The Central Bank of Nigeria (CBN) has disclosed that Deposit Money Banks (DMBs) will no longer require a separate license to operate a mobile wallet or mobile banking.
This was disclosed in Lagos by the director, Banking and Payment System, CBN, Sam Okojire, who was represented by the deputy director, Banking and Payment System, Mr. Musa Itopa Jimoh, at the First Bank cross border seminar for Banking and Telecom Regulators from sub-Saharan Africa.
Jimoh said: “You do not need authorization from the CBN to go into Wallet services or mobile money schemes. All you need is to notify the CBN your current license suffix.”
Speaking of the apex bank’s position on the adoption of digital currencies, he said: “We have not made up our mind on what steps to take but I am not sure or believe that the CBN will ever go crypto.
“We know what they are doing in Sweden and China. We are not running on the same parameter and so based on financial inclusion, adopting digital currency will mean a number of our population will be excluded.”
In his opening remarks, the Managing Director/CEO of First Bank of Nigeria Limited Adesola Adedutan, said as the global market continues to grapple with digital technology, the bank will be at the forefront.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.
The total money owed by Nigerian governments, whether federal or regional now stands at more than $69 billion (N24.97trn) in the first quarter of 2019. This is more than the value of all money (GDP) made by Ghana last year.
A Break Down Of The Figures
Figures from the Nigerian Bureau of Statistics say Nigerian States and Federal Debt Stock data as at 31st March 2019 showed that the country’s total public debt portfolio stood at N24.95trn.
Further disaggregation of Nigeria’s total public debt showed that N7.86trn or 31.51% of the debt was external while N17.08trn or 68.49% of the debt was domestic.
Similarly, total domestic debt was N3.97 trillion with Lagos state accounting for 13.64% of the total domestic debt stock while Yobe State has the least debt stock in this category with a contribution of 0.68% to the total domestic debt stock.
Remember that Congo recently got a major bailout from the International Monetary Fund (IMF) to help it service its debt obligations with its creditors.
Government debt as a percent of GDP for African countries, 2017. Source: IMF, 2018. Regional Economic Outlook
This bailout potentially set a precedent for other nations struggling under the weight of large debts to China.
It appears that what IMF has succeeded in doing is to alert other countries borrowing from China that China would never cut off any percent from any borrowed sum, but may instead, prolong the period of repayment.
Many observers see Congo as a test case for the IMF. A number of African countries facing unsustainable debt resulting from commercial borrowing, a boom in Eurobond issues and years of Chinese lending on the continent are expected to turn to the IMF for help in the coming years.
This is even bound to grow more because sovereign debt financing is inevitable given that African countries budgetary resources are insufficient to finance their vast development agenda.
“The IMF is tacitly accepting that China will not take a haircut on debts to African governments,” said one banker, who has followed the negotiations.
The IMF is also advising Congo’s government to restructure high-interest debt it contracted with oil traders including Glencore (GLEN.L) and Trafigura despite a previous pledge to the Fund that it would not engage in oil-backed borrowing.
“I think they’ve learned their lesson as to the costs of these kinds of practices,” Alex Segura, IMF mission chief for Congo, told Reuters.
IMF Is Also Pitching Its Stakes And Leaving African Countries At Their Own Mercy
All that bailout would not just happen without a reciprocal deal. For instance, the IMF said in November that Congo’s government must take a series of steps before the lender agrees to a bailout, including reforms to improve governance and transparency, adjustments to the state budget. It’s also requested “explicit financing assurances,” including debt relief, from creditors before it considers a bailout.
With all these, African countries with heavy debt burdens may all be sitting on a time bomb.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
Nigeria has recorded an Inflation drop from 11.40 percent to 11.22 percent with analysts saying it is not enough to make even the slightest dent on rising poverty.
Consumer Price Index (CPI), which measures inflation, declined to 11.22 percent year-on-year in June compared to 11.40 percent in May, according to the National Bureau of Statistics (NBS).
Nigeria inflation rate of 2019
Food inflation also reduced to 13.56 percent in June compared to 13.79 percent in the preceding month.
