As the global economy transitions from a dependence on natural resources, and the focus shifts towards innovation in the provision of services, some of the most valuable companies today are privately owned Financial Technology (Fintech) companies like Opay, Interswitch and Flutterwave. With valuations of over a billion US Dollars, these 'unicorns' make the countries where they are located, attractive destinations for foreign investment. Today, there are 5 unicorns in Africa, and Nigeria alone is home to 4 of them. The only one of those which is not a Fintech company is Jumia. The success of these 'big' companies has unsurprisingly catalyzed the proliferation of numerous hopefuls, ambitious to join the coveted rank of unicorn.

Presently, Nigeria has over 200 Fintech companies operating within the payment sector, to enhance business transactions. The Fintech industry is highly regulated in Nigeria, with major regulators like the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC), constantly monitoring and circumscribing their activities. With very low retail investor confidence in the Nigerian equity capital markets space since 2008, companies like Cane Systems Technology Limited, Arise Top Technologies Limited, and Drove Technologies Limited's1 business model is hinged on facilitating direct access for Nigerians to invest in the securities of companies listed on exchanges in other jurisdictions. The very nature of this business means that regulatory interest in them is always going to be high. As a result, these companies have had to constantly struggle with navigating the web of requirements, guidelines, circulars, directives, and frameworks, churned out by their regulators on a frequent basis, to ensure that compliance with all of them, while still trying to be profitable.

In the past six months alone, a considerable number of directives and guidelines have been issued to regulate the Fintech industry. For instance, on 8th April 2021, the SEC, in a circular titled "Proliferation of Unregistered Online Investment and Trading Platforms Facilitating Access to Trading in Securities Listed in Foreign Markets" instructed that only foreign securities listed on any Exchange registered in Nigeria may be issued, sold, or offered for sale or subscription to the Nigerian public. Additionally, on 12th January 2021, the CBN released a circular detailing a "Framework for Regulatory Sandbox Operations" requiring all deposit money banks, mobile money operators and payment service providers, including Fintech companies to conduct live tests of new innovative products, services, delivery channels or business models under the supervision of the CBN. Likewise, on 5th February 2021, the CBN issued a circular to Deposit Money Banks, and Financial Institutions to close bank accounts belonging to persons and or entities transacting in cryptocurrency or operating cryptocurrency exchanges. This circular instructs that dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges is prohibited (the 'crypto ban'). The crypto ban saw hordes of notable Fintech companies scrambling to comply promptly with the directive and trying to reassure their customers and platform users that the quality of the services would not be (significantly) affected by the surprise directive. Almost unsurprisingly, on 17th August 2021, the CBN got an Order from the Federal High Court (FHC) sitting in Abuja, directing the freezing of the bank accounts of some Fintech companies for 180 days, pending the conclusion of investigations by the CBN. According to the CBN, these Fintech companies contravened the directive prohibiting trading in cryptocurrencies and utilizing foreign exchange (FX) sourced from the Nigerian FX market for purchasing foreign bonds and shares. It is also noteworthy to mention that the action instituted in the FHC, was adjourned to 20th February 2022 for Hearing (a six-month adjournment).

The action of the CBN could be attributed to concerns by the Federal Government that cryptocurrencies are susceptible to use for money laundering, financing terrorism, and other criminal activities. More so, because these companies provide trading platforms and or investment applications facilitating direct access to securities listed on exchanges in other jurisdictions, the FX deals transacted by the companies were suspected to be a significant contributor to the devaluation of the Naira.

The concerns of the Federal government are understandable, and the CBN is authorized by section 97 of the Banks and other Financial Institutions Act (BOFIA) 2020 to institute exparte (without notice to the other party) applications at the FHC to freeze account(s) of individuals/ entities held with any financial institution, where the CBN governor reasonably believes that transactions undertaken using such accounts may involve the commission of criminal offences. The freezing orders were obtained on grounds of reasonable suspicion that the affected Fintech companies were allegedly complicit in illegal trading, in line with the provision of the law.

Notwithstanding the validity of the CBN's concerns, one wonders whether these regulations are attentive to the need to promote a conducive business environment for Fintech companies to flourish, while simultaneously ensuring that the stability of the financial market is not compromised. What is more, the judiciary, being the arm of government to whom the aggrieved companies and the general public should naturally turn to for redress, is itself not helping matters. Adjourning matters of such economic sensitivity for six months is indicative of an inattentiveness and apathy to the business climate of the Fintech environment in Nigeria.

The Nigerian government is gaining notoriety for adopting policies and taking stances that detract from the ease of doing business in the country. This is very concerning, at a time when significant advancements are being made globally, and the manner in which business is conducted is evolving daily. If there is anything that one can be certain of, it is that stakeholders and foreign investors in Fintech in Nigeria are watching and anxiously waiting to see the outcome of this saga. Whatever the FHC decides will almost certainly shape the future of the Fintech industry, and Nigeria's desirability as a destination for foreign investment.


1. The names of the companies mentioned are pseudonyms and do not reflect the actual names of operators in the Fintech market.

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