2023 Regulator Roundup – – Nigeria

At the end of 2023, we highlight some significant regulatory and legal changes in the Nigerian business environment this year. Some of these key events signal possible regulatory directions for 2024. Recognizing the implications of these key milestones becomes imperative for businesses embarking on comprehensive enterprise-wide audits and compliance planning; it enables the organization not only to align with current standards, but also to anticipate and adapt to future possible shifts in the business environment.

The Ease of Doing Business (Miscellaneous Provisions) Act 2023

On 14 February 2023, the Facilitation of Doing Business (Miscellaneous Provisions) Act was passed to amend 21 business-related laws, including the Companies and Allied Matters Act 2020, to create a more enabling environment for micro, small and medium enterprises (MSMEs ) in Nigeria.

The Act aims to remove regulatory bottlenecks and introduces full automation of application processes with the Corporate Affairs Commission (CAC), streamlining operations and promoting ease of doing business in the country.

Operational guidelines for open banking

In March 2023, the Central Bank of Nigeria (CBN) unveiled the Operational Guidelines for Open Banking, signaling a transformational shift in the country’s financial landscape. These guidelines create a framework for secure data sharing and collaboration within the financial sector, unlocking potential benefits such as the creation of innovative financial products, increased availability and affordability of services to underserved populations, greater transparency and competition, better financial governance through integrated platforms, and stimulating new business models and technologies based on open financial data. December 30, 2023.

Securities and Exchange Commission (SEC) Regulatory Incubation Program (RI)

The SEC’s Regulatory Incubation Program (RI) began in 2021 and authorized cohorts of Fintech models for a one-year period. On April 28, 2023, the SEC invited public applications for the first cohort. This program provides basic requirements for fintech firms to operate under limited provisions, allowing the SEC to oversee new capital market service models before they are fully established. This is in line with the SEC’s regulatory focus on innovation and the government’s Ease of Doing Business Policy (Executive Order 001), which aims to remove business constraints and make Nigeria a more business-friendly environment.

The Financial Reporting Council of Nigeria (FRCN) (Amendment) Act, 2023

The Financial Reporting Council of Nigeria (Amendment) Act 2023 became law on 3 May 2023. This legislation seeks to promote corporate governance by emphasizing transparency, accountability and ethical conduct. It introduces key changes to financial reporting regulations and standards in order to increase the quality and reliability of financial reporting.

Finance Act 2023

The Nigerian Finance Bill 2023, signed into law in May 2023, brings important changes to the country’s fiscal framework. Its goal is greater equity, sustainable development and economic growth. The legislative objective focuses on fair and transparent tax regulation, stimulating economic activity, streamlining tax incentives and improving tax collection and administration.

Increased antitrust regulatory scrutiny by the Federal Competition and Consumer Commission (FCCPC)

On December 27, 2023, the FCCPC announced mutual enforcement of a consent order imposing a $110 million fine on British American Tobacco. It follows an investigation into alleged anti-competitive conduct and other violations of the Federal Competition and Consumer Protection Act (FCCPA). The enforcement action highlights a growing trend of increased regulatory scrutiny by the FCCPC in matters related to anti-competitive practices.

These signal developments have increased the focus on regulatory oversight and enforcement activities aimed at addressing conduct that reduces, restricts or impedes competition. The FCCPC’s continued commitment is evident in its ongoing multi-industry investigations into violations of the FCCPA in various industries. This signals a possible outlook for 2024.

The Nigerian Privacy Act 2023

The NDPA 2023 represents a significant milestone in the regulation of data collection and protection in Nigeria. The law establishes a set of data collection and protection policies along with security measures to prevent unauthorized data collection and misuse. One of the key provisions of the Act is the establishment of the Nigerian Data Protection Commission. This institution serves as a vital mechanism for law enforcement and enforcement. By entrusting the Commission with these responsibilities, the law reinforces the commitment to comply with data protection standards and to hold entities accountable for their data processing activities. NDPA compliance is not only a legal requirement, but also a strategic move for businesses. Promotes confidence in Nigeria’s digital ecosystem; and by extension, strengthens Nigeria’s digital economy as users are assured of sharing important data within a protective regulatory framework.

