Licensing Requirements For Banks And Other Financial Institutions In Nigeria

Introduction

The financial sector in Nigeria is comprised of banks and other financial institutions. These entities are primarily regulated by the Central Bank of Nigeria (CBN) to ensure the security, stability and transparency of the financial system.

To guide companies wishing to operate in the financial services sector in Nigeria, we have set out in this newsletter, a table summarizing the licenses issued by the CBN and the requirements for obtaining them.

A. BANKS

Three major banking licenses are granted to banks upon meeting the specified requirements. These are:

S/N	NAME OF LICENSE	ACTIVITIES THE LICENSE PERMIT	LICENSING REQUIREMENTS	FEE AND CAPITAL REQUIREMENTS
1.	Commercial Banking License	Taking deposits and maintaining accounts; retail banking services; foreign exchange and related services; providing treasury management and custodial services; acting as a settlement bank, etc.	A formal application to the Director of Banking Supervision at the CBN. A feasibility report/business plan providing information on ownership, management, operations, and finances. A list of the shareholders, directors, and principal officers of the banks and their particulars. Details of the bank's corporate structure, branch expansion plans, IT systems, and employee training. The bank's Memorandum and Articles of Association. Evidence of location of head office/branch building. Copies of letters of offer and acceptance of employment in respect of the management team. Such other information, documents and reports as the CBN may, from time to time specify.	Non-refundable application fee of ₦500,000. Licensing fee of N5 million Minimum share capital: International Operators – ₦500 Billion; National Operators – ₦200 Billion; Regional Operators – ₦50 Billion. The minimum share capital is to be placed in an escrow account at the CBN during the registration process.
2.	Merchant Banking License	Taking deposits from corporate clients above ₦100 million; providing finance and credit facilities to non-retail customers; dealing in foreign exchange and providing related services; acting as an issuing house and underwriting securities; debt factoring, treasury management, and custodial services; fixed income trading and proprietary investments services	A formal application to the Governor of the CBN. Feasibility report/business plan addressing the bank's projected activities, management, and projected revenues. Details of the bank's organizational structure, branch network, IT systems, and staff training. Memorandum and Articles of Association. Evidence of location of head office/branch building. Copies of letters of offer and acceptance of employment in respect of the management team. Such other information, documents and reports as the CBN may, from time to time specify.	Non-refundable application fee of ₦500,000. Licensing fee of ₦5 million. Minimum share capital of ₦50 billion to be placed in escrow at the CBN.
3.	Specialised Banking License	Providing financial services for certain sectors or segments of the population.	A formal application to the Director of Banking Supervision at the CBN. Feasibility report/business plan that discusses ownership, management, operations, finances, etc. Details of the bank's corporate structure, branch expansion plans, IT systems, and staff training. Memorandum and Articles of Association. Evidence of location of head office/branch building. Copies of letters of offer and acceptance of employment in respect of the management team. Such other information, documents and reports as the CBN may, from time to time specify.	Non-refundable ₦500,000 application fee. Licensing fee of ₦5 million Minimum share capital: Non-Interest Bank (Regional) – ₦10 Billion Non-Interest Bank (National) – ₦20 Billion Primary Mortgage Institution – ₦ 5Billion This is to be placed in escrow at the CBN.

S/N

NAME OF LICENSE

ACTIVITIES THE LICENSE PERMIT

LICENSING REQUIREMENTS

FEE AND CAPITAL REQUIREMENTS

Commercial Banking License

Taking deposits and maintaining accounts; retail banking services; foreign exchange and related services; providing treasury management and custodial services; acting as a settlement bank, etc.

A formal application to the Director of Banking Supervision at the CBN.
A feasibility report/business plan providing information on ownership, management, operations, and finances.
A list of the shareholders, directors, and principal officers of the banks and their particulars.
Details of the bank's corporate structure, branch expansion plans, IT systems, and employee training.
The bank's Memorandum and Articles of Association.
Evidence of location of head office/branch building.
Copies of letters of offer and acceptance of employment in respect of the management team.
Such other information, documents and reports as the CBN may, from time to time specify.

Non-refundable application fee of ₦500,000.
Licensing fee of N5 million
Minimum share capital: International Operators – ₦500 Billion; National Operators – ₦200 Billion; Regional Operators – ₦50 Billion.

The minimum share capital is to be placed in an escrow account at the CBN during the registration process.

