Policy & Regulations - Afrikan Heroes

Barrage Of Sanctions In Nigeria: CBN Freezes Accounts Of Foreign Stock-trading Startups, NITDA Fines Soko Loan $24k

August 18, 2021

Nigerian startups are still swimming in an ocean of regulatory sanctions and uncertainty. In the latest barrage of sanctions, a host of startups have been the targets of both the Central Bank of Nigeria and the National Information Technology Development Agency (NITDA), a regulator in charge of regulating, among other things, transfer of technology and data protection.

startups Nigeria NITDA CBN — *Tosin Osibodu is the CEO of Chaka*

CBN Secures Order Freezing Startups Over ‘Illegal FX Transactions’

Rise Vest Technologies Limited, Bamboo Systems Technology Limited, Bamboo Systems Technology Limited OPNS, Chaka Technologies Limited, CTL/Business Expenses, and Trove Technologies Limited are among the companies included in the frozen accounts.

The apex bank claimed it is examining ‘illegal foreign exchange transactions’ by fintech companies in a court filing seen on Tuesday.

It also requested a court order freezing their bank accounts for 180 days while the inquiry was ongoing.

“The investigation being carried out concerns what has been discovered to be serious infractions by the defendants/respondents in connection with some foreign exchange transactions, and non-documentation by the defendants/respondents in violation of the extant laws and regulations, particularly the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act and the Central Bank of Nigeria foreign exchange manual,”an ex parte motion marked FCH/ABJ/CS/822/2021 and filed on August 4, CBN through its counsel Michael Kaase Aondoakaa, was quoted as saying.

“That more specifically, there is a grave allegation that the defendants/respondents are engaged in illegal foreign exchange transactions, accessing/procuring of foreign exchange via their banks from the Nigerian foreign exchange market via several bureaux de change, international money transfer operators and have transferred cash deposit of more than S10,000.00 (Ten thousand dollars) to various accounts overseas contrary to provisions of extant laws and regulations and also traded in foreign securities and cryptocurrencies in contravention to CBN Circular referenced TED/FEM/FPC/GEN/01/012 and BSD/DIR/PUB/LAB/014/001 dated February 5, 2021, and July 01, 2015,” it added.

“It is evident that Rise Vest Technologies Limited, Bamboo Systems Technology Limited, Chaka Technologies Limited and Trove Technologies Limited are complicit in operating without license as asset management companies and utilising FX sourced from the Nigerian FX market for purchasing foreign bonds/shares in contravention of CBN’s directive,” it further added.

“Having listened to senior counsel to the applicant, on the motion ex parte filed in August, it is granted as pleaded,” Ahmed Mohammed wrote in his judgement.

He further stated that anyone who is harmed by the freezing order has the right to seek remedies from the court within the time limit.

He then postponed the hearing until February 20, 2022.

The Securities and Exchange Commission (SEC) issued a warning to investors in April about the growth of unregistered online investment and trading platforms that facilitate trading in securities listed on foreign exchanges.

The latest incident is coming barely a month after Chaka announced it had procured an operating license from the Nigerian Securities and Exchange Commission.

Soko Loan Is Fined $24,000 By NITDA For Violating Data Privacy

Joining the league of newly sanctioned entities is Soko Lending Company Limited (Soko Loans), an online lending company, which has been fined N10 million ($24k) by the National Information Technology Development Agency (NITDA) for data privacy violations.

The sanction came after many complaints filed by several Soko loan customers, according to a statement released by NITDA.

According to NITDA, the corporation was accused of “unauthorized disclosures,” “failure to secure consumers’ personal data,” and “character defamation.”

Soko Loans provides its customers uncollateralised loans, according to NITDA, and asks a loanee to download the company’s mobile application on their phone and initiate a direct debit in the company’s favor, giving the application access to the loanee’s phone contacts.

“According to one of the complainants, when he failed to meet up with his repayment obligations due to insufficient credit in his account on the date the direct debit was to take effect, the company unilaterally sent privacy-invading messages to the complainant’s contacts,” the statement read in part.

Soko Loans also embeds trackers that exchange data with third parties inside its mobile application, according to the NITDA, without informing consumers or utilizing the necessary legal basis.

Soko Loans was found guilty of employing a non-conforming privacy notice, insufficient lawful reason for processing personal data, and illegal data sharing without an appropriate lawful basis, according to the Nigeria Data Protection Regulation.