According to the CPI figures for June, which was released this week by the NBS, core inflation, which excludes the prices of volatile agricultural produce dropped to 8.8 percent in June, down by 0.2 percent compared with 9.0 percent recorded in May.
A deceleration in the headline index could encourage the monetary authority to cut the monetary policy rate, thereby lowering the cost of borrowing in the economy.
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.
Nigeria’s aspiration for universal internet coverage has received a boost with the materialization of a $100 million loan from the Government of India.
The facility arranged by the EXIM Bank of India is the result of a close collaboration between the India High Commission in Nigeria and the Federal Ministry of Communications. The deal was facilitated by the immediate-past Minister, Alhaji Adebayo Shittu, who had promised a 70 percent broadband penetration by 2021.
The loan from India is expected to accelerate the deployment of solar-based mobile telephone sites in the country’s vast rural areas. Officials of the communication ministry privy to the details of the plan said no fewer than 1,000 sites can be built within 12 months once the two countries seal the agreement.
The credit facility from India is expected to be devoted to financing Nigeria’s Rural Broadband Network and the deployment of robust masts that will rely on alternative power sources, especially solar power. The plan is hinged on the government’s determination to extend telephone services to all rural communities at a relatively affordable cost while ensuring that identified bottlenecks experienced in urban areas are minimized.
Early this year, Shittu had disclosed that the government was desirous of fast-tracking the implementation of the National Broadband Roadmap by rapidly deploying less-expensive telecoms masts in the rural and remote areas. The plan, he explained, would provide access to telephone services and rapidly increase broadband penetration in hitherto hard-to-reach regions of the country.
The latest statistics from the Nigerian Communications Commission (NCC) has indicated that broadband subscription stood at 63.2 million while actual broadband penetration increased to 33.13 percent in May this year.
“I am optimistic that if we put all the current efforts together, in another two years, we should be able to attain 70 percent. My ambition is two years rather than the five years being postulated,” the former minister said at a conference organized by the Association of Telecommunications Companies of Nigeria in February this year.
The minister premised his hope on the $100million loan from India, saying: “The current mast that the telecom operators use is very expensive to maintain. They rely on electricity, and we do not have electricity all around the country. So we have a situation where somebody who wants to build a mast of N40million would also have to acquire a 200KVA generator and fuel it.
“For this reason, we have redirected our effort at getting solar-based masts which will also have 50km radius so that if you have a land area of 100km, you will have two masts. It is cheap to maintain and all operators can depend on it, rather than having the rural operators to construct their own masts or lay their own cables.
“We are doing all of these, and I believe that within the next two months, we should have an approval from the Indian Government for work to commence on deploying this to all rural areas in Nigeria”
Figures from the NCC indicate that there are about 120 million internet users in Nigeria, most of them in the urban areas. Internet penetration is a little above 33 percent, although the commission is working with the National Broadcasting Commission (NBC) to introduce Television White Space to further deepen broadband penetration.
Although the Nigerian communications industry has attracted huge investments of recent, experts believe that a robust telecommunications network is important for economic growth in the country. Indeed, the Executive Vice Chairman of NCC, Prof. Umar Dandatta, has noted that while the present portfolio of $68 billion investment in Nigeria is huge, it is by no means adequate for one of the fastest-growing telecommunications markets in the world.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.
Whether it is to reach for more financial inclusion or to open up the heavily regulated Nigerian banking sector, Nigeria’s apex bank is already facing the heat of global digital disruption in the financial services sector. From now on, banks in Nigeria would no longer be required to have a separate license to operate a mobile banking app.
Here Is Why This Change Is Significant
Before now, to operate a mobile money service in Nigeria, the operator shall, among other things be :
(a) Be licensed by the CBN on such terms and conditions as the Central Bank shall desire.
Such terms and conditions usually involve the presentation of evidence of the formation of the Consortium that will deploy the project (Certificate of Incorporation)
The Consortium’s profile and functional contact e-mails and telephone numbers
Securities features that will be put in place
3 years Financial projections for the company
Draft agreements with the following: a. Technical Partners b. Participating banks c. Switching company/(s) 24 d. Merchants e. Telcos f. Any other party
Tax Clearance Certificate for three (3) years of each party in the Consortium
Project Deployment Plan (time, location, operation, etc.)
