Lagos, Nigeria


Law and Technology for Growth



Just last night, a friend of mine called to discuss the challenges facing the Technology (Tech) Startups in Nigeria and what we could do to improve the situation. During the discussion, we touched on several matters but dwelled most on some fiscal policy issues affecting Tech Startups.

The whole world seems to be moving forward, encouraging Tech Startups, embracing innovation while promoting entrepreneurship, but for some rather strange reasons Nigeria seems to enjoy taking the back seat. Going forward, this publication will take a brave dive in addressing some of the underlying reasons behind the recent regulatory intervention in financial technology services in Nigeria.

This publication is set out to achieve two things: first is to provide guidance on how to set up a Mobile Money Operation (MMO); and the second being to provide knowledge on how regulations for Tech Startups, particularly in the financial industry, can be navigated. It will further explore the Guidelines on Mobile Money Services in Nigeria (‘the Guideline’) issued by the Central Bank of Nigeria (CBN) in its effort to promote a sound financial system in Nigeria.

According to IGI Global, a Mobile Money Operator (MMO) is a licensed mobile money service provider that develops and deploys financial services through mobile phones and mobile telephone networks. Mobile money services include cash-in, cash-out, remittances, utility/bill payments, airtime top-up, savings, credits and so on.

The Guideline identified two models of mobile money services for operation in Nigeria and they are the Bank-led model (wherein the lead initiator is a bank or a consortium of banks) and the Non-Bank led model (a corporate organization duly licensed by the CBN as lead initiator).

Considering the nature of the bank-led model which would involve owning a bank and going through all the tedious and expensive regulatory requirements, it is not the suitable model for (aspiring) young Tech Entrepreneurs. Hence, the Non-Bank led model is more suitable for financial technology (fintech) startups.

The Guideline makes one thing very clear, which is that every such operation involving the Non-Bank led model must be a Corporate body, therefore, the requirements of the Law regarding the establishment of a Corporate entity apply. Check this link for the step by step approach for registering a company (public or private).

Although the CBN has severally identified the digital financial technology services as greatly useful for the reduction of barriers to financial inclusion as well as contributing substantially in boosting a country’s Gross Domestic Product (GDP), as stated by the CBN Governor, Mr Godwin Emefiele on various occasions, the CBN still chooses the Bank-led model for the protection of Users from losses (which is very fair) but also stifling the growth of the Non-Bank led model which is where the Startups would naturally operate; stifling innovations. However, we have seen a few MMOs thrive in Nigeria. So how do they do it?

The Guideline further highlights the ‘business rules’ for MMOs using the Non-Bank led model, which are that:

  1. MMOs shall be licensed by the CBN and the requirements for the Mobile Money License are:
  2. Certificate of Incorporation (what you get from the Corporate Affairs Commission- CAC after registering your company)
  3. Company’s profile and functional contact e-mails and telephone numbers
  4. Memorandum and Articles of Association
  5. Shareholding structure of the Company
  6. Return on Allotment of Shares and Particulars of Directors
  7. Curriculum Vitae of the Management of the Company
  8. Organogram (the Organizational Chart) of the company
  9. Business plan to include: nature of the business; features of the scheme; securities features that will be put in place; 3 years Financial projections for the company; Transaction and other charges that will be borne by customers; profit sharing agreement among the parties; diagrammatic illustration of transaction flows.
  10. Information Technology Policy of the Company including: Privacy Policy; Information Ownership/Disclosure/Loss Policy; Backup and Restore Policy; Network Security Policy; Encryption Policy; Confidential Data Policy; Password Policy; Third Party Connection Policy; Incidence Response Policy; Physical Security Policy.
  11. Enterprise Risk Management Framework (here, you have to understand what risks you face such as credit and settlement risk, business continuity risk and how to manage the risk)
  12. Contingency and Disaster Recovery Plan (Business Continuity Programme)
  13. Draft agreements with the Technical Partners, Participating banks, Switching company or companies, Merchants, Telecommunications (Telcos) and any other party.
  14. Tax Clearance Certificate for three (3) years of the Company
  15. Project Deployment Plan (time, location, operation etc.)
  16. Payment of non-refundable Application fee of One hundred thousand naira made payable to the CBN via the Real Time Gross Settlement – RTGS Third Party Transfer
  17. Evidence of Shareholders’ Fund of ₦2 billion before a license is issued. This particular requirement has been a knot for so many, discouraging them from actualizing their innovations. The question is, ‘How and where does the CBN expect fintech companies to secure ₦2 billion, particularly, given that most are startups?’ How feasible is it for startups to get investors that are willing to invest such sum?

