Name
Global FinTech Guide
Country _ Name
Nigeria
SectionTitle
Loan services/factoring/loan broking/finetrading
Body
FinTechs belonging to this category act as a loan creditor (even short and very short-term loans), are broking loans or receivables or conduct factoring of loans, which were given to private or business customers. In this business area you also find “peer-to-peer” (P2P) services, in which FinTechs enable a multitude of users to give loans (and brokered by the FinTech-platform) to other users or companies.

Finetrading is hereby a financial service of FinTechs, where they buy due receivables and grant the debtor an extension of payment time. 

As an ancillary service some FinTechs offer alternative credit assessment services to check the solvency of a borrower.

Introduction

Attitude of the country towards loan-giving-, factoring-, brokerage-, finetrading- and ancillary services

Loan-giving, factoring, brokerage, and finetrading are recognised in Nigeria. With respect to loan-giving in Nigeria, providers can leverage state and federal regimes for their services. At the state level, the primary law governing lending is the Money Lenders Law of the various states. The laws set out the licensing requirements and regulations for money lenders operating within the state. Some state laws often impose limits on the maximum interest rates that money lending companies can charge borrowers. These interest rate caps aim to protect consumers from exorbitant interest charges and predatory lending practices. The Federal Competition and Consumer Protection Commission (“FCCPC”) also regulates money lending activities in Nigeria and protects the rights of consumers in relation to money lending services. At the federal level, FinTechs can leverage several licensing structures including a microfinance bank or finance company license.

The CBN, under the Banks and Other Financial Institutions Act (“BOFIA”), recognises factoring as one of the activities a financial institution can undertake. Likewise, in the Revised Guidelines for Finance Companies in Nigeria, factoring is one of the permissible activities a finance company make undertake.

However, there is no consolidated or unified law regulating factoring or finetrading in Nigeria. Efforts are being made by various finance institutions in ensuring that there is a regulatory framework for factoring in Nigeria. In effect, the Nigerian Factoring Working Group has intensified efforts for factoring to be regulated in Nigeria through its promotion of the Factoring Assignments (Establishment, Etc) Bill at the National Assembly for its enactment into law.
Nigeria has a growing financial market with brokerage, offering services in stocks, bonds, commodities, and other financial instruments. Brokerage services play a crucial role in facilitating transactions the Nigerian investment sector.


Legal affairs

Obligations and requirements to provide loan-giving-, factoring-, brokerage-, finetrading, and ancillary services described above
To provide loans in Nigeria, the FinTech must be incorporated as a limited liability company by the CAC and comply with regulations set by the CBN and other relevant bodies in Nigeria such as the FCCPC. This includes obtaining licenses, documenting agreements, and adhering to interest rate regulations. Lenders must also conduct KYC checks, follow consumer protection laws, implement Anti-Money Laundering, Countering the Financing of Terrorism, and Countering the Proliferation Financing (“AML/CFT/CPF”) measures, and uphold data protection laws. These measures ensure transparency, fairness, and legality in lending practices.

Brokerage is regulated by the SEC. The ISA provides the legal framework for securities trading and regulates the activities of market intermediaries, including brokerage firms. Brokerage firms must also obtain licenses from the SEC and comply with rules regarding capital adequacy, market conduct, client protection, and disclosure.

Since the BOFIA recognises debt factoring as one of the permissible activities of financial institutions in Nigeria, it is a mandatory requirement that such financial institution be registered with the CBN and obtain an operating license. An application for a license is to be made to the CBN Governor accompanied by (a) a feasibility report for the proposed bank, including financial projections for at least 5 years; (b) a draft copy of the memorandum and articles of association of the proposed bank; (c) a list and particulars of the shareholders, directors and principal officers of the proposed bank; and (d) such other information, documents and reports as the CBN may require. Section 58 BOFIA.

Additional comments regarding the legal situation for loan-giving-, factoring-, brokerage, finetrading-, and ancillary services or what FinTech’s must be aware of in this business area

As earlier stated, debt factoring is still at its early stages in Nigeria as there is no unified law regulating debt factoring in Nigeria such that recourse is had to the provisions of other laws such as BOFIA and the CBN Revised Guidelines for Finance Companies in Nigeria 2014 (the “Guidelines”). Efforts are being made by various finance institutions in ensuring that there is a regulatory framework for factoring in Nigeria.


Economic conditions

Market size for loan-giving-, factoring-, brokerage-, finetrading- and ancillary services and biggest companies in this business area

Debt factoring, brokerage and finetrading is in its early stages in Nigeria and is yet to be fully utilized in the business or financial space in Nigeria. Debt factoring is only provided by a few specialist firms in Nigeria amongst which are: SukFin, Finance and Commercial service Limited, Redoak Trust Investment, VendorCredit, Factoring & Supply Chain Finance Limited, Allianzbridge Finance Limited, Tekla Factoring and Finance Limited, Capsa Technology.

Additional comments regarding the economic situation for loan-giving-, factoring-, brokerage-, finetrading- and ancillary services or what FinTech’s must be aware of in this business area

N/A

Authors

NameOrganisationEmail
Ebimobowei JikenghanG Elias[email protected]06346
Eberechukwu Ezike [email protected]0 

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