Nigeria—Africa’s largest economy and its most populous state—is poised for incredible growth in fintech, but it continues to face serious structural challenges. Forty percent of Nigeria’s population lives in poverty—and 25% are vulnerable—due to inequality, a lack of job opportunities and social and political turmoil. Amidst the COVID-19 pandemic and rapid population growth, approximately seven million more Nigerians were estimated to have fallen into poverty in 2020.1 Meanwhile, Nigeria’s oil-dependent economy contracted by 1.8% in 2020 in response to the health crisis, capital outflows, heightened risk aversion, a slowdown in remittances and a global drop in oil prices.2 The International Monetary Fund (IMF) predicts growth rates of 2.5% and 2.6% in 2021 and 2022, respectively.3
Nigeria’s rapidly growing fintech ecosystem could be key in promoting economic diversification, financial inclusion and other development goals. The West African state is home to about 200 fintech startups,4 which raised approximately USD$330.5 million in the first half of 2021—over double the sector’s earnings in 2020.5 Companies like Opay and Palmpay have made international headlines,6 and digital money is estimated to contribute USD$3.7 trillion to Nigeria’s GDP by 2025.7 Despite fintech’s optimistic outlook, overall digitalization in Nigeria has lagged. According to the Digital Intelligence Index (DII), developed by Mastercard and Tufts University’s Fletcher School, Nigeria ranks last of 90 economies in digital evolution momentum.
This year, regulators are focused on central bank digital currency (CBDC), open banking, a national digital ID, a cryptocurrency ban and a fintech regulatory sandbox. To enable further digitalization, regulators must strengthen national data protection standards and digital infrastructure. Cheaper, faster and more accessible digital infrastructure will help to ensure that the digital divide does not widen. Less than 50% of the Nigerian population has access to the internet,8 although smartphone penetration is steadily increasing.9 Cybersecurity remains another key challenge, as less than 25% of Nigerian businesses have an IT security provider or staff member.10
Financial Regulatory Authorities
The Central Bank of Nigeria is the central bank of Nigeria.
The National Information Technology Development Agency (NITDA) enforces the Nigerian Data Protection Regulation (NDPR).
The Securities and Exchange Commission (SEC) regulates the Nigerian capital market.
Policy, Laws and Regulations
National Digital ID, 31 October 2021
Nigeria’s quest to institute a national digital ID, which began seven years ago, has been fraught with controversy. By 31 October 2021, Nigerians were required to have linked their national identity numbers (NINs) with their mobile numbers, a move that has been met with outcry over data protection and privacy concerns. The 11-digit NIN, the bedrock of the national digital ID system, aims to tamp down on insurgency and other crimes. Per an August 2021 statement by the National Identity Management Commission, only about 60 million citizens and legal residents—in a country of 200 million—have enrolled for an NIN.11 In February 2021, the Minister of Communications and Digital Economy communicated a plan to replace the bank verification number (BVN) with the NIN, as the BVN can only be used by people with bank accounts.12
Central Bank Digital Currency, 25 October 2021
The central bank launched its CBDC, the eNaira, making Nigeria one of the first countries in the world to introduce a digital currency. The eNaira, which supplements cash and coins, aims to bolster financial inclusion and make remittances cheaper and faster. The project was announced in February, after the central bank banned banks and other financial institutions from handling and facilitating cryptocurrency transactions.13 Still, Nigerians continue to gravitate towards cryptocurrencies as inflation climbs. Cryptocurrencies also offer Nigerians an easier way to make cross-border transactions, as US dollars can be difficult to obtain in the state.14
Approved Standard Operating Guidelines for BVN Matching System Version 2.0, 29 March 2021
The Nigeria Inter-Bank Settlement System (NIBSS) issued the Approved Standard Operating Guidelines for BVN Matching System Version 2.0 (the “BVN Guideline”), non-bank entities would no longer be able to utilize the bank verification number (BVN) system for the identity verification of new customers.15 The move has had a negative effect on Nigerian fintechs, who were previously allowed to use the system. It is unclear why the NIBSS, which is owned by the central bank, issued the new rule, but there is speculation that it intends to attract more participants to the national identity number (NIN) system.16
Regulatory Framework for Open Banking, 17 February 2021
The central bank issued the Regulatory Framework for Open Banking. According to the circular, “The framework establishes principles for data sharing across the banking and payments ecosystem, which will promote innovation, broaden the range of financial products and services, and deepen financial inclusion. The regulatory framework stipulates, amongst others, data and Application Programming Interface (API) access requirements, principles for API, data, technical design and information security specifications. Operational guidelines related to the framework will be communicated in due course.17” An open banking regime will be instrumental in driving down costs, encouraging innovation and offering consumers more choice, which will expand access to financial services amongst Nigeria’s unbanked population.
Cryptocurrency Ban, 05 February 2021
The central bank issued a circular banning banks and other financial institutions from dealing in and facilitating cryptocurrency transactions. The bank claimed that violations would incur “severe regulatory sanctions.18” Lamido Yuguda, the director-general of the Nigerian Securities and Exchange Commission, stated that the ban has caused market disruptions, and that the SEC and central bank were developing a regulatory framework for cryptocurrencies. The ban has not stopped cryptocurrency transactions in Nigeria, however, as investors have flocked in rising numbers to peer-to-peer channels.19
Fintech Regulatory Sandbox, 13 January 2021
The central bank approved a framework for regulatory sandbox operations, which seeks to promote competition, foster the development and adoption of innovative technologies, strengthen confidence in the financial system and bolster financial inclusion. The sandbox is open to fintechs operating in payments.