Soko Loans was also accused of refusing to cooperate with the Data Protection Authority, in violation of Article 3.1 (1) of the Data Protection Implementation Framework, and of failing to file NDPR Audit reports through a licensed Data Protection Compliance Organization (DPCO), in violation of Article 4.1(7) of the NDPR, according to NITDA.

Aside from the N10 million fine, NITDA ordered that no more privacy-invading messages be sent to Nigerians until the company and its entities demonstrate complete compliance with the NDPR, and ordered Soko Loan to pay for a Data Protection Impact Assessment on its operation by an NITDA-appointed DPCO.

On Soko loans, the agency also imposed a 9-month mandatory Information Technology and Data Protection monitoring.

The criminal components of the inquiry have been deposited with the Nigeria Police Force, according to NITDA, to evaluate if the company’s leaders are subject to incarceration for breaking Section 17 of the NITDA Act, 2007.

“NITDA, therefore, uses this medium to remind all Nigerian businesses and data controllers of their obligation to engage NITDA-licensed Data Protection Compliance Organisations (DPCO) to guide them towards compliance with the data protection law,” the statement read in part.

Sanctions startups Nigeria NITDA CBN Sanctions startups Nigeria NITDA CBN Sanctions startups Nigeria NITDA CBN

Newly Licensed Nigerian Stock-trading Startup, Chaka, Raises $1.5m Pre-seed Funding

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

In Leaked Proposed Law, Nigeria Plans To Crack Down On Tech Startups. Here’s What You Need To Know

In Nigeria, to establish certain businesses such as insurance, banks, or investment companies, one needs a sector-specific license obtained from the relevant industry regulator, apart from a general certificate of incorporation from the country’s Corporate Affairs Commission — in charge of registering companies. To put it more clearly, a proposed digital bank desiring to do business in Nigeria, for instance, must first both go through the Central Bank of Nigeria and the Corporate Affairs Commission to obtain an operating license and a certificate of incorporation respectively. This is the same for an insurance or a telecommunications company in the country, which must first go through their respective sector regulators in order to be able to do business in Nigeria.

Now, the West African country— if the leaked proposed bill is not eventually discarded — is about to introduce a shocker: a sector regulator for all technology businesses in Nigeria, one of the major firsts in Africa.

The new regulator, which is simply an expansion of the powers of the National Information Technology Development Agency (NITDA) — a regulator hitherto in charge of regulating, among other things, transfer of technology and data protection — will now be in charge of “issuing and renewing licenses and authorisations for the provision of information technology and digital services.” It will also be in charge of “fixing licensing and authorisation charges, collect fees and penalties,” from the license holders.

“The purpose of this Act is to create an effective, impartial, and independent regulatory framework for the development of the Nigerian information technology sector and digital economy, which shall include:… encourage local and foreign investments in information technology and digital economy through regulatory interventions…promote the deployment and use of indigenously produced goods, services and platforms for the development of the digital economy;…promote the use of innovative digital services, systems, practices and emerging technology in Nigeria,” the bill reads in parts.

But the proposed bill, coupled with Nigeria’s regulatory antecedents towards its tech ecosystem in recent times, appears to be out to destroy instead of promoting the country’s nascent tech landscape.

Nigeria tech law — *Until now, Nigeria’s NITDA is one of the country most powerful data protection regulators. Image credits: NITDA*

If The Bill Becomes Law, All Technology Businesses In Nigeria Must Now Be Licensed And Fined By NITDA

This is the first time this has ever happened in the West African country. Section 20 of the Bill authorises NITDA to issue licenses to technology businesses, as well as provide for licensing and authorisation criteria including renewal, suspension, and revocation, to promote free market operation and competition, among others.

The direct implication of this is that any such licenses granted by NITDA may now be suspended at will, or simply revoked. The Bill did not state in specific details, the procedure for seeking redress from any aggrieved persons whose licenses have suffered such suspension or revocation.

According to the section, the classes of licenses that may be procured under the bill, if it becomes law, are a) product license b) service provider license c) platform provider license. It however did not define the above classifications in specifics, neither did it state the respective licensing fees. In any case, this means that virtually no type of technology business now escapes the regulatory eyes of NITDA, including small-scale technology businesses located in the remotest parts of the country.

The consequence of non-compliance with the rules is that the defaulting business commits an offence, whichdirectly means criminal conviction of the offending parties. Below is the table of these offences and their accompanying punishments.

