Regulatory Developments For Startups In Nigeria: A 2023 Outlook
KEY TAKEAWAY
Despite the economic headwinds, and low funding raised, through 2022, Nigerian startups continue to be the focal point of attraction for venture capital investment across Africa.
Certain key regulatory spillovers such as the establishment of the Nigeria Startup Act, and newer developments such as the launch of CBN’s first regulatory sandbox project, and a possible relaxation of cryptocurrency transaction restrictions under the Finance Bill, point towards an eventful 2023.
Expectations must still be tempered as Nigeria heads to the polls in Q1 2023. This sets a watch-and-wait tone for regulatory activity in the course of the year.
CBN SANDBOX IMPLEMENTATION 2023
On January 12, 2021, the Central Bank of Nigeria (“CBN”) issued the Framework for Regulatory Sandbox Operations. Very recently, on December 18, 2022, the CBN published a Call for Expression of Interest, from intending applicants interested in its Regulatory Sandbox, with a deadline for application on February 1, 2023.
The purpose of the CBN Regulatory Sandbox is to aid the testing of innovative financial products, services, and business models, in a controlled environment, under regulatory oversight, and subject to appropriate conditions and safeguards. There are a few considerations for startups who are interested in applying for the CBN Regulatory Sandbox Programme 2023.
Eligible Applicants
The Regulatory Sandbox is open to all local Nigeria-registered companies (including existing CBN licensees (financial institutions with FinTech initiatives), and other local companies (non-financial sector institutions or technology and telecom companies intending to test an innovative payment product or service).
Eligible Products & Services
A proposed product, service or solution must meet certain thresholds of the CBN, to be accepted into the Sandbox programme.
Under the Framework, the CBN indicates all financial products, services and solutions that are innovative, will be considered for entry into the Regulatory Sandbox. However, activities that are outrightly unlawful will not be accepted into the Regulatory Sandbox. Other non-regulated financial products and services using emerging technologies will also be considered.
Timelines of Sandbox Programme
While the Framework for the Regulatory Sandbox Operation do not provide a clear duration limit for each Regulatory Sandbox cohort, it provides that each Applicant may indicate in their application, the estimated start and end date of their testing timelines. The Framework also permits applicants to apply for the extension of testing timelines during the Sandbox programme, subject to the approval of the CBN.
Documentary, Filing and Operational Requirements
The Framework for Regulatory Sandbox Operations provide for an exhaustive documentary, filing and operational requirements, that Applicants must provide at the stage of applying and during the course of the Regulatory Sandbox. We have highlighted a few of the requirements below