Lagos State Data Protection Bill, 25 October 2021
The Lagos State Data Protection Bill passed the Lagos State Assembly’s second reading. If enacted into state law, the bill would establish the Lagos State Data Protection Commission, impose obligations on data controllers and data processors, create a Data Protection Register and codify the rights of data subjects. The bill will now proceed to the committee stage, during which the public may submit comments. After the committee has made a report, the bill will enter the third reading
1. “The World Bank in Nigeria.” The World Bank, 03 November 2020. https://www.worldbank.org/en/country/nigeria/overview#1.
2. “Nigeria Economic Update: Resilience through Reforms.” The World Bank, 15 June 2021. https://www.worldbank.org/en/country/nigeria/publication/nigeria-economic-update-resilience-through-reforms.
3. “FAULT LINES WIDEN IN THE GLOBAL RECOVERY.” International Monetary Fund, July 2021. https://www.imf.org/en/Publications/WEO/Issues/2021/07/27/world-economic-outlook-update-july-2021.
4. Nwokoma, Chimgozirim. “Over 150 Nigerian fintech startups reportedly generate annual revenues of over $5 million.” Techpoint Africa, 11 May 2021. https://techpoint.africa/2021/05/11/nigerian-fintech-startups-revenue/.
5. Hodgson, Leah. “Is Africa fintech's next frontier?” PitchBook, 06 August 2021. https://pitchbook.com/news/articles/Africa-fintech-startups-unicorns.
6. Kanife, Eljike. “Nigeria’s Opay is the only African fintech listed in the 2021 Top 250 by CB Insights.” Technext, 11 October 2021. https://technext.ng/2021/10/11/nigerias-opay-is-the-only-african-fintech-listed-in-the-2021-top-250-by-cb-insights/.
7. Ayileka, Ayomide. “Regulating Fintech space: Promoting innovation or stifling growth?” The Nation, 11 October 2021. https://thenationonlineng.net/regulating-fintech-space-promoting-innovation-or-stifling-growth/.
8. “Community-led approaches to connectivity: How CITAD is bridging the digital divide in northern Nigeria.” Association for Progressive Communications, 26 August 2021. https://www.apc.org/en/node/37551.
9. “Mobile internet user penetration in Nigeria from 2016 to 2026.” Statista, 11 July 2021. https://www.statista.com/statistics/972900/internet-user-reach-nigeria/.
10. Uba, Josephine. “Nigeria: The Most Serious Cyber Security Threats Facing Businesses In Nigeria And How To Mitigate Them.” Mondaq, 23 August 2021. https://www.mondaq.com/nigeria/security/1104438/the-most-serious-cyber-security-threats-facing-businesses-in-nigeria-and-how-to-mitigate-them.
11. Iruoma, Kelechukwu. “Nigerians are pushing back on a new law that mandates linking their national identity numbers to their mobile numbers.” Thomson Reuters Foundation News, 05 August 2021. https://news.trust.org/item/20210805104557-zunak.
12. Diya, Olubusola Oyeyosola et al. “Nigeria: Fintech Half-Year Review 2021 – Recent Regulatory And Legal Developments In Nigeria.” Mondaq, 05 August 2021. https://www.mondaq.com/nigeria/fin-tech/1098176/fintech-half-year-review-2021-recent-regulatory-and-legal-developments-in-nigeria?type=popular.
13. “Nigerian central bank to launch digital currency within days – governor.” Reuters, 07 October 2021. https://www.reuters.com/technology/nigerian-central-bank-launch-digital-currency-within-days-governor-2021-10-07/.
14. Ohuocha, Chijioke and Libby George. “Crypto trading thrives in Nigeria despite official disapproval.” Reuters, 12 October 2021. https://www.reuters.com/article/crypto-currency-nigeria/crypto-trading-thrives-in-nigeria-despite-official-disapproval-idUSL8N2R31LA.
15. Diya, Olubusola Oyeyosola et al. “Nigeria: Fintech Half-Year Review 2021 – Recent Regulatory And Legal Developments In Nigeria.” Mondaq, 05 August 2021. https://www.mondaq.com/nigeria/fin-tech/1098176/fintech-half-year-review-2021-recent-regulatory-and-legal-developments-in-nigeria?type=popular.
16. Onaleye, Tomiwa. “CBN’s BVN Verification Ban: What it Means for Nigerian Fintechs and their Customers.” Technext, 09 April 2021. https://technext.ng/2021/04/09/cbns-bvn-verification-ban-what-it-means-for-nigerian-fintechs-and-their-customers/.
17. “Issuance of Regulatory Framework for Open Banking in Nigeria.” Central Bank of Nigeria, 17 February 2021. https://www.cbn.gov.ng/out/2021/psmd/circular%20on%20the%20regulatory%20framework%20on%20open%20banking%20in%20nigeria.pdf.
18. “Nigerian Crypto Ban Hasn’t Ended Use of Digital Currency.” PYMNTS, 12 October 2021. https://www.pymnts.com/cryptocurrency/2021/nigerian-crypto-ban-hasnt-ended-use-of-digital-currency/.
19. Avan-Nomayo, Osato. “Nigeria’s SEC says central bank’s crypto ban disrupted the market.” Cointelegraph, 16 April 2021. https://cointelegraph.com/news/nigeria-s-sec-says-central-bank-s-crypto-ban-disrupted-the-market.
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Last updated: November 2021