S/N	OFFENCE	DESCRIPTION	PUNISHMENTS

1	Non-payment of assessed levy	Failure to pay within two months after receiving an official notice from NITDA	The company pays a fine of 0.5 per cent of the assessed sum every day of the default.
2	Failure to comply with the law	That is, failure to obtain a license, or comply with the provisions of the law establishing NITDA, or any regulations made by NITDA, etc.	Individual: fine of NGN3, 000, 000 or jail for not less than 1 year. Company: corporate fine of NGN30, 000, 000 or jail for company officers for not less than 2 years.
3	Denial of entry into the property of the licensee.	Entries include entry into premises or access to records or data.	Individual: fine of NGN3, 000, 000 or jail for not less than 1 year. Company: corporate fine of NGN30, 000,000, plus every director and officer to pay a fine of NGN3, 000, 000 or jail for not less than 2 years or both.
3	No specific offence and penalty stated in the law.	That is, a person commits an offence under the law where no specific penalty is provided.	Individual: fine of NGN30, 000, 000, plus administrative sanctions, or jail for not less than 2 years or both. Company: corporate fine of NGN30, 000, 000.
4	First Offender	Where no specific offence and penalty are stated in the law, and the person is a first offender.	A fine of N3, 000,000.00 or jail for not more than 1 year or both.
5	Subsequent Offender	Where no specific offence and penalty are stated in the law, and the person is a subsequent offender.	A fine of N5, 000,000.00 or jail for not more than 3 year or both.

$1=411.70 Nigerian Naira as at 10:58 PM, GMT +1. View source.

If The Bill Becomes Law, All Technology Businesses In Nigeria Must Now Remit One Percent Of Their Profit Before Tax Into The National Information Technology Development Fund

This is not the first time this is happening. Under the previous legislation establishing NITDA, a technology company in Nigeria is obligated to pay 1% levy on profit before tax if it has an annual turnover of ₦100,000,000 (One Hundred Million Naira) and above. These provisions have been carried forward into the proposed rules, with the following amendment:

The defaulting person will now have to pay two percent of the levy (that is NGN2,000,000), instead of the previous flat fine of NGN1 million.

The Implications Of The Proposed Bill

The bill implies a lot of things, including that:

All technology companies in Nigeria must now first obtain a license to operate before they can even be allowed to register with Nigeria’s Corporate Affairs Commission. This is counter-productive given the country’s population and land sizes.

By stating that NITDA has the power to “develop regulations, guidelines and directives on the use of information technology and digital services in every sector of the economy to attain the purpose of the Agency” and at the same time have the power to “issue notices of contravention and non-compliance with this Act, regulations, standards and guidelines,” it implies that NITDA may introduce policies through the back door to checkmate the activities of technology companies in Nigeria. This is exactly re-creating the scenarios recently played out by Nigeria’s National Broadcasting Commission, when it introduced a set of sweeping rules that forced startups such as the entertainment startup, iROKOtv, to shutter its Nigerian operations.

The new powers of NITDA are sweeping in their effects, including the power to, on its own, state the licensing fees for the licenses, among other deductions.

The proposed bill continues the trends of hostile policies against Nigeria’s tech startup ecosystem. The west African country had recently disrupted the operations of bike hailing startups, cryptocurrency trading, foreign stock-trading, Twitter, among other regulatory blocks.

Nigeria tech law Nigeria tech law Nigeria tech law Nigeria tech law

Why Is iROKOtv Leaving Africa’s Billion Dollar Industry So Early, And What Does The Future Hold For Other Video-on-Demand Startups?

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Botswana Launches E-Visa Platform, Targets Investors. Here’s How To Apply

August 15, 2021

Botswana has inaugurated an E-Visa online visa application platform, allowing citizens and tourists to apply for a visa from the comfort of their own homes. Anna Mokgethi, Minister of Nationality, Immigration, and Gender Affairs, stated the new platform will increase productivity, customer happiness, and Botswana’s digital footprint during the inauguration of E-Visa in Gaborone, Botswana’s capital city.

Anna Mokgethi, Minister of Nationality, Immigration, and Gender Affairs

Here Is What You Need To Know

Tourists who want a visa to enter Botswana can now use the portal to generate an application, pay for it, fill it out, and upload all supporting papers. They can also use the portal to check the status of their visa.

For a single admission for up to one month, the eVisa costs BWP300 (€23), and for multiple entries for up to three months, it costs BWP500 (€38). Payment of the visa cost is non-refundable, and acceptance is not guaranteed.

According to Mokgethi, the previous procedure took a long time because applicants had to fill out forms, attach other relevant papers, submit them, and pay the appropriate money to the local immigration office. Outside of Botswana, applicants were also obliged to have aids submit application papers and make fees on their behalf.

