By Jeph Ajobaju, Chief Copy Editor
A new directive by the Central Bank of Nigeria (CBN) for fintechs to possess N2 billion capital base may squeeze some of them and reinforce talk of unreasonable regulations in Nigeria, which led to Twitter locating its African HQ in Ghana.
According to NOI polls, there are 39.6 million Twitter subscribers in Nigeria, more than the entire 30.4 million population of Ghana.
The tech firm snubbed Africa’s largest economy which has a rapid growth and investment in its tech scene but papers over the cracks of a stressful business environment.
Before Twitter did in April this year, the problem had been highlighted back in 2018 when Google built an AI lab in Accra, Ghana rather than in Lagos, Nigeria.
The CBN directive sets capital benchmarks for firms involved in financial technology and payment operations.
Those in the top category – dealing with switching, processing, and mobile money operation – must have N2 billion shareholders’ funds unimpaired by losses, the regulator announced.
A document conveying the guidelines on the CBN website shows that six categories of payment operators were newly approved by the CBN.
They include those involved in switching and processing, mobile money operators, Payment Solution Services (PSS), Payment Terminal Service Provider (PTSP), Payment Solution Service Provider (PSSP), and Super Agent licences.
The top category must pay escrow refundable N2 billion into a CBN account, made in full single lump sum. Escrowed funds are to be invested in treasury bills, subject to availability of treasury instruments, which would be refunded accordingly.
For PSS, an escrow of refundable N250 million must be deposited, and fintechs applying for PSSP licence must pay N100 million, PTSP (N100 million), and Super Agent (N50 million).
The same conditions as the first category apply but with varying amounts.
“All written applications should be addressed to the Director, Payments System Management Department, Central Bank of Nigeria, Abuja, accompanied by evidence of payments of application fee and other documentary requirements,” the CBN said.
All applicants for licence are required to pay non-refundable N100,000 and, if the application is successful, they are to pay another N1 million before the licence can be issued.
PREMIMUM TIMES writes that Nigeria has seen a rise of fintechs in recent years and has produced some of Africa’s most notable payment platforms – the best known being Flutterwave, Paystack, and Interswitch.
The firms have raised billions of dollars in funding. But some analysts have raised concerns about the regulation of the blossoming sector, constraining innovation.
Flutterwave raises $225m to service small businesses
In March, Flutterwave – famed for its “seamless and secure” payments system – said it had processed more than $1 billion in transaction value, according to Chief Executive Olugbenga Agboola, who founded the tech firm in 2016.
He announced the milestone after Flutterwave secured $170 million capital from investors, saying the new capital flows – facilitated by “a leading group of international investors” – will bolster the firm’s client base in the global market.
“The fundraise brings the total investment in Flutterwave to USD $225 million and is one of only a very small number of African fintech companies to have raised significant funds in a period of widespread disruption and economic uncertainty,” the statement added, per CNN reporting.
Flutterwave provides digital payment services for small businesses in Africa.
Agboola said on Twitter that the firm aims to “build a payments technology infrastructure that connects Africa to the global economy by making local and international payments seamless.”
More than 1,000 SMEs across the continent have signed up to display and sell their products online using the Flutterwave store.
CNN reports below the success of Paystack which has further burnished the image Nigerian fintech, which is growing in importance and being notice globally.
Paystack puts $200m on table to get Africa paid
Paystack, recently acquired by American digital payment giant Stripe for $200 million, wants to inject the windfall into expanding digital payments across Africa, having now risen from the continent to Silicon Valley.
The acquisition is another marker of the great strides of Nigerian fintech which in total attracted over $600 million funding between 2014 and 2019.
Over the past year, the pandemic fueled a shift towards digital banking and mobile money. In Africa, this change in habit has international investors eyeing the lucrative opportunity to bring the unbanked online.
These digital platforms could help expand financial inclusion on the continent, where more than half of people over the age of 15 in sub-Saharan Africa lacked access to a bank or mobile money account as of 2017 according to the World Bank.
Nigeria alone has more than 200 fintech companies, with the sector attracting global interest from companies such as Mastercard and Visa.
According to a recent report from consulting firm McKinsey & Company, funding for Nigerian fintech companies between 2014 and 2019 topped $600 million.
In 2019, outside investment in Nigerian fintech startups accounted for a quarter of all funding for tech startups across Africa.
Founded in Lagos in 2015, Paystack says it now has more than 60,000 clients, including corporations like Domino’s Pizza and telecom giant MTN.
Kuda raises $36.6m for digital banking in Africa
Also in March, another fintech startup, Kuda based in Lagos, raised additional $25 million in a Series A round led by Valar Ventures, the firm co-founded and backed by PayPal co-founder Peter Thiel.
Kuda disclosed that it processed $2.2 billion transactions in February in Nigeria alone.
Target Global, the European venture capital firm that led Kuda’s last funding, participated in the round, as reported by TechCabal.
Kuda has now raised a total $36.6 million in two years to build a digital bank in Africa and cater to a burgeoning 1.2 billion population.