Payment of non-refundable Application fee of N100,000.00 (One hundred thousand naira) made payable to the CBN
Evidence of Shareholders’ Fund of N2 billion before a license is issued
This document, and may be reviewed from time to time.
Be issued a unique Scheme Code by the NIBSS for managing interoperability.
But all that is about to change
Going forward, once the Central Bank of Nigeria is satisfied that your current license to provide financial services in Nigeria suffices, the need to procure an additional license for your business would be obviated.
“You do not need authorisation from the CBN to go into Wallet services or mobile money schemes. All you need is to notify the CBN your current license suffix,” CBN Department of Banking and Payment System said at the First Bank cross border seminar for Banking and Telecom Regulators from sub-Saharan Africa.
Banks Are Being Reluctant Investing In Mobile Money Because The Heavy Regulations Don’t Make Any Case For Profitability
Many institutions in Nigeria are using prepaid payment cards and the mobile phone as a means of providing financial services to the previously financially excluded.
While not a bank account in the traditional sense, mobile wallets, and prepaid card products provide individuals with a safe electronic store of value and electronically initiated and accepted payment transactions and funds transfers.
In 2015, the CBN published both a Regulatory Framework for Mobile Money Services in Nigeria and Guidelines on Mobile Money Services.
The Regulatory Framework makes provision for only two specific models, namely bank-led, or non-bank led (a corporate organization duly licensed by the CBN).
Mobile money was one of the major segments of the Nigeria e-payment ecosystem primed by the CBN to drive its financial inclusion vision, in which 80 percent of Nigerians will be established in the national banking system by 2020.
However, mobile money operators (MMOs) have had little success in supporting the country’s financial inclusion targets.
This is mostly due to a lack of proper understanding of the conditions of their licenses, limited funds, poor infrastructure in rural areas, and limited customer access due to limited agent network rollouts.
Most of the licensed Mobile Money Operators in Nigeria are believed to have remained inactive and many have yet to officially commence payment platform operations.
Consequently, the CBN took the decision to raise the capital requirements for licenses from N500 million to N1 billion at the end of December 2017 and now to N2 billion, with a caveat that any operator that fails to meet the 1 July 2018 deadline for the new capital requirements will have its licenses revoked, further reducing participation.
The implication of these for Nigerian banks is that from now on, they would no longer be required to have a separate license to operate a mobile banking app.
However, on the other hand, the situation of non-bank led organizations involved in mobile operation remain heavily uncertain, as they may be required to still apply for and obtain licenses.
Cold Feet On Digital Currencies
Expecting Nigeria’s apex bank to adopt cryptocurrencies? This still remains a dream.
The apex bank’s position on the adoption of digital currencies still remains that:
“We [CBN] have not made up our mind on what steps to take but I am not sure or believe that the CBN will ever go crypto.
“We know what they are doing in Sweden and China. We are not running on the same parameter and so based on financial inclusion, adopting digital currency will mean a number of our population will be excluded.”
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
Nigeria is expected to feature significantly in the 2019 Africa Investment Forum scheduled to take place in Johannesburg, South Africa this November, business leaders and government heard at a roadshow event held in Abuja over the week.
Following the hugely successful inaugural edition held last year, the African Development Bank’s innovative investment marketplace set up to accelerate investment into the continent will convene for its second meeting from 11-13 November.
The Nigerian roadshow, held 9th July, was organized by the Nigeria Country Department of the Bank in collaboration with the Africa Finance Corporation. It was attended by key industry players, including, policy makers and representatives of state governments.
Speaking at the event, Ekiti State Governor Dr. Kayode Fayemi emphasized the role of private capital to deliver the infrastructure required to grow Nigeria’s economy and provide jobs for millions of young Nigerians.
“With the support of the African Development Bank and the African Finance Corporation, and the quality of investors that attended the inaugural edition in South Africa last year, I am confident that if we put our best foot forward, we will receive significant funding commitment for investments across Nigeria and the continent,’’ Fayemi said.