The new digital system will replace the manual approach, and it is projected to save the government money, time, paperwork, and labor spent on visa applications while also providing better service to visitors.

Economy | Go Botswana | Botswana Investment and Trade Centre (BITC) | Invest, Trade, Export — *Percentage Of Gross Domestic Product by Economic Activity.* *Source: Botswana Investment and Trade Centre*

Here Is How To Apply

The entire visa application process is thought to be moved to the digital domain with E-Visa. The traveller accesses the country’s E-Visa portal, completes the application and accompanying documents, pays online, and communicates with the authorities through the Internet.

The Republic of Botswana’s immigration procedures must be followed when visas are granted.

The portal can be accessed by visiting the new website here.

Botswana e-visa Botswana e-visa

Nothing Is Often Heard About The Startup Ecosystem in Eswatini. Here Is Why

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Backed By FMO, Fintech Startup Dopay Joins Telda, Obtains Egypt’s Latest Banking Agent License

August 14, 2021

Telda, the Egyptian fintech startup formed by Ahmed Sabbah, a former co-founder of SWVL, was the first in Egypt to get a license from the Central Bank of Egypt under the new Banking Agents regulations, but it has reason to be concerned. This is because another fintech startup Dopay, which is backed by renowned investors such as FMO, Techstars Ventures, Ace & Company, Force over Mass, and NN Group, has received Egypt’s second banking agent license through the Arab Banking Corporation Egypt (Bank ABC Egypt).

Frans van Eersel, Founder and CEO at Dopay, — *Frans van Eersel, Founder and CEO at* **Dopay**,

“I am delighted that, after rigorous scrutiny, the Central Bank of Egypt has recognized the security and efficiency of our platform and product. Obtaining this license is a significant landmark on our journey to becoming a leading virtual banking platform in Egypt. I am very proud of dopay’s team of innovators who have taken us successfully to this milestone and I am also appreciative of the support of Bank ABC Egypt,” Frans van Eersel, Founder and CEO at Dopay, said.

“Being granted this licence will [also] give our existing and prospective customers even more confidence in our ability to deliver the fast, convenient and secure cashless payment services they need to help grow their businesses, benefit their employees, and fulfil their ambitions. It is also a vital next step to making our platform the foundation for delivery of many more new services to come.”
Read also:CBN’s Latest Rules Could Allow Nigerian Fintechs To Offer More Financial Services Than Permitted. Here’s How

Here Is What You Need To Know

Dopay will be able to offer a digital banking platform as a result of the new permit, which will allow organizations and businesses to easily register accounts for their employees and other beneficiaries while also being able to pay them in real-time (in accordance with the requirements provided by the Central Bank of Egypt).

Under a partnership agreement, dopay and Bank ABC Egypt are working together to develop and offer a novel value proposition for SMEs, corporations, and their financially underprivileged employees (and various other beneficiaries based in Egypt).

The cooperation and platform should help lay the groundwork for Egyptian firms and their workers in emerging areas to grow their payment and banking services.

Jaap Reinking, Director Private Equity of the Dutch entrepreneurial development bank FMO, added:

“Accessible and affordable payment platforms, like dopay’s in Egypt, increasingly drive financial inclusion, and thereby effective pursuit of many of the United Nations’ sustainable development goals.”

A Look At What Dopay Does

Companies of any size can use the Dopay platform to create and manage personal accounts for their employees and contractors in “seconds.” Staff may be paid immediately, even on weekends and holidays.

Each account comes with a prepaid debit card that “allows for 24-hour access to funds.” Enrolled firms can use a secure, cashless payroll system with easy-to-use interfaces and full auditability.

Users of personal accounts “enjoy instant, secure access to mainstream banking facilities, regardless of their income,” according to the Fintech firm, which also noted that dopay has grown from a proof of concept to “a fully licensed next generation virtual banking platform in Egypt, with hundreds of active customers ranging from small local businesses to global enterprises” in just five years.

The firm “pursues a program of concentrated growth in the MENA area, continuing to actively develop financial inclusion as a functioning reality for many thousands of users” through offices in London, Cairo, and Abu Dhabi.

Egypt is Dopay’s first operating market, with 2.4 million local enterprises and 104 million residents.

Around two-thirds of Egyptians, or 67 percent, do not have access to a bank account, and nearly all do not have access to credit.

