Nigeria: Fintech Regulations In Nigeria- An Overview (Part 2)

Last Updated: 25 June 2019
Article by Davidson Oturu, Hannatu Dan-Habu and Kanyinsola Ojeshina

FinTech Regulations in Nigeria

Nigeria has seen remarkable growth in the technological sector, including an exponential growth in FinTech companies, encompassing start-ups and more established businesses. Consequently, the Nigerian government has been inquiring into the financial services sector and focusing on FinTech as one of the key impetus for growth in the Nigerian financial services industry. For this reason, and as part of a national strategy for the development of the FinTech industry in Nigeria, there has been significant interest from policymakers in implementing new regulations for the FinTech industry.

In the first part of this series, we took a closer look at FinTech in relation to Digital Payments and discussed the various regulations that inadvertently affect them within Nigeria.

In this part, we seek to examine the Nigerian regulations that affect, FinTech Testing and Data Protection respectively.

1. FinTech Testing

In the tech space, testing applications and software can sometimes be a daunting task- especially in Nigeria where tech start-ups are cropping up by the minute. Usually, it takes a great deal of time for FinTechs to test their solutions and ensure that they are ready for the market, after which several of those FinTechs then realise that they are in breach of a regulation that they were not aware of. In light of this and in a bid to keep up with the fast-paced changes in the technology sector, some Countries have explored the option of a 'Regulatory Sandbox'.

A 'Regulatory Sandbox' is a controlled environment that offers a 'safe space' in which start-ups and other businesses can test innovative products, services, business models and delivery mechanisms relating to the financial and capital markets in a live environment without immediately satisfying all the necessary regulatory requirements.1

Regulatory Sandboxes have been implemented in several countries like, the UK, Singapore, Malaysia, Abu Dhabi, Canada, Denmark and Australia2 to name a few.

The Securities and Exchange Commission (SEC) have just launched a Regulatory Sandbox. SEC, on its portal, invites businesses or individuals that plan to launch innovation products, services, business models and delivery mechanisms relating to capital markets, to fill the questions contained on its website to enable the SEC provide guidance to the tester on regulatory requirements (if any).3

With the SEC Regulatory Sandbox, FinTechs will have a safe environment to test their solutions. We believe the sandbox is live and fully operational and expect this step to have a huge impact on both the growth and the successful regulation of FinTechs in the coming years. Furthermore, the Central Bank of Nigeria ('CBN') and the Nigerian Inter-Bank Settlement System ('NIBSS') announced in 2018, that they would be collaborating to create a CBN x NIBSS regulatory sandbox for the facilitation of digital innovation and FinTech solutions. To that effect, they created the Financial Service Innovators Association of Nigeria (FSI) to co-ordinate the project and are expected to launch by the end of the year.4

2. Data Protection

There are several regulations that apply to Data protection in Nigeria. In January 2019, an all-encompassing regulation was released by the National Information Technology Development Agency ('NITDA') for the sole purpose of regulating data protection across the nation- but it is not the only one. Below are all the regulatory sources that apply to data protection in Nigeria:

a. Section 37 of the 1999 Constitution (as Amended)

The Nigerian Constitution provides the umbrella law that clearly states the nation's position on the issue of data protection. Section 37 provides;

''The privacy of citizens, their homes, correspondence, telephone conversations and telegraphic communications is hereby guaranteed and protected.''5

All other regulations that were released subsequently, used the provisions of this section as the underlying principle.

b. Freedom of Information Act 2011

The Freedom of Information Act ('the Act') was signed into law in May 2011 and it aims to:6

  • Make public records and information more freely available;
  • Provide for public access to public records and information;
  • Protect public records and information to the extent consistent with the public interest and the protection of personal privacy;
  • Protect serving public officers from adverse consequences of disclosing certain kinds of official information without authorization; and
  • Establish procedures for the achievement of those purposes.

To the extent of data protection, the Act provides that a public institution must deny an application for information, if the information requested contains personal information. Such personal information being7:

  • maintained with respect to clients, patients, residents, students, or other individuals receiving social, medical, educational, vocation, financial, supervisory or custodial care or services directly or indirectly from public institutions;
  • maintained with respect to employees, appointees or elected officials of any public institution or applicants for such positions;
  • maintained with respect to any applicant, registrant or licensee by any government or public institution cooperating with or engaged in professional or occupational registration, licensure or discipline; and
  • required of any tax payer in connection with the assessment or collection of any tax unless disclosure is otherwise requested by the statute

It further provides that before such personal information can be released, the consent of the related party must have been obtained.