Merchant Banking License

Taking deposits from corporate clients above ₦100 million; providing finance and credit facilities to non-retail customers; dealing in foreign exchange and providing related services; acting as an issuing house and underwriting securities; debt factoring, treasury management, and custodial services; fixed income trading and proprietary investments services

A formal application to the Governor of the CBN.
Feasibility report/business plan addressing the bank's projected activities, management, and projected revenues.
Details of the bank's organizational structure, branch network, IT systems, and staff training.
Memorandum and Articles of Association.
Evidence of location of head office/branch building.
Copies of letters of offer and acceptance of employment in respect of the management team.
Such other information, documents and reports as the CBN may, from time to time specify.

Non-refundable application fee of ₦500,000.
Licensing fee of ₦5 million.
Minimum share capital of ₦50 billion to be placed in escrow at the CBN.

Specialised Banking License

Providing financial services for certain sectors or segments of the population.

A formal application to the Director of Banking Supervision at the CBN.
Feasibility report/business plan that discusses ownership, management, operations, finances, etc.
Details of the bank's corporate structure, branch expansion plans, IT systems, and staff training.
Memorandum and Articles of Association.
Evidence of location of head office/branch building.
Copies of letters of offer and acceptance of employment in respect of the management team.
Such other information, documents and reports as the CBN may, from time to time specify.

Non-refundable ₦500,000 application fee.
Licensing fee of ₦5 million

Minimum share capital:

Non-Interest Bank (Regional) – ₦10 Billion
Non-Interest Bank (National) – ₦20 Billion
Primary Mortgage Institution – ₦ 5Billion

This is to be placed in escrow at the CBN.

B. OTHER FINANCIAL INSTITUTIONS

The table below contains the requirements for licenses issued to Microfinance Banks, Finance Houses, and Payment Service Providers. These licences are commonly used by FinTechs to provide services.