Dopay banking license Dopay banking license

Sequoia Capital Pours $5 million Pre-seed Into Egyptian Digital Bank Telda

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

University Of Ghana Launches A New Venture Fund And Accelerator Programme

August 8, 2021

The Vice President of Ghana, Dr Mahamudu Bawumia, has commissioned the University of Ghana’s Innovation and Entrepreneurship Programme (UGIEP) to help students and young entrepreneurs add value to their products and services. The UG Startup Challenge, the UG Incubator, the UG Venture Accelerator, the UG Venture Fund, and the UG Alumni Angel Investor Network are the five pillars that will help the programme achieve its goal.

The UGIEP is a non-academic initiative run by the Vice-Office Chancellor’s that aims to promote a culture of entrepreneurship and innovation within the University.

The programme is a $100,000 Start-up initiative, run in collaboration with the Global Entrepreneurship Network, that will provide cash and mentoring to students and young entrepreneurs.

A Look At The University of Ghana Innovation and Entrepreneurship Programme

UGIEP is a trans-disciplinary initiative that uses extracurricular programs and projects to promote entrepreneurship and innovation culture at the University of Ghana.

These programs and projects encourage innovative thinking, venture creation, and growth in Ghana, with the goal of advancing innovation and entrepreneurial development.

As a result, it would unlock the ideas of students, alumni, and teachers, as well as translate new ideas, products, and services into jobs and economic growth.

UGIEP is a critical component of the University’s research development strategy to strengthen its innovation ecosystem.
It is intended to engage students, professors, and external stakeholders in using their research, innovative skills, and experimental models to establish start-ups and other opportunities by utilizing their research, innovative skills, and experimental models.

This program is the outcome of a collaboration between the University of Ghana’s Institute of Applied Science and Technology (IAST) and the Ghana-based Global Entrepreneurship Network (GEN-G).

University Ghana venture fund accelerator University Ghana venture fund accelerator

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

CBN’s Latest Rules Could Allow Nigerian Fintechs To Offer More Financial Services Than Permitted. Here’s How

August 6, 2021

The Central Bank of Nigeria has issued a series of new guidelines to govern how a holder of a fintech license in Nigeria may combine it with other types of fintech licenses in a holding company structure.

Under the new rules, termed “GUIDELINES FOR LICENSING AND REGULATION OF PAYMENTS SERVICE HOLDING COMPANIES IN NIGERIA”, companies that wish to operate under more than one license category must establish a Payments Service Holding Company (PSHC) with clearly defined subsidiaries.

One notable feature of the new rules is that fintech companies in Nigeria, under a holding company structure, can now acquire controlling stakes in Nigerian financial companies, including fund managers, loan and credit companies, money brokerage companies, etc.

More specifically, CBN provides under Section 2.3 of the new rules that a Payment Service Holding Company (PSHC) is permitted to have only two hierarchies.

“Given the permissible level of hierarchies, the PSHC may have a subsidiary which is a parent to another subsidiary (intermediate company),” the new rules state.

“A PSHC may acquire controlling interest in any permissible financial and/or technological company, subject to prior approval of the CBN, where controlling interest represents a minimum of 51% of authorised share capital of the entity,” the rules add.

The Implications of The New Rules

The new rules imply that it is now possible for fintech companies in Nigeria to acquire controlling stakes in financial companies and expand the scope of their operations in the country. However, the key words from the latest guidelines are “any permissible financial…company… subject to prior approval of the CBN,” meaning that the CBN holds the decisive power to determine whether this is possible or not, and the extent of it.

Nevertheless, it remains unclear if instead of fintech companies in Nigeria relying most commonly on microfinance licenses to launch their operations in the absence of any of the payments licenses, they could now structure themselves under a holding company structure, permitting them to include traditional banks in their portfolios.

But then, again, the new rules are more particularly true for fintechs focused on mobile money operations, switching and processing or payment solution services.

The latest guidelines may be the much needed respite for mobile money operators in Nigeria. Under the CBN’s recently introduced rules for mobile money operations in Nigeria, holders of mobile money license are forbidden from undertaking activities, including granting any form of loans, advances and guarantees (directly or indirectly); accepting foreign currency deposits; dealing in the foreign exchange market except as prescribed in Section 4.1 (ii & iii) of the extant Guidelines for Licensing and Regulation of Payment Service Banks in Nigeria; insurance underwriting; accepting any closed scheme electronic value (e.g. airtime) as a form of deposit or payment.

The latest rules could now permit them, subject to CBN’s approval, to acquire companies doing any of the above activities under a holding company structure.

