoters within 90 days of the receipt of the application.
13. The proposed CGC shall not register or incorporate its name with Corporate Affairs Commission until an Approval-in-Principle has been obtained from the CBN.

Requirements for Final Licence

Not later than six months after obtaining the Approval-in-Principle from CBN, the promoters of a proposed CGC shall submit an application for the grant of final licence. The application shall be accompanied with the following:

1. Non-refundable licensing fee of N1,000,000 (One Million Naira)
2. Certified True Copy (CTC) of certificate of incorporation of the CGC.
3. CTC of the Memorandum and Articles of Association.
4. CTC of CAC form 1.1.
5. Evidence of payment of stamp duties.
6. Internal control policy.
7. Business continuity plan, etc.

However, before the final licence is granted, CBN shall inspect the premises and facilities of the proposed CGC.

Corporate Governance Structure for CGCs

The board is to be responsible for the affairs of the CGC and its performance. The board shall be made up of both executive and non-executive directors whose number is to be more than executive directors’. The board is to be composed of 5 members minimum and 7 members at the maximum. It should be noted that the appointment of the members of the board is subject to CBN’s approval.

There shall be the positions of a Managing Director and Chief Executive Officer. The two positions are not to be merged but to be occupied by different individuals.

The board is to be appraised annually by an independent consultant on aspects of board’s structure, composition, responsibilities and performance.

Sources of Funds of CGCs

CGCs can access funds from any source approved by CBN. These sources include:

1. Paid-up share capital.
2. General reserves.
3. Long-term loans from international organisations and sponsors.
4. Funds from development partners.
5. Loans from governmental bodies.
6. Preference shares.
7. Bonds.
8. Grants and donations from sources approved by the CBN, etc.

Compliance, Sanctions, and Revocation of Licence

CGCs are required to comply with all laws, rules and regulations. One of the directives is for CGCs to be prudent and not to guarantee more than 75% of the credit provided to any MSME. Where the CGC fails to comply, it shall be met with administrative sanctions. The sanction could be suspension of its operation, monetary penalties, prohibition from declaring dividends, or revocation of licence, etc.

The licence of a CGC may also be revoked where it is insolvent, misuses the licence or ceases operation for a continuous or aggregated period of six months within 12 months.

Conclusion

The issuance of the Guidelines is aimed at facilitating MSMEs access to credit at low interest rate. This is a step in the right direction by CBN. It will ensure that credit loans are guaranteed by minimizing credit risks that banks and other financial institutions are reluctant to take up. It would potentially also lead to business and economic growth for Nigeria especially in the MSME sector.

In applying for approval in principle and license, CGCs are to be prudent by ensuring that all CBN’s requirement for CGC’s licensing are met.

Please note that the contents of this Article are for general guidance on the Subject Matter. It is NOT legal advice.

For further information or to see our other service offerings, please visit www.goldsmithsllp.com  or contact us.

The post Overview of the Central Bank of Nigeria Exposure Draft Guidelines for Credit Guarantee Companies in Nigeria first appeared on Goldsmiths Solicitors.