The Act pays cognisance to professional privileges and provides that a public institution may deny an application for information that is subject to legal practitioner-client privilege; health workers- client privilege; journalism confidentiality privilege and any other professional privileges provided for in an Act.8

c. Cybercrimes (Prohibition, Prevention, etc.) Act, 2015

The Cybercrimes (Prohibition, Prevention, etc.) Act, 2015 ('the Cybercrimes Act') came into effect in May 2015 for the purpose of; ensuring the protection of critical national information infrastructure; promoting cybersecurity and the protection of computer systems and networks; protecting electronic communications, data and computer programs; and safeguarding intellectual property and privacy rights.9

The Cybercrimes Act goes on to provide several punitive measures against individuals or corporations engaged in cybercrimes and breach of data privacy, describing each offence usually with the words; 'fraudulent intent' or 'without authorization.'

d. The Data Protection Regulation 2019

Finally, the NITDA Nigeria Data Protection Regulations 2019 ('the NITDA Regulations') were put into place recognizing that many public and private bodies have migrated their businesses online and realising that there is indeed a need to safeguard the data of these subjects.10

The NITDA Regulations provide a more detailed approach to data protection, taking the time to define terms such as; 'Personal Data', 'Data Subject', 'Data Controller', 'Lawful Processing' and 'Consent'.

It provides that data processing will be lawful only in the following circumstances;11

  • the Data Subject has given consent to the processing of his or her Personal Data for one or more specific purposes
  • processing is necessary for the performance of a contract to which the Data Subject is party or in order to take steps at the request of the Data Subject prior to entering into a contract
  • processing is necessary for compliance with a legal obligation to which the Controller is subject
  • processing is necessary in order to protect the vital interests of the Data Subject or of another natural person; and
  • processing is necessary for the performance of a task carried out in the public interest or in exercise of official public mandate vested in the controller;

The NITDA Regulations make provisions for data security, third party processing, transfer of data to a foreign country and the rights of Data Subjects among others.12

Any person/organisation in breach of the data privacy rights of a Data Subject will if dealing with less than 10, 000 data subjects be liable to pay a sum equalling 1% of annual revenue or 2 million naira (whichever is greater) and if more than 10, 000 Data Subjects, be liable to pay 2% of same or 10 million naira (whichever is greater).13

All organizations involved in the control or processing of Personal Data are now mandated to publish their data protection policies and failure to comply with the provisions of the Regulations shall be treated as a breach of the NITDA Act of 2007 and sanctioned accordingly.

Concluding note

FinTechs should be aware of the fast approaching FinTech testing regulations as well as the various sources of data protection regulations, as they will strongly affect several of their decisions in the coming years.

Footnotes

1. Securities and Exchange Commission, Nigeria, 'Regulatory Sandbox- Assessment' (2019) (https://sec.gov.ng/regulatory-sandbox-assessment/)

2. nyujlb.org, 'Playing in the Regulatory Sanaldbox' (2019) (https://www.nyujlb.org/single-post/2018/01/08/Playing-in-the-Regulatory-Sandbox)

3. Securities and Exchange Commission, Nigeria, 'Regulatory Sandbox- Assessment' (2019) (https://sec.gov.ng/regulatory-sandbox-assessment/)

4. https://www.independent.ng/cbn-nibss-launch-regulatory-sandbox-to-empower-fintechs/

5. Section 37 of the Constitution of the Federal Republic of Nigeria 1999 (as amended)

6. Preamble of the Freedom of Information Act 2011

7. Sections 14(1&2) of the Freedom of Information Act 2011

8. Section 16 of the Freedom of Information Act 2011

9. Explanatory Memorandum of the Cybercrimes (Prohibition, Prevention, etc.) Act, 2015

10. Preamble of the Nigerian Data Protection Regulation 2019

11. Article 2.2 of the Nigerian Data Protection Regulation 2019

12. Article 2.6, 2.7, 2.11, 2.12 & 3.1 of the Nigerian Data Protection Regulation 2019

13. Article 2.10 of the Nigerian Data Protection Regulation 2019

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions