Approaches and developments
The Financial Technology ("Fintech") industry in Nigeria has continued to witness notable and remarkable developments in 2023. The number of startups in Nigeria grew from 144 recorded in 2021, to 217 in 2023.1 Nigeria retained a top spot across African countries for early-stage Fintech investment in 2023, with 49 deals out of a total of 116 transactions in Africa. FrontEdge, a Nigerian startup providing finance, secured up to USD10 million in its funding round in November 2023, topping the highest seed funding across Africa.2
Nevertheless, the Fintech industry witnessed a decline in funding and investment for various reasons.3 While it still ranked top for the number of funded startups, Nigerian startups raised circa USD400 million in 2023, 16.6% of the continent's total, dropping from first to fourth place for total funding. This funding total is a 59% decline compared to 2022, when the startups accumulated circa USD976 million, 29.3% of Africa's total – a staggering decline.4 Notwithstanding the decline in funding, Nigerian Fintech Nomba and e-health venture Helium Health maintained a significant development as they raised USD30 million each (pre-Series B, and Series B, respectively).
The Fintech landscape witnessed various events in 2023. Nigeria had its general elections in February 2023, which came with a change in government across all levels of government, a change in regulatory committees and a dish out of new regulations and policies. The Central Bank of Nigeria ("CBN") for one, mandated Nigerians to deposit old currencies in banks for new ones. The currency redesign came with a consequent cash crunch nationwide and Fintechs, particularly payment platforms witnessed a rise in onboarding of new customers and reuniting with old customers. Digital banking transactions were on the rise with the Nigerian Inter-bank Settlement System ("NIBSS") recording in February 2023, 183.7 million transactions significantly higher than the 108.1 million transactions recorded in January 2023.5
Regulatory approaches in Nigeria have also witnessed more pragmatic approaches and solutions in recent years, including the first half of 2024. In July 2023, the Federal Competition and Consumer Protection Commission ("FCCPC"), in a bid to implement its guidelines for the registration of digital lending established in 2022, permanently delisted two digital money lending companies along with their respective applications, for violating customer privacy and engaging in fraudulent activities. Additionally, in August 2023, the FCCPC in accordance with its regulations, ordered Google LLC to remove the mobile applications of unlicensed digital lenders from its playstore and prohibit payment gateways or services from providing or continuing services to the affected businesses.
The regulatory approach has also evolved to more prominently recognise digital and virtual assets. This was further evident with the CBN lifting the ban on commercial banks from collaborating with digital/virtual assets providers and mandating compliance with the Securities and Exchange Commission ("SEC") regulation on virtual and digital assets service providers. More recently, in June 2024, the SEC established a regulatory incubation programme for onboarding of virtual asset providers in Nigeria. The Finance Act, 2023 also expanded the scope of chargeable assets to include digital and virtual assets, formally recognising them in Nigeria.6 There has also been ongoing discussions on the appropriate regulation of digital and virtual assets in the country. Regarding the payment system in Nigeria, in the first half of 2024, the CBN, in a bid to promote the smooth functioning and liquidity of the FX markets, released several guidelines to regulate international money transfer services and diaspora remittances in Nigeria.
Overall, Fintech continues to foster the transformation of the traditional banking system in Nigeria at an unprecedented pace and continues to advance the reach and efficiency of financial services within and beyond the country.
Click the link to read - Fintech Laws and Regulations 2024 - Nigeria Chapter
Footnotes
1. Statista, "Number of Fintech Startups in Nigeria from 2017 to 2023", 2024, available at https://www.statista.com/statistics/1252523/number-of-fintech-startups-in-nigeria/#:~:text=Fintech%20startups%20 in%20Nigeria%202017%2D2023&text=In%202023%2C%20there%20were%20217,this%20sector%20 experienced%20an%20increase
2. https://fintech.global/2023/11/23/nigerian-startup-frontedge-bags-10m-for-trade-finance-growth/
6. https://www.pwc.com/ng/en/assets/pdf/nigeria-finance-act-2023.pdf
Originally published by Global Legal Group.
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