Nigeria Inter-Bank Settlement System PLC (NIBSS) Memorandum on Non-Deposit Accepting FinTech Decommissioning

On December 5, 2023, the NIBSS issued a Financial Institutions Directive that mandates the exclusion of non-deposit-taking financial institutions from the external transfer channels of commercial banks. The directive emphasized that while these entities can process outgoing transfers as inflows to banks, their licenses do not authorize them to receive inflows or hold customer funds. This is in line with previous Central Bank of Nigeria (CBN) guidelines, circulars and discussions aimed at securing service-oriented licenses, maintaining a clear separation of financial activities by Fintech companies and preventing them from exceeding the approved scope of licenses.

Regulation on the Maintenance of Bank Accounts for Virtual Asset Service Providers (VASP)

At the end of 2023, the Central Bank of Nigeria (CBN) lifted its two-year restriction on virtual asset transactions, marking a significant policy reversal and showing the CBN’s willingness to explore the regulation of virtual asset service providers (VASPs), including cryptocurrencies. and crypto assets.

Prior to this recent policy change, the CBN actively discouraged investment in virtual assets, reflecting global regulatory concerns regarding potential systemic risks to the financial system, issues related to ensuring market integrity as well as investor and consumer protection.

Subject to specific regulatory requirements, regulated financial institutions may now open accounts, provide designated clearing accounts and clearing services, and act as conduits for forex inflows and trading for licensed VASPs involved in various virtual asset transactions. The guidelines set out, among other things, enhanced Know Your Customer (KYC) requirements for account opening, restrictions on account use, operational and transaction limits and ongoing reporting obligations for transactional activity on open accounts. Account opening requires top management approval and CBN authorization is mandatory for the opening of Designated Settlement Accounts (DSAs), which must be maintained and operated in accordance with the settlement processes and guidelines set out in the regulation.

While these regulatory changes represent a significant shift in the CBN’s stance on virtual assets, moving from a ban to a more nuanced regulatory framework, it is crucial to note that the CBN has not provided any legal acceptance of virtual assets as a substitute for domestic currency or as a medium of exchange in domestic transactions. Banks and other financial institutions remain prohibited from directly holding, trading, or trading in virtual assets. Basically, the CBN’s approach focuses on managing the associated risks while recognizing the potential benefits of virtual asset transactions. The impact of these changes and their contribution to the growth of the virtual asset market requires careful monitoring.

Increased consumer protection for digital loans

Based on the limited interim regulatory/registration framework and guidelines for digital lending in 2022, the Federal Competition and Consumer Commission (FCCPC) has launched a series of investigations to identify unlicensed digital money lenders or digital lenders (DMLs) that are violating the guidelines. On 20 July 2023, the Commission decommissioned the approved DMLs, rendering them legally inoperable. It further ordered Google to remove them from the Play Store and restrict payment gateway services to these entities. The FCCPC is currently developing a comprehensive and permanent regulatory framework for digital lending, scheduled for release in 2024, aimed at addressing the gaps and issues identified in the interim guidance.

Concluding remarks and general outlook for 2024

The regulatory environment in 2022 and 2023 has set the stage for remarkable developments in the business sector, particularly in the financial services industry. In 2024, regulators are expected to further strengthen supervision, enforcement and oversight by implementing recent frameworks and guidelines.

These initiatives will shape a more robust and compliant business environment as regulators implement and refine frameworks from previous years. Increased regulatory scrutiny demonstrates a commitment to transparency, integrity and stability of financial operations.

To succeed in this evolving environment, businesses must proactively anticipate upcoming regulatory developments. Strategic compliance planning will be key to managing regulatory change, which will include staying current, understanding new regulations and adapting internal processes to align with evolving requirements.

A proactive approach to compliance not only protects businesses from liability, but also fosters a culture of diligence, transparency and accountability, enhancing overall resilience and reputation in the Nigerian market.

As 2024 unfolds, businesses in Nigeria, especially in the financial services sector, should brace themselves for increased regulatory activities. Staying informed, adopting proactive compliance strategies and aligning with evolving regulatory expectations will not only help navigate change effectively, but also contribute to sustainable business growth and success.

The content of this article is intended to provide a general guide to the issue. Professional advice should be sought regarding your particular situation.

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