Important regulators every Nigerian lender should know

The ease at which one can wind up in trouble when handling money is unprecedented. For an industry as delicate as lending, it’s even 10x faster to end up in one regulatory mishap or the other. For this reason, we’re loud propagators of lending regulations, responsible lending, ethical lending, and compliance in general.

Regulatory compliance is all about lenders adhering to the rules laid out by relevant authorities or regulators. These rules ensure everyone plays fair, protects borrower rights, keeps things ethical, and ensures our industry runs transparently.

There are many financial regulators in Nigeria, and some of these will affect a lender in one way or another, from being as high as the federal government to being as low as the local government. Let’s look at some critical regulators every Nigerian lender must know.

Central Bank of Nigeria (CBN)

The apex bank is the most high-ranking financial regulator in the country, and this also cuts across lending. CBN can either issue a Finance company license or a Microfinance bank (MFB) license to operate federally as a lender. Other regulatory requirements include Periodic submission of financial and operational reports to the CBN every quarter. Lenders must also ensure ongoing compliance with the requirements of the Money Laundering (Prohibition) Act, 2011 (as amended), and Terrorism (Prevention) Act, 2011(as amended). 

State license lending

This license is issued by a state regulatory authority that authorises an entity or individual to engage in lending activities within that specific state. Lending state licenses are often required to ensure lenders comply with state laws and regulations related to lending practices. Learn more about state lending license.

Federal Competition and Consumer Protection Commission (FCCPC)

As a digital lender in Nigeria, you must know about the FCCPC. If you’re going to lend using technology in the form of a digital channel, especially mobile apps, you must meet the standards and requirements of the FCCPC to lend digitally.

Federal Inland Revenue Service (FIRS)

The Federal Inland Revenue Service is Nigeria’s primary tax collection agency. Its