Although it is possible, before now, for companies in Nigeria to own stakes in Nigerian banks, the latest rules give new impetus to fintechs to make outright acquisitions of more financial companies in Nigeria, which could be a strategic way of increasing their product offerings above the limits permissible under the law in each case.

How Many Subsidiaries Must A Fintech Holdco Have To Be Approved By CBN?

According to the central bank, any fintech holding company must have at least two subsidiaries, which comprise a Mobile Money Operator (MMO) and a Switching firm, before it can be regarded as a Payments Service Holding Company.

Whatever activities conducted under this arrangement — whether the holdco desires to hold controlling interests, that is 51% or more of another fintech company or financial institution or simply to change back into a single license — requires the approval of the central bank.

Nigerian fintechs permitted services Nigerian fintechs permitted services

Here’s How To Structure A Holding Company For Fintech Operations In Nigeria Under CBN’s New Rules

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Here’s How To Structure A Holding Company For Fintech Operations In Nigeria Under CBN’s New Rules

August 4, 2021

The Central Bank of Nigeria has issued a series of new guidelines to govern how a holder of a fintech license in Nigeria may combine it with other types of fintech licenses in a holding company structure.

Under the new rules, termed “GUIDELINES FOR LICENSING AND REGULATION OF PAYMENTS SERVICE HOLDING COMPANIES IN NIGERIA”, companies that wish to operate under more than one license category must establish a Payments Service Holding Company (PSHC) with clearly defined subsidiaries.

The standards, according to the CBN, are important to avoid commingling of activities, simplify risk management, and allow the Central Bank of Nigeria to effectively regulate all of the Group’s companies.

Which Type Of Fintech Licenses Do The Guidelines Apply To?

According to the CBN, the guidelines apply to:

Mobile Money Operations
Switching and Processing
Payment Solution Services
Any other activity as may be approved by the CBN.

In other words, holders of a Super-agent, Payment Terminal Service Provider (PTSP) or Regulatory sandbox license cannot or need not form a Payments Service Holding Company.

In simple terms, where a fintech startup wants to combine a mobile money banking or Switching and Processing or Payment Solution Services license with any other type of licenses, it must set up a “non-operating” holding company.

What Nature Must The Payments Service Holding Company Assume?

Anyone intending to run a group of fintech companies must do so through a non-operating Payments Service Holding Company, according to the CBN. The word is “non-operating”.

To put it another way, the holding company that will be approved by the Central Bank of Nigeria to hold the combination of licenses cannot engage in any fintech operations or day-to-day activities, but must instead serve as a special utility vehicle for the investment of capital and other resources into its subsidiary fintech companies.

“A PSHC shall be a corporate body, registered with the Corporate Affairs Commission (CAC), and licensed, supervised and regulated by the Central Bank of Nigeria. It shall have a board size of between 5 and 10 or as determined by applicable CBN Corporate Governance Guidelines,” CBN states.

How Many Subsidiaries Must A Fintech Holdco Have To Be Approved By CBN?

According to the central bank, any fintech holding company must have at least two subsidiaries, which comprise a Mobile Money Operator (MMO) and a Switching firm, before it can be regarded as a Payments Service Holding Company.

Whatever activities conducted under this arrangement — whether the holdco desires to hold controlling interests, that is 51% or more of another fintech company or financial institution or simply to change back into a single license — requires the approval of the central bank.

What Are The Requirements For Obtaining A Fintech Holdco License?

CBN states that to obtain a license to operate a Payments Service Holding Company, the applicant shall, among other things, do the following:

Pay a non-refundable application fee of NGN1,000,000 ($2.5K). Another non-refundable licensing fee of NGN 5,000,000 ($12k) must be paid before the expiration of six months after the holdco license has been granted.

Must have a minimum paid-up capital that is more than the sum of the minimum regulatory capital/total equity of all its subsidiaries, in cases where the holdco owns 100% of the subsidiaries. However, when the holdco holds less than 100% of the subsidiaries, its minimum paid-up capital must be more than the total of the subsidiaries’ proportionate holdings. A subsidiary’s excess capital cannot be utilized to cover a deficiency in another subsidiary, states the rules.

The holdco must also comply with any applicable corporate governance rules in place in Nigeria.

For other application requirements, click here.

How Can The Holdco Be Owned And Controlled?

According to the central bank, the following are the way and manner any fintech holdco may be owned and controlled:

Seek the approval of the central bank where any person holds 5% and above of the shares of the holdco.

Subsidiaries under the holdco cannot acquire shares of the holdco.

Subsidiaries under the holdco cannot acquire shares of other subsidiaries under the holdco.

