In our earlier commentary on the subject here, we considered the critical stakeholders in the Nigerian Fintech (financial technology) sector, namely:
- CBN (Central Bank of Nigeria)
- Nigeria Central Switch
- Switching Companies
- MMO (mobile money operators) and PSB (payment service Banks)
- NIBSS (Nigerian Inter-Bank Settlement System)
- State Ministry of Commerce & Industry
In this second part of this commentary on critical stakeholders in Nigeria’s Fintech Sector, we will discuss:
- Special Tribunal for the Enforcement and Recovery of Eligible Loans
- NCC (Nigerian Communication Commission)
- SEC (Security and Exchange Commission)
- NITDA (Nigerian Information Technology Development Agency)
- NAICOM (National Insurance Commission)
- Regulators of Cooperatives
- PSSP (Payment System Service Providers)
SPECIAL TRIBUNAL FOR THE ENFORCEMENT AND RECOVERY OF ELIGIBLE LOANS
Changes that the Banking and Other Financial Institution Act (BOFIA) 2020 introduced include the establishment of the Special Tribunal for the Enforcement and Recovery of Eligible Loans (the “Tribunal for the Enforcement and Recovery of Eligible Loans”).
The Tribunal for the Enforcement and Recovery of Eligible Loans enjoys the competence to hear claims between a financial institution and its customers concerning:
- enforcement and recovery of eligible loans or;
- arising from the enforcement of security or guarantee or attachment of any assets under an eligible loan, throughout Nigeria.
The meaning of financial institutions in the context of the Tribunal for the Enforcement and Recovery of Eligible Loans include banks, specialized banks, or other financial institutions.
The definition of other financial institutions under BOFIA 2022 excludes fintechs that operate with money lending licence issued by a State Government in Nigeria. Other financial institutions include other financial technology companies.
BOFIA 2020 enables a Federal or State High Court (the “High Courts”) not hear a party whose claim is subject to the jurisdiction of the Tribunal for the Enforcement and Recovery of Eligible Loans if the party had in a loan or guarantee arrangement with a financial institution submitted to the Tribunal for the Enforcement and Recovery of Eligible Loans.
If the other party, who may be the financial institution or the customer, had not taken steps in the proceedings.
An application requesting the High Courts to transfer any such claims to the Tribunal for the Enforcement and Recovery of Eligible Loans is not “taking steps in the proceedings.”
The rule of taking steps in the proceedings is sufficiently developed under the Nigerian jurisprudence as applied in arbitration or arbitration-related proceedings.
The Apex Court affirmed in OBEMBE v. WEMABOD ESTATES LTD (1977) LPELR-2161 that in an application for a stay of proceeding, the applicant must not take any step in the proceedings.
The President of the Federal Republic of Nigeria has the powers to appoint the president and other members of the Tribunal for the Enforcement and Recovery of Eligible Loans.
We are unaware that the President constituted the Tribunal for the Enforcement and Recovery of Eligible Loans, whose powers are equal to the High Courts.
Specific appeals from the Tribunal for the Enforcement and Recovery of Eligible Loans go to the Court of Appeal. The appellate courts must establish special rules prioritizing such appeals over all other appeals – with named exceptions.
To utilize the benefits of the Tribunal for the Enforcement and Recovery of Eligible Loans, Lawyers or contract engineers negotiating for borrowers or lenders may subject all debt recovery or security or guarantee-related claims to the Tribunal for the Enforcement and Recovery of Eligible Loans.
Between the contract date and when the cause of action arises, the President may constitute the Tribunal for the Enforcement and Recovery of Eligible Loans to the advantage of the parties who acted forthrightly.
NCC (Nigerian Communication Commission)
The NCC is the regulator of the communication sector and a relevant stakeholder in the USSD (unstructured supplementary service data) banking operations. USSD banking is a vital feature of the financial inclusion agenda.
USSD banking, otherwise known as SMS banking, is a consumer mobile banking application generally subscribed to in Nigeria – with all the earlier challenges we had examined here.
The USSD banking and other fintech services include air time and utilities’ vending that ride on the SIM-based mobile communication.
The CBN’s licence is critical to NCC issuing approval of any USSD or other applicable value-added financial technology services provider.
NITDA (Nigerian Information Technology Development Agency)
A Fintech that fails to comply with the data protection regime in NDPR (Nigerian Data Protection Regulation) 2019 courts penalties and fines from NIDTA.
NITDA is the data protection ombudsman. In addition to the NDPR, Fintech must comply with NIDTA’s Guidelines, Frameworks, Policies, and Standards, as well as data protection and security standards such as PCI DSS (payment card industry data security standard).
NITDA intends to ensure a strict data protection regime for Fintechs in the digital money lending space.
NAICOM AND SEC
NAICOM (National Insurance Commission), PENCOM (Pension Commission), and SEC (Security and Exchange Commission) play crucial roles in the Fintech sector.
All funds in the payment service provider’s Settlement Account are insurable by NAICOM. It is not clear if NAICOM is the trustee in a liquidation event.
We examined the custodial arrangement in a settlement account here. We are unaware that NAICOM enforces the requirement of insuring settlement accounts in the financial technology sector in Nigeria.
A Fintech that insures settlement accounts may gain a marketing advantage. Although the agent-bankers or merchants may not attach any importance to insurance, given the low financial knowledge among consumers.
Digital crowdfunding is a financial technology service that the SEC has blacklisted. ESUSU or Ajo could leverage digital payment platforms with insurance against a contributor’s death.
SEC is critical to digital crowdfunding and digital assets in Nigeria.
Financial technology services include banking, payment system services, value-added services such as airtime vending, utilities, digital insurance, and tradeable digital assets.
Any operator of fintech services is a stakeholder. Cooperative societies could leverage financial technology to manage their contributions.
Conclusively, a compliant fintech is the 1st beneficiary of its ethical business. A clear governance structure aids compliance. Given our business environment, regulators should find ways to incentivize compliance with regulations.