Senior Bank Director for the Nigeria Country Office Ebrima Faal, highlighted Nigeria’s prominence during the 2018 Forum. Nigeria was very visible. Out of the 63 boardroom deals presented at the Forum, Nigeria had 5 deals worth $7 Billion. This represents 14.9% of the total deals accounted for on the continent, and 43% of the deals accounted for the region.
“The African Development Bank and its partners are excited to present you with … the only platform that allows you to instantly pitch and close monumental deals on the spot. We encourage you to engage early and wholesomely to be a part of re-writing Africa’s economic history,’’ he urged.
According to Africa Finance Corporation Senior Director Taiwo Adeniji, “building on the success recorded in 2018, it is expected that Nigeria will be a major participant at the 2019 Forum. The Africa Finance Corporation is keen to support Nigerian businesses across sectors to ensure effective project implementation to boost economic development.’’
The Nigeria roadshow included highlights and key lessons from the 2018 forum, project preparation guidelines as well as presentations on selected pipelines.
“We are now seeing positive momentum in building transparent and durable institutions to anchor the political economy, promote and support the development of the private sector, in order to increase the pace, depth, and spread of economic growth,’’ Faal said.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.
Guaranty Trust Bank plc, one of Africa’s foremost financial institution has been named the Best Bank in Africa 2019 by Euromoney at its annual Awards for Excellence, which held in London over the week.
The Bank was also named the Best Bank in Nigeria for a record ninth time, reflecting the Bank’s position as one of the best managed financial institutions in the country, with strong and focused leadership that keep the business in a constant state of re-invention and innovation.
Now in its 50th year, Euromoney is the leading publication for covering the growth of international finance. Euromoney’s Awards for Excellence are the awards that matter to the banks and bankers who matter. This year, Euromoney received almost 1,500 submissions from banks in an awards programme that covers 20 global awards, more than 50 regional awards, and best bank awards in close to 100 countries.
The Magazine’s Awards for Excellence celebrates the best banks around the world by recognizing institutions that have demonstrated leadership, innovation, and momentum in the markets they operate. In selecting its award recipients, Euromoney combines quantitative and qualitative data to honor institutions that have brought the highest levels of service, innovation, and expertise to their customers.
Key to the emergence of GTBank as the Best Bank in Africa and the Best Bank in Nigeria, is the Bank’s digital drive and its clarity of vision in reimagining the future of banks and banking. The Euromoney awards also recognized GTBank’s commitment to leading the future of banking as well as its consistent long-term strategy led by a senior management team that abhors complacency and keeps the business in a constant state of innovation.
Commenting on the Bank’s Euromoney awards, the Chief Executive Officer of GTBank, Segun Agbaje, said; “We are delighted and proud to win the Euromoney Awards for Africa’s Best Bank and Nigeria’s Best Bank. These awards reflect the progress we are making in delivering the best banking experience that captures what customers want in the world of today and tomorrow. They are also a testament to our leading role in driving world-class corporate governance standards, excellent service quality and innovation in Africa’s banking industry.”
He further stated that; “At GTBank, we are passionate about building the bank of the future by leveraging the best of technology to add real value to our customers’ lives, and these awards illustrate the hard work and commitment of our staff, management, and board towards achieving this goal.”
GTBank has consistently played a leading role in Africa’s banking industry. The GTBank brand is regarded by industry watchers as one of the best run financial institutions across its subsidiary countries and serves as a role model within the financial service industry due to its bias for world-class corporate governance standards, excellent service quality, and innovation.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.
MSMEs in Nigeria has grown to 41.543 million in 2017, according to the National Survey of Micro Small & Medium Enterprises (MSMEs). The 2017 National Survey of MSMEs covered enterprises in Nigeria employing below 200 persons, which are MSMEs and was conducted in all the 36 states of the federation and Nigeria’s Federal Capital Territory, Abuja.
Here Is A Further Break Down And The Implication Of This Number
The figures represent micro, small and medium scale businesses as at December 2017.
Nigeria had about 37 million MSME in 2013. The 41 million MSME number shows an increase of three million new MSMEs.