An alternative some institutions have been opting for is the Super-Agent license which requires a minimum Shareholders’ Fund of ₦50 million (more information later) according to the Exposure Draft on the Licensing Framework for Super-Agents.

It is important to note that the CBN license terms and conditions may be reviewed from time to time.

  • MMOs shall be issued a unique Scheme Code by the Nigeria Inter-Bank Settlement System Plc (NIBSS) for managing interoperability.
  • MMOs shall be issued short codes by the Nigeria Communications Commission (NCC).

The other documents to be submitted along with the Application Form for Short Code to be issued by the Nigerian Communications Commission (FORM STDS/003) are:

  1. Photocopy of the applicant’s Value Added Service (VAS) license/Offer Letter & Receipt of Payment issued by the Commission or CBN License for Mobile Payment Operators MPO’s.
  2. Comprehensive List of Telecommunication Equipment associated with the service (Names, Model and Manufacturer) together with an evidence of Type Approval from the Commission.
  3. Network Architecture (showing how you intend to Connect with the Network Operators).
  4. Utilisation plan of previously allocated short code if any (Any service provider applying for short code range expansion must supply this information)
  5. Evidence of payment of ₦1,000 for Application form and ₦10,000 processing fee payable in Bank Draft in favor of the Nigerian Communications Commission
  6. Any other Additional Documents (MOU e.t.c)
  • MMOs shall ensure that all telecommunication equipment are type approved by the NCC.
  • MMOs shall register users of its scheme based on technology standards and the requirements of the Guidelines, which include:
  • MMOs ensuring that the minimum technology standards for communication are met (Interoperability and Interconnectivity).
  • MMOs ensuring that only secure channels are used in providing mobile money services.
  • The mobile money services ensuring non-repudiation.
  • MMOs shall consistently execute payment instruction and in the event of failure, reversal shall be immediate and automatic. They must also ensure that Consumers get immediate value for every successful transaction.
  • The user interface shall not provide access to confidential information, PIN shall be encrypted at the point of entry and it shall at minimum adhere to the security requirement stated in the Guideline.
  • MMOs shall ensure that the registration processes within its mobile money scheme fulfil the entire Know Your Customer (KYC) requirements specified in the Guidelines on Mobile Money Services in Nigeria.

It is noteworthy to state that the Guideline which served as the foundation for this article shall be reviewed from time to time by the Central Bank of Nigeria.

CBN financial inclusion goal 2020 is to have 80% of the Nigerian population financially included. The CBN plans to make this vision a reality by working with Banks, MMOs and Super Agent Networks over the years and this has not proven efficient for reasons to be addressed in subsequent publications. Now, with just a year to go, many people question if the goal 2020 is achievable. There is therefore an urgent need to accelerate the process, which many Stakeholders believe to be possible if the Telcos, considering their capacity and wide reach, are permitted to actively participate in the race to financial inclusion.

Getting the license for the business is one thing, running the business sustainably is another thing. This Publication has so far focused on the various crucial guidelines and Licenses, but running a Mobile Money Business goes beyond the regulations. Here are some other things that should be put into consideration:

Technology Capacity: Building the payment service, acquiring the best talent to build your Applications are of great importance.

Vendors: You can only be as reliable as the person you rely on. NIBSS and Interswitch are the leading players in the switch business. All banks today use NIP (NIBSS instant Payment) for interbank transfers, so that is your best shot. You must keep in mind that downtimes are a normal part of running a business, so brace up.

Logistics: The foot soldiers, acquiring agents, KYC, marketing… all these are crucial especially when you are new in the business and you are yet to build the brand and the name. This business is all about trust.

Customer Satisfaction: This is also very crucial to the success of building a MMO business. You must keep in mind that your Customers are not interested in understanding the technicalities, they just want the result you promised. You must therefore ensure you resolve issues without delay, remembering always that you are dealing with people’s money.

Lastly, Reconciliation: You need to start this from day one. Get an accountant as soon as possible. A major mistake fintech startups make is to underestimate the need for an accountant.


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