This year, regulations have been a part of the fintech space in Nigeria. Earlier this year, the CBN placed a ban on cryptocurrency in Nigeria and also introduced the Central Bank of Nigeria's regulatory sandbox. Similarly, SEC frowned at the activities of fintechs linking Nigerians to the foreign stock exchange market, and last month, the CBN issued a new license and capital requirements for fintechs.
Now, SEC is planning on launching a new regulation in the form of the Regulatory Incubation Program, which is expected to kick off by the third quarter of 2021. SEC said the program is for Fintechs operating or seeking to operate in the Nigerian Capital Market.
According to SEC, "the Regulatory Incubation (RI) program is designed to address the needs of new business models and processes that require regulatory authorisation to continue carrying out full or ancillary technology-driven Capital Market activities."
"The RI Program has thus been conceived as an interim measure to aid the evolution of effective regulation which accommodates the innovation by fintechs without compromising market integrity and within limits that ensure investor protection," SEC added.
Participation in the Regulatory Incubation Program will encompass an Initial Assessment Phase and the Regulatory Incubation Phase. Fintechs are required to fill the fintech Initial Assessment (FIA) Form as this will determine if they will go through the Incubation phase. This will include both startups already operating and those still looking to enter into the fintech sector. Where a framework exists for regulating the applicant's innovation, guidance will be provided on the next steps.
However, in the case where the proposed innovation is eligible for further consideration, but no framework exists for its regulation, an applicant will be directed to fill and submit the Regulatory Incubation (RI) Form.
Based on SEC's terms, the application will either be accepted or rejected based on whether the innovation is allowed or not.
The incubation period has a 12-month duration. In the tenth month of the incubation period, participants will be guided on the applicable regulatory regime and regulatory requirements. Upon completing the 12-month program, the startup is either directed to continue operating as a registered entity or terminate its operations.
Nigeria in focus
GDP: $448.12 billion compared to Malaysia's $364.681 billion in 2019
Population: 200,963,599 compared to Malaysia's 31,949,777 in 2019
GDP per capita: $2,229 compared to Malaysia's $11,414 in 2019