The statistics came from Nigeria’s National Bureau of Statistics (NBS) which launched the National Survey of Micro Small & Medium Enterprises (MSMEs) 2017 yesterday in Lagos.
The survey also showed that micro enterprises which employed less than 10 employees stood at 41.469 million, representing 99.8 percent, small enterprises employ 10 to 45 staff, 71,288 or 0.17 percent, while Medium enterprises with 50 to 199 staff were 1,793 or 0.004 percent.
According to the report, micro and small medium enterprises increased during the period under review, but medium scale enterprises dropped, which can be attributed to the economic recession the country witnessed in 2017.
From the statistics, most of the businesses are located in Lagos, Nigeria’s largest commercial city. While Lagos State had the highest numbers of enterprises across all classes, only three states, Katsina (36.4 percent), Rivers (21.7 percent) and Kaduna (18.l percent) recorded significant increases in enterprise numbers.
“There is a need for the government to pay a lot of attention to micro businesses because they have the largest share of employment, contributed to GDP growth and have the opportunity to create more jobs. During the period micro business grew to 41 million and if we can get half of them to produce one job, we will have 20 million jobs created, which is significant,” the director-general of Small and Medium Enterprises Development Agency of Nigeria (SMEDAN), Mr. Umaru Radda, said.
The survey which was supposed to be released in the fourth quarter of last year was delayed as a result of the election, according to the Statistician General of the Federation/CEO NBS, Dr. Yemi Kale.
The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) set up in 2003, was Nigeria’s government’s major response to tackling the problems of MSMEs in a coordinated fashion.
The MSME sub-sector has huge potential and the government should pay more attention to them than on large organization, by initiating friendly government policy in the sub-sector.
The figure above is so important that businesses would need to begin to readjust their strategies in order to remain in business.
With over 41 million businesses in Nigeria serving a population of over 200 million, compared the United States’ 30 million small businesses serving a population of 327.2 million, this is a significant number, in terms of competition for loans, scramble for people with buying power and other limited resources. It would boost the economy, no doubt, but businesses should begin to look at more creativity in order to retain their existence. Of course, most of the small businesses may only be existing on paper. But until that is proved, the figures still remain the facts.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
Startups in Nigeria who do not have landed property but movable assets as securities for loans now have an alternative. Following the passage of Secured Transactions in Movable Assets Act into law, owners of small businesses can now borrow from banks and other financial institutions, even though they do not have any lands or buildings. All they need to do is to first register the movable assets such as cars, or any property of worth (which property is not land or building or fixed property) with the National Collateral Registry.
This Is How It Works Under The Secured Transactions in Movable Assets Act
This law allows small, medium business owners or startups to create security interests in respect of both their present and future movable assets.
Movable collateral under the Collateral Registry Regulation includes equipment, inventory, accounts receivable, household items, bank accounts, farm products, motor vehicles, boats, planes, consumer goods, trees that have been severed and oil, gas or minerals that have been extracted, etc.
You can register your interest over such assets as you do when you want to perfect titles to land at the Land Registry.
In this case, all that is required is that you take steps to perfect the interests in that asset.
The law has created a National Collateral Registry where you can now perfect the assets.
An asset is deemed perfected when a financial statement in respect of such a security interest has been registered with the National Collateral Registry.
The registered financial statement is valid until the expiration of the terms specified in the financial statement.
The creditor who registers the Financial Statement is issued with a confirmation statement by the registrar.
Where two security interests have been perfected in respect of the same asset, the first to be registered would rank first.
Using the confirmation statement and other documents, you may then apply for loans at a bank in Nigeria under the National Collateral Registry Scheme or theSecured Transactions in Movable Assets Act
Why This Is So Different From Normal Collateral Requirements From Banks
Previously, before the passage of the Secured Transactions in Movable Assets Act, small and medium scale businesses in Nigeria were often required to present their landed property or buildings (which they hardly had) in order to procure a loan.
Now, persons who have movable assets in Nigeria such as equipment, inventory, accounts receivable, household items, bank accounts, farm products, motor vehicles, boats, planes, consumer goods, trees that have been severed and oil, gas or minerals that have been extracted can now borrow loans from banks without landed property being demanded as collateral. All they need to do is to register the asset with the National Collateral Registry in order to create security interests over the assets.