Return the holdco license to CBN for cancellation within six consecutive months, if the holdco loses control of any of the two payments services subsidiaries — switching and processing company or mobile money operator — in the group.

However, if the holdco loses controlling interest in a subsidiary, and the subsidiaries include a Switching and Processing company, and Mobile Money operator, the subsidiaries shall continue to operate independent of one another.

What Activities Is The Holdco Prohibited From Participating In?

The holdco is prohibited from engaging in the following activities:

Establishing, divesting, or closing subsidiaries without the CBN’s prior written approval.

Earnings from sources other than: a. Dividend income from subsidiaries/associates; b) Income from shared services, where applicable; c. Interest earned from idle funds invested in government securities or placement with licensed financial institutions; d) Patents, royalties, and copyrights; e. Profit on divestment from subsidiaries/associates; and f) Any other source as the CBN may approve.

Engaging in any transaction with any of its subsidiaries or maintain any business relationship with them unless the transaction or relationship is at arm’s length.

Taking out a loan from the Nigerian banking system to fund itself or any of its subsidiaries.

A holdco must not also pay dividends on its shares unless: a) all of its operating, preliminary, and organizational expenses, losses incurred, and other capitalised expenses not represented by tangible assets (except goodwill) have been fully written down. b) adequate provisions for actual and contingent losses have been made to the satisfaction of the CBN. c) any other capital requirements have been met.

What Happens To Fintech Holdcos Before The New Rules?

According to the CBN, a Financial Holding Company with a payment service provider subsidiary that was licensed before the introduction of the neew rules does not need to apply for a PSHC license.

Which Department Of The CBN Is Responsible For The Grant Of The Holdco License?

CBN’s Payments System Management Department created in 2018 is responsible for the holdco license.

Additional Comments:

CBN’s latest move has already been taken care of in its previous guidelines, except that the latest rules provide more clarity as to how a holding company for a group of fintech companies in Nigeria may be run.

Central Bank of Nigeria Toughens Rules For Fintech Startups Looking For Licenses

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

The Latest Tax Free Destination For Foreign Businesses In Africa Is Zanzibar. Here’s How It Works

July 31, 2021

For a long time, Mauritius has been the number one location for foreign corporations seeking to establish a tax base in Africa, but that fact is now in jeopardy as Mauritius’ neighbor, Zanzibar, has just presented a challenge. The Tanzanian island has introduced a new free tax and residency program for expats who want to live and invest there. The move follows a slew of infrastructure and tourism-friendly improvements that helped the Tanzanian region survive much of the storm that the Covid-19 outbreak wreaked in 2020.

What Benefits Do Businesses Obtain From New Scheme?

There are a range of tax benefits for businesses under the new tax regime: These are that:

1) Foreign ownership is permitted.
2) For the first three months, there are no company license fees.
3) Company tax: For the first five years, the company is tax-free. After the first five years, 50% (Income Tax is 30 percent so it will be 15 percent )
4) Profit repatriation is permitted after tax.
5) There is a 100% withholding tax exemption on interest paid to foreign banks.
6) A depreciation rate of 100% within five years is deducted.
7) Permits for investors and employees to live and work in the country.

Zanzibar Africa free tax — *Zanzibar is home to some of Africa’s tourist attraction sites. Image credits: Africajoytours.com*

A Special Case For Real Estate Developers

Previously, the Investments Act of 2018 specified procedures and requirements for Strategic Investment Status (SIS) projects, as well as incentives and allowances for real estate developers, but not for individuals looking to purchase property in the country.

Foreign buyers will now be able to take advantage of a range of perks as a result of the new investor program, thereby luring investment and improving Zanzibar’s and Tanzania’s economies.

The following are new tax and residency perks for real estate buyers:

1)There is no income tax on global income and wealth.
2) Resident permit for the VILLA buyer, his or her partner, and up to four minor children under the age of twenty.
3) The first buyer pays only half of the regular capital gains on the sale of the unit, instead of the full 10%.
4) Foreign ownership is permitted.
5) The Zanzibar Investment Promotion Authority will register ownership (ZIPA)
6) There is no VAT on the renting or selling of units.
7) The income tax rate on local income is cut in half, from 30% to 15%. (applicable to foreigners only)
8) Profit repatriation is permitted after tax.
9) The buyer’s residence permit is only valid for the life of the property’s ownership (renewed every two years for $3050 for the primary investor and $550 for each dependent).
10) No work permit is issued, but the employer may apply for one independently.
11) There is no requirement for a minimum stay in order to get benefits.