S/N	NAME OF LICENSE	ACTIVITIES THE LICENSE PERMIT	LICENSING REQUIREMENTS	FEE AND CAPITAL REQUIREMENTS
1.	MFB License	Acceptance of deposit, provision of microloans, provision of credit to customers, issuance of debentures, provision of banking activities to customers (limited to domestic remittance of funds), etc.	A feasibility report/business plan. Details of the bank's corporate structure, branch expansion plans, IT systems, and staff training. Memorandum and Articles of Association. Evidence of payment of non-refundable licensing fee to the Central Bank of Nigeria. Corporate documents. Evidence of the location of the Head Office (rented or owned). Schedule of changes, if any, in the Board, Management and Shareholding after the grant of AIP. Evidence of ability to meet technical requirements and modern infrastructural facilities such as office equipment, computers, and telecommunications, to perform the bank's operations and meet CBN and other regulatory requirements, etc.	Non-refundable application fee of: Unit MFBs: ₦50,000 State MFBs: ₦100,000 National MFBs: ₦250,000 Minimum share capital: Tier 1 Unit – ₦200 million Tier 2 Unit – ₦50 million State MFB – ₦1 billion National MFB – ₦5 billion This is to be placed in escrow at the CBN. Licensing fee of: Unit MFB -₦250,000 State MFB – ₦500,000 National MFB – ₦1 million
2.	Finance House License	Providing consumer loans, funds management, asset finance, project finance, local and international trade finance, debt factoring, debt securitization, debt administration, financial consultancy, loan syndication, warehouse receipt finance, covered bonds and issuing vouchers, coupons, cards and token stamps.	A formal application to the Governor of the CBN. A feasibility report/business plan. A copy of the draft memorandum and articles of association of the finance company. A copy of the letter of intent to subscribe to the company signed by each subscriber. A copy of the list of proposed shareholders in tabular form showing their business addresses and the names and addresses of their bankers. A signed and dated curriculum vitae of the proposed shareholders of the finance company. A copy of the draft manual of operations such as the enterprise management framework. Corporate documents. Shareholders' register and a copy of share certificate issued to the shareholders. A copy of the audited statement of affairs. Copies of letters of offer and acceptance of employment in respect of the management team. A letter of undertaking to comply with all the rules and regulations guiding the operations of companies. Evidence of registration with the Finance Company's association umbrella body.	Non-refundable application fee of ₦100,000. Deposit of a minimum share capital of ₦1 million to the CBN. Licensing fee of ₦250,000
3.	Switching and Processing License	Switching; card processing; transaction clearing; settlement agents; and all activities permitted for Payment Solution Services (in 5 below).	Corporate documents. Tax Clearance Certificate (TCC) for 3 years (if applicable) and Taxpayers' Identification Number (TIN) of the company. Details of ownership and holding company structure (if applicable). Company details and profile. Bank Verification Number (BVN), Curriculum Vitae (CV) and means of identification (ID) for the directors and top management (including one independent non-executive director, chairman and managing director). Business plan and product deployment methodology. Requisite policies and framework. Signed agreements with sub-agents, financial institutions and business parties. Evidence of payment card security certification and other relevant payment terminal certification.	Non-refundable application fee of ₦100,000 Payment of the refundable sum of ₦2 billion in escrow to CBN Licensing fee of ₦1million to be paid before the issuance of the final license.
4.	Mobile Money Operator License	E-money issuing; mobile wallet creation and management; pool account management; and all activities permitted for Super-Agent (in 8 below).	Corporate documents. TCC for three years (if applicable) and TIN of the company. Details of ownership and holding company structure (if applicable) Company details and profile. BVN, CV and means of ID of the directors and top management (including one independent non-executive director, chairman and managing director). Business plan. Requisite policies and framework. Project deployment time. Signed agreements with its partners.	Non-refundable application fee of N100,000. Payment of the refundable sum of N2 billion in escrow to CBN Licensing fee of ₦1,000,000 to be paid before the issuance of the final license.
5.	Payment Solution Services (PSS) License	It includes all the activities permitted for Payment Solution Service Providers (PSSP) (in 7 below); Payment Terminal Service Providers (PTSP) (in 4 below); and Super Agents (in 6 below). Companies seeking to obtain the PSS license will have to select any one or combination of the following licenses: PSSP; PTSP; and Super-Agent.	Corporate documents. TCC for three years (if applicable) and TIN of the company. Details of ownership and holding company structure (if applicable). Company details and profile. BVN, CV and means of ID of the directors and top management (including one independent non-executive director, chairman and managing director). Requisite policies and framework. Signed agreements with its sub-agents, financial institutions, and partners. Minimum of 50 agents. Evidence of payment card security certification and other relevant payment terminal certification. Project deployment methodology.	Non-refundable application fee of ₦100,000. Payment of the refundable sum of up to ₦250 million (depending on which of the licenses the company wishes to obtain) in escrow to the CBN. Licensing fee of ₦1,000,000 to be paid before the issuance of the final license.
6.	Payment Terminal Service Provider (PTSP) License	POS Terminal deployment and services and POS terminal ownership.	Corporate documents. Tax Clearance Certificate (TCC) of three years (if applicable) and TIN of the company. Details of ownership and holding company structure (if applicable). Company details, profile and business plan. BVN, CV and means of ID of the directors and top management (including one independent non-executive director, chairman and managing director) Requisite policies and framework. Project deployment methodology.	Non-refundable application fee of ₦100,000. Payment of the refundable sum of ₦100 million in escrow to the CBN. Licensing fee of ₦1,000,000 to be paid before the issuance of the final license.
7.	Payment Solution Service Provider (PSSP) License	Payment processing gateway; payment solution development; and merchant service aggregation and collection.	Corporate documents. Tax Clearance Certificate (TCC) of three years (if applicable) and TIN of the company. Details of ownership and holding company structure (if applicable). Company details, profile and business plan. BVN, CV and means of ID of directors and top management (including one non-executive director, chairman, managing director). Signed agreements with its partners. Requisite policies and framework. Evidence of payment card security certification and other relevant payment terminal certification.	Non-refundable application fee of N100,000. Payment of the refundable sum of ₦100 million in escrow to the CBN. Licensing fee of ₦1 million to be paid before the issuance of the final license.
8.	Super-Agent License	Conducting certain banking activities such as cash deposit and withdrawal; bill payments; local fund transfer; balance enquiry etc.	Corporate documents. TCC for three years (if applicable) and TIN of the company. Details of ownership and holding company structure (if applicable). Company details, profile and business plan. BVN, CV and means of ID of the directors and top management (including one independent non-executive director, chairman and managing director). Minimum of 50 agents. Reference letter from a financial institution and signed agreement with the sub-agents, financial institution, and business partners. Must have existed for over 12 months. Requisite policies and framework. Payment Terminal Service Aggregator of Payment Terminal Application Certification.	Non-refundable application fee of N100,000. Payment of the refundable sum of ₦50 million in escrow to the CBN. Licensing fee of ₦1 million to be paid before the issuance of the final license

Conclusion

Please note that the information above is not exhaustive and is focused on the primary regulator of the financial services sector, CBN. Also, note that there are other regulators empowered to monitor the activities of companies in this sector to a certain extent.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Licensing Requirements For Banks And Other Financial Institutions In Nigeria

Contributor

Introduction

A. BANKS

Finance and Banking

Contributor

Nigeria