Registration will remain in the Collateral Registry until the expiration of the term indicated in the financing statement, or until the registration is canceled (discharged). The period of registration does not, however, need to be the same as the duration of the loan, as there may be an expectation between the debtor and secured creditor that the loan will be renewed. Six months after the expiration of a registration, it shall cease to be publicly searchable and will be moved to an archive, from which it can be retrieved only by the Collateral Registry staff.
Where the debtor fails to pay back the loan, the secured creditor has a right to enforce its security interest in the collateral.
Key Things To Have In Mind About The Secured Movable Assets In Question
With this law, individuals in Nigeria may apply for a loan as a group. They may use their assets that they own individually or jointly as collateral for the loan.
Using immovable property, such as land or building carries certain unwanted risks for the debtor. It is therefore reasonable that a debtor will be more comfortable with losing equipment or other movable property than with losing a house in case of a default.
Currently, it costs N1000 for the registrations of initial financing statements, and N500 for renewal or amendment. However, these fees may change from time to time, so it is recommended that you check the Collateral Registry website for the up-to-date information.
Under the Collateral Registry Regulation, the secured creditor may enforce its security interest by taking possession of the collateral or rendering the collateral inoperative. Subsequently, it may dispose of the collateral through a sale. The Collateral Registry Regulation permits the secured creditor to proceed extra-judicially without having to obtain a court order before repossessing the collateral. The secured creditor may also choose to apply to the court to authorize enforcement.
Where the proceeds of the sale of the secured assets are insufficient to satisfy the loan, the debtor will be liable for the shortfall. The secured creditor has a right to obtain the balance from the debtor directly or may proceed against other assets of the debtor. The secured creditor may initiate legal action against the debtor for the balance and get a judgment for the amount owed. It may also choose not to take legal action against the debtor and just write off the loss on the loan.
Collateral Registry Nigeria
Are Secured Transactions In Movable Assets Already Taking Place?
To a large extent. The Central Bank of Nigeria (CBN) recently disclosed that the National Collateral Registry has assisted over 154,000 Micro, Small and Medium Enterprises (MSMEs) to access N1.2 trillion loans from 628 financial institutions.
The report showed that the number of MSMEs in Nigeria that have used their movable assets to obtain loans from financial institutions through the NCR rose to 154,827 as at December 19, 2018, from 100,049 in the first year, 2017, indicating the increase of 54 percent. The report also showed that 22,251 of the MSMEs were female entrepreneurs. Further breakdown showed that 146,777 of the borrowers were individuals, 3,416 were micro businesses, 2,169 were medium businesses, 1,777 were small businesses and 687 were large businesses.
The number of participating Deposit Money Banks (DMBs) rose to 21 from three in 2017, microfinance banks rose to 551 from 96, Development finance institution rose to four (4) from one(1), merchant banks rose four from one, finance companies rose to 13 from 2 while non interest bank rose to one from zero in 2017.
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
Good day for South African businesses, bad day for their Nigerian counterparts. This is because there are still so many issues surrounding equity crowdfunding in Nigeria. Below, we discuss the legal implications of crowdfunding in Nigeria more intensely.
Crowdfunding sometimes appears the only alternative for start-ups, in the face of stifling interest rates on loans from banks and financial institutions, and lack of funds from family and friends as well as the absence of venture capitalists and angel investors. Crowdfunding is a way of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet. Here is a quick grasp of reality.
The United States
The United States’ Securities and Exchange Commission has made a lot of rules on Crowdfunding which will enable eligible companies to offer and sell securities through crowdfunding. Thus in the US, all transactions under Regulation Crowdfunding take place online through an SEC-registered intermediary, either a broker-dealer or a funding portal. A company is to raise up to a maximum aggregate amount of $1,070,000 through crowdfunding offerings in a 12-month period. However, there is a limit on the amount individual investors can invest across all crowdfunding offerings in a 12-month period. Securities purchased in a crowdfunding transaction generally cannot be resold for one year.
South Africa.
