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Our licencing regime series on the regulatory Sandbox in Nigeria hovers on the functional approach to Nigeria’s regulatory Sandbox, critical areas of improvement, and key licencing requirements.


The United Kingdom’s Financial Conduct Authority’s (FCA) Project Innovate 2014 popularised regulatory Sandbox in financial technology, which is now a crucial tool in financial technology adoption and inclusion.

Before the FCA’s 2014 Project Innovate, the United States Consumer Financial Protection Bureau launched Project Catalyst in 2012. The FCA set the pace for a regulatory sandbox in November 2015 – nearly every other country, including the US, followed afterwards.

According to O. David-West, sandboxes promote experimentation. Sandboxes are not open-ended and have predefined restrictions, including testing under regulatory supervision, client population or transaction limitations (sample size), and limited test periods (time limit).

In January 2021, the Central Bank of Nigeria (CBN) issued the Framework for Regulatory Sandbox Operations (“Nigeria’s Regulatory Sandbox”). Nigeria’s Regulatory Sandbox was the second in Africa, given that Mauritius was the first African financial authority to issue a framework for operating a regulatory sandbox.

Nigeria’s Regulatory Sandbox aims at ensuring new and more flexible ways of engaging with the payment systems in Nigeria including a consumer protection measures.

Regulatory Sandbox is a process for operators to test innovative products, services, delivery channels, or business models in a controlled environment with regulatory oversight.

O. David-West (supra) defines Sandbox as a “safe space” where financial service innovations can be tested in a “live” environment without the entire burden of regulation whilst still safeguarding consumer protection.


Admittedly, Nigeria’s Regulatory Sandbox applies to innovative products, services, delivery channels or business models. We submit that innovative products or services in the context of Nigeria’s Regulatory Sandbox do not mean novelty, innovative solution’s upgrades should be tested in the Sandbox .

Deploying financial technology from the programmers’ lab to the market could pose high risks to the financial technology operators in Nigeria. From the programmer’s lab to the market becomes the route without a regulatory sandbox (“direct market approach”).

NIBSS (Nigeria Inter-Bank Settlement System) operates sandbox that a remotely mimics real-time market environment before any integration on its platform. Nigeria’s Regulatory Sandbox cannot mirror the market environment in all its vagaries.

FinTech suffer financial losses due to a glitch. A Nigerian payment system operator programmed its payment App to recognise inputs as NGN1.00. But french-speaking customers who changed the language of the payment device to French realized without feedback to the Fintech that the payment App recognised NGN1.00 as one thousand Naira and one thousand Naira as ten thousand Naira.

The CBN should widen participants on the Regulatory Sandbox to include accredited early adopters who will help simulate the Sandbox approximately to a real-time market environment.


CBN’s New Licence Categorization for Nigerian Payment Systems 2020 categorises regulatory Sandbox in the Nigerian payment system, subject to the provisions of Nigeria’s Regulatory Sandbox.

Objectives of Nigeria’s Regulatory Sandbox include to:

  • increase the potential for innovative business models that advance financial inclusion;
  • reduce time-to-market for innovative products, services, and business models;
  • increase competition, widen consumers’ choice and lower costs;
  • ensure appropriate consumer protection safeguards in innovative products;
  • clearly define the roles and responsibilities of stakeholders and the operations of the Sandbox for the Nigerian Payments System industry;
  • ensure adequate provisions in regulations to create an enabling environment for innovation without compromising on safety for consumers and the overall payments system; and
  • provide an avenue for regulatory engagement with FinTech firms in the payment space while contributing to economic growth.

Nigeria’s Regulatory Sandbox prescribes the processes and procedures for analysing, collecting, updating, integrating, and storing consumer data and information. It includes innovation, whether as an upgrade or proposed product or service.

Specific legislation does not apply within the Sandbox. All laws relaxed in the Sandbox resurrect upon exit. The Sandbox is not a haven for stimulating illegal products or services – the CBN rejects such requests.

Eligible products or services include innovative solutions that improve financial access or customer choices, efficiency, security and quality in financial services.

CBN licensees and other local companies may participate in the Sandbox. Including those proposing non-regulated financial products or services using emerging technologies not covered by the CBN’s regulations.


The following documents accompany a request to participate in the CBN’s Sandbox cohort:

  • Board Approval (where applicable)
  • Incorporation documents, company profile and functional contact detail
  • Professional biography of board members and management
  • Project plan and business proposal showing proposed key outcomes
  • the
  • strategy of the sandbox trials and AML/CFT Policy
  • proof of intellectual property rights in the solution

The CBN’s operational requirements for Nigeria’s Regulatory Sandbox cover the following phases:

  • Filing requirements.
  • Reporting requirements while in the Sandbox
  • Exit conditions and approval for expiration and
  • Evaluation and Review of a license.


Nigeria’s Regulatory Sandbox should foster a FinTech-conducive regulatory environment. CBN’s yearly cohort at the rate financial technology services and products advance in Nigeria may hamper innovations.

O. David-West argues that Sandboxes can either be regulatory or industry. Regulators drive a regulatory sandbox towards adopting innovations that deliver superior consumer outcomes.

Industry sandboxes are supplementary. It enables industry players to self-organise and provides a knowledge-sharing and communication channel and fora, as well as an optional certification facility as part of the regulatory process.

Where applicable, the Cohort may integrate NIBSS Sandbox into Nigeria’s Regulatory Sandbox with necessary approvals. The combined integration of NIBSS and the Regulatory Sandbox may enable products or services in the sandbox cohort to tick all the boxes for accessing NIBSS’ platform while in the Cohort.

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