How To Apply For The Benefits

To know more, visit here.

Zanzibar Africa free tax Zanzibar Africa free tax

Inside Mauritius Where A Majority of South Africans Are Migrating To And Their Reasons

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Kenya Rolls Out New Tax Machines For Businesses To Install Before August, 2022

July 22, 2021

The Kenya Revenue Authority (KRA) has given businesses until August 2022 to install new electronic tax registers, also known as ETR machines, that are connected to its computers for daily sales monitoring. ETR machines are required by law for all enterprises with an annual turnover of at least Ksh5 million ($46k) in order to keep track of daily sales and tax returns.

“Kenya Revenue Authority wishes to inform the public that the rollout of the Electronic Tax Invoice pursuant to the provisions of the Value-Added Tax (Electronic Tax Invoice) Regulations 2020 shall commence on August 1, 2022,” said KRA in a statement.

Here Is What You Need To Know

Businesses were given until September 2021 to comply with the regulation, which was issued in October 2020, even as the IRS tightens its grip on tax defaulters.

“All VAT registered taxpayers shall thereafter be required to comply with the requirements of the regulations on implementation of the Electronic Tax Invoice within a period of 12 months from the date of the rollout. Where a person is unable to comply within the timelines, they shall apply to the Commissioner Domestic Taxes for extension of time to comply which shall not exceed six months as provided for in the regulations,” added KRA.

Businesses will also have to obtain authorization to use the machines outside of the designated area, or risk being locked out.

Kenya’s New Digital Service Tax Regime

Businesses in Kenya and consumers in Kenya started paying digital tax for transactions conducted on the internet-based platforms such Google, Amazon, Jumia and other online platforms from January 1, 2021. This followed the gazetting of the country’s Digital Marketplace Supply Regulations, 2020, by the National Treasury Cabinet Secretary Ukur Yatani.

The new 1.5% ‘Digital Service Tax’ imposed on the gross transaction value of services is due at the time of payment.

Additionally, under Kenya’s new 2020 Value Added Tax (Digital Market Supply) Regulations, digital marketplaces (ecommerce websites) that fail to pay Value Added Tax (at 14%) pursuant Section 5(8) of the country’s Value Added Tax Act, 2013 shall, in addition to the penalties prescribed under the law, be liable to restriction of access to their websites in Kenya until such tax is paid.

With these regulations, Kenyan Revenue Authority (KRA) is targeting ecommerce platforms with taxes to fund the Sh3 trillion ($28 billion) 2020/2021 budget.

Kenya tax machines Kenya tax machines

Digital Tax Regime Starts In Kenya. Here Is What Your Startup Should Know

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer

Despite CBN’s Policy, P2P Crypto Transactions In Nigeria Total $204m In First Half Of 2021

July 18, 2021

Despite the fact that the central bank has prohibited financial institutions from enabling cryptocurrency payments or trade, crypto remains popular in Nigeria. Bitcoin’s popularity in Nigeria has not waned in recent months. Bitcoin’s peer-to-peer (P2P) transaction volume grew to over $204 million in the first half of the year, according to numerous sources.

Nigeria, according to Coindesk’s Usefultulips statistics, outstripped the rest of Africa in terms of volume during this time period. Kenya’s revenue totaled $84.3 million, while Ghana’s revenue totaled $59.8 million.

According to Paxful and LocalBitcoins data, Bitcoin’s P2P transaction volume in Nigeria would have surpassed $38 million in June 2021, up 8.7% from May. This volume might really be larger, according to the sources, because it excludes transactions from other major platforms like Binance and Remitano.

All of this data implies that Nigerians are still interested in Bitcoin and other cryptocurrencies, as evidenced by their frequent visits to online exchanges. Remember that, after the United States and Russia, Nigeria is expected to be the third country to adopt cryptocurrency, according to forecasts from the end of March.

It will be interesting to monitor how transaction volumes evolve over the following months if the Central Bank of Nigeria follows the global trend and launches its own digital currency scheme. It should be highlighted that worldwide financial authorities have created central bank digital currencies (MNBCs) as “rivals” to cryptocurrencies since they are “more safe” and “less polluting for the environment.”

Another thing to watch is whether the Nigerian government decides to take a tougher stance on bitcoin as its MNBC initiative progresses.

P2P crypto Nigeria P2P crypto Nigeria

Central Bank Of Nigeria Closes Crypto Bank Accounts. What Does This Mean For Nigerian Crypto Startups?

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning write