The financial services and products offered in Nigeria have changed significantly in recent years as a result of scientific and technological innovation and ever-evolving consumer behaviour and needs. In turn, this has resulted in a proliferation of new fintech companies.
‘Fintech’ generally refers to the various technologies and innovations used to provide financial services to consumers in competition with traditional banking services. The term also refers to companies that employ technology, software and algorithms to create innovative financial products that provide consumers with access to cheaper, faster and more efficient financial services. Such companies are essential if Nigeria is to achieve 100% financial inclusion, as they:
- provide financial services to the unbanked part of society;
- offer new and alternative products and services to consumers;
- and offer new investment opportunities to entrepreneurs.
Due to the value of the fintech sector and the impact that fintech companies and products have had on society, financial services regulators worldwide have been left to determine how best to regulate this industry in a way that encourages innovation while protecting consumers, investors and the economy. Areas of concern include data protection, cybersecurity, cross-border transactions, principles of contract, exchange control, taxes, money laundering, fraud and terrorism financing.
Current Regulatory Framework
Like many other countries, Nigeria must decide how to regulate its growing fintech sector. The Nigerian regulators have reiterated their commitment to encouraging innovation and recognise that fintech could be a major driver of economic growth as well as job and wealth creation. As such, they have been cautious in their approach to regulation. For example, in response to the significant interest in cryptocurrencies in 2015 and 2016, the Nigerian Securities Exchange Commission and the Central Bank of Nigeria (CBN) issued public statements and circulars advising the public to take care when investing in cryptocurrencies and barring Nigerian financial institutions from engaging in cryptocurrency transactions. In addition, the Nigerian Securities and Exchange Commission has suggested that crowdfunding activities could be illegal.
This article was originally published by the International Law Office.