There is no substantial legislation on crowdfunding in South Africa, except that equity crowdfunding is a form of securities. However, South’s Africa’s first equity crowdfunding platform Uprise.Africa was launched after being told by the Financial Services Board (FSB) that the platform does not fall foul of the Collective Investment Schemes Act, the platform’s founder and COO Patrick Schofield said. Inge Prins, the Chief Marketing Officer Uprise.Africa, had hinted the platform, in one of its numerous success instances, paid out investment funds to a local brewery, Drifter Brewery following a successful campaign that raised R3,889,000 (US$293,000), far exceeding its stated goal by almost R1,000,000.
Understanding How Crowdfunding Works
Crowdfunding refers to raising money from the public (who collectively form the “crowd”) primarily through online forums and social media.
Crowdfunding models include: Donation-based crowdfunding (in which donors are not typically granted anything in return for their donation)
Rewards-based crowdfunding (in which backers contribute funds in exchange for some reward–in many cases the item produced by the campaign)
Equity crowdfunding (Equity crowdfunding refers to raising money from small public investors (who collectively form the “crowd”) primarily through online forums and social media. In exchange for relatively small amounts of cash, investors get a proportionate slice of equity in a business venture).
Debt/lending crowdfunding (in which lenders provide money and expect their loan to be paid back with interest).
Crowdfunding For Private Companies Cannot Work Unless Nigeria’s Companies And Allied Matters Act (Nigeria’s Chief Company Legislation) Is Amended.
The idea of having crowdfunding for companies is that the general public would be allowed to contribute towards the formation of the companies. Now while the public can contribute to an idea, the same is not possible for a company. By section 22(5) of Nigeria’s CAMA, it is impossible for a private company to invite the members of the public to subscribe to its shares. It is also impossible for equity crowdfunding to work because the idea of equity crowdfunding is that the public funds the formation of the company expecting to be repaid their contributions by way of shares in the company.
Again, under Section 22 of CAMA, the maximum number of persons a private company shall have shall not exceed fifty, not including persons who are bona fide in the employment of the company.
Nigeria’s Securities and Exchange Commission and Crowdfunding
The Commission determines governs all company securities in Nigeria. Section 13 of the Investment and Securities Act (the chief Act that regulates securities of companies in Nigeria) empowers the Commission to:
regulate all offers of securities by public companies and entities;
register securities of public companies;
prepare adequate guidelines …necessary for the establishment of securities exchanges and capital trade points.
register and regulate the workings of venture capital funds and collective investments schemes in whatever form;
Consequently, by Section 67(1) of the Act, no person shall make any invitation to the public to acquire or dispose of any securities of a body corporate or to deposit money with anybody corporate for a fixed period or payable at call, whether bearing or not bearing interest unless the body corporate concerned is-(a) a public company, whether quoted or unquoted, and the relevant provisions of Act are duly complied with.
To this effect, the SEC, which was empowered to do so, has gone ahead to give the listing requirements for any company in Nigeria to include that the company must be registered as a public limited company with no restrictions on the transfer of fully paid shares; have a minimum of three (3) years operating track record; have a pre-tax profit from continuing operation of not less than N300million cumulatively for the last three (3) fiscal years and a minimum of N100 million in two (2) of these years. Hence, since equity crowdfunding is ideally a thing for new, mostly private companies limited by shares, there is no way any of them would be able to fulfill the listing requirements, to be able to offer their securities to the public.
The continued ban on equity crowdfunding in Nigeria by SEC, therefore, is not a surprise, even though the Commission said it is looking at the crowdfunding rules in the US and Canada.
The SEC believes that crowdfunding cannot be effective in Nigeria in the meantime because of a lack of rules.
Bottom Line
While equity crowdfunding remains banned in Nigeria, donation and reward-based crowdfunding are however excluded from the SEC’s regulatory remit. This explains why there are a number of donation crowdfunding platforms, and not one for equity crowdfunding. Nigeria’s first equity-based crowdfunding platform, Malaik, launched in 2015 is now down and is up for sale at $3795 on HugeDomains.com, while other donation-based platforms such as Donate-ng.com, and Imeela have since carried on.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
