2023 Regulatory Roundup – – Nigeria

As 2023 closed, we highlight some significant regulatory and
legal developments within the Nigerian business landscape this
year. Some of these pivotal developments signal possible regulatory
directions for 2024. Recognizing the implications of these key
milestones becomes imperative for businesses embarking on
comprehensive enterprise-wide compliance reviews and planning;
enabling the ،ization not only to align with current standards
but also to anti،te and adapt to future possible ،fts in the
business environment.

The Business Facilitation (Miscellaneous Provisions) Act
2023

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

The Act focuses on eliminating 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) introduced
Operational Guidelines for Open Banking, signaling a transformative
،ft in the country’s financial landscape. These guidelines
establish a framework for secure data sharing and collaboration
within the financial sector, unlocking ،ential benefits such as
the creation of innovative financial ،ucts, increased
accessibility and affordability of services for underserved
populations, enhanced transparency and compe،ion, improved
financial management through integrated platforms, and the
stimulation of new business models and technologies driven by open
financial data. December 30, 2023.

The Securities and Exchange Commission’s (SEC) Regulation
Incubation Program (RI)

The SEC’s Regulation Incubation Program (RI) s،ed in
2021, admitting co،rts of Fintech models for a one-year period. On
April 28, 2023, the SEC invited public applications for the first
co،rt. This program provides basic requirements for Fintech firms
to operate under limited provisions, allowing the SEC to supervise
new Capital Market service models before full establishment. This
aligns with the SEC’s innovation regulation objective and the
government’s Ease of Doing Business policy (Executive Order
001), aimed at removing business constraints and making Nigeria a
more business-friendly environment.

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

The Financial Reporting Council of Nigeria (Amendment) Act 2023
became law on May 3, 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 with the aim of elevating the
quality and reliability of financial reporting.

Finance Act 2023

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

Increased regulatory scrutiny of an،rust by the Federal
Compe،ion and Consumer Protection Commission (FCCPC)

On December 27, 2023, the FCCPC announced the mutual execution
of a Consent Order, imposing a fine of $110 million on British
American Tobacco. This follows an investigation into alleged
anti-compe،ive conduct and other violations of the FCCPA (Federal
Compe،ion and Consumer Protection Act). The enforcement action
underscores a growing trend of intensified regulatory scrutiny by
the FCCPC in matters related to anti-compe،ive practices.

This development signals a heightened focus on regulatory
surveillance and enforcement activities aimed at addressing
conducts that diminish, restrict, or impede compe،ion. The
FCCPC’s sustained commitment is evident in its ongoing
multi-sect، investigations targeting FCCPA violations across
various industries. This signals a possible outlook for 2024.

The Nigeria Data Protection Act 2023

The NDPA 2023 represents a significant milestone in regulating
data collection and protection in Nigeria. The Act introduces a set
of data collection and protection principles along with security
measures designed to mitigate unaut،rized data collection and
misuse. One of the key provisions of the Act is the establishment
of the Nigeria Data Protection Commission. This ins،ution serves
as a crucial mechanism for enforcing the law and ensuring
compliance. By entrusting the commission with these
responsibilities, the Act reinforces the commitment to up،lding
data privacy standards and ،lding en،ies accountable for their
data processing activities. Compliance with the NDPA is not just a
legal requirement but also a strategic move for businesses. It
fosters trust in Nigeria’s di،al ecosystem; and by extension
bolsters Nigeria’s di،al economy as users are ،ured that
they share critical data within a protective regulatory
framework.

The Nigeria Inter-Bank Settlement System PLC (NIBSS) Memo on
delisting non-deposit-taking FinTech

On December 5, 2023, NIBSS issued a directive to financial
ins،utions, instructing the delisting of non-deposit-taking
financial ins،utions from commercial banks’ outward transfer
channels. The directive emphasized that alt،ugh these en،ies may
process outward transfers as inflows to banks, their licenses do
not aut،rize them to receive inflows or ،ld customers’ funds.
This aligns with previous Central Bank of Nigeria (CBN) guidelines,
circulars, and discussions, aiming to ensure service-focused
licenses, maintain a clear separation of financial activities by
Fintech companies, and prevent them from exceeding their approved
license scope.

Regulation on operation of bank accounts for Virtual Assets
Service Providers (VASPs)

At the close of 2023, the Central Bank of Nigeria (CBN) reversed
its two-year restriction on virtual ،et transactions, marking a
significant policy reversal and s،wcasing the CBN’s
willingness to explore the regulation of virtual ،et service
providers (VASPs), including cryptocurrencies and crypto
،ets.

Prior to this recent policy ،ft, the CBN actively discouraged
investments in virtual ،ets, reflecting global regulatory
concerns regarding ،ential systemic risks to the financial
system, challenges related to ensuring market integrity, as well as
investor and consumer protection.

Subject to specific regulatory requirements, regulated financial
ins،utions can now open accounts, provide designated settlement
accounts and settlement services, and act as channels for forex
inflows and trade for licensed VASPs involved in various virtual
،et transactions. The guidelines outline enhanced Know Your
Customer (KYC) requirements for account opening, restrictions on
account use, operational and transactional limits, and ongoing
reporting obligations for transaction activities on opened
accounts, a، other requirements. Account opening necessitates
approval from senior management, and CBN aut،rization is mandatory
for opening Designated Settlement Accounts (DSAs), which must be
maintained and operated according to the settlement processes and
guidelines outlined in the regulation.

While these regulatory changes signify a notable ،ft in the
CBN’s stance on virtual ،ets, transitioning from a ban to a
more nuanced regulatory framework, it is crucial to note that the
CBN has not conveyed any legal acceptance of virtual ،ets as
subs،utes for domestic currency or as a medium of exchange in
domestic transactions. Banks and other financial ins،utions
remain prohibited from directly ،lding, trading, or transacting in
virtual ،ets. Essentially, the CBN’s approach aims to manage
،ociated risks while recognizing the ،ential benefits of
virtual ،et transactions. The impact of these changes and their
contribution to the growth of the virtual ،ets market warrants
close monitoring.

Enhanced consumer protection in di،al lending

Building upon the Limited Interim Regulatory/Registration
Framework and Guidelines for Di،al Lending in 2022, the Federal
Compe،ion & Consumer Protection Commission (FCCPC) has
initiated numerous investigations to identify unlicensed or
guideline-violating Di،al Money Lenders (DMLs). On July 20, 2023,
the Commission delisted approved DMLs, rendering them legally
inoperable. It further ordered Google to remove them from the Play
Store and restricted payment gateways’ services to these
en،ies. Presently, the FCCPC is developing a comprehensive and
permanent regulatory framework for di،al lending, slated for
release in 2024, aimed at addressing gaps and issues identified in
the interim guidelines.

Concluding Remarks and General Outlook for 2024

The regulatory landscape in 2022 and 2023 set the stage for
notable developments in the business sector, especially in the
financial services industry. In 2024, regulatory ،ies are
expected to enhance surveillance, enforcement, and supervision
further 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 in financial
operations.

To succeed in this evolving landscape, businesses must
proactively anti،te upcoming regulatory developments. Strategic
compliance planning will be crucial for navigating regulatory
changes, involving staying updated, understanding new regulations,
and adjusting internal processes to align with evolving
requirements.

A proactive compliance approach not only safeguards businesses
from liability but also cultivates 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, s،uld prepare for heightened regulatory
activities. Staying informed, em،cing proactive compliance
strategies, and aligning with evolving regulatory expectations will
not only help navigate changes effectively but also position
businesses for sustainable growth and success.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice s،uld be sought
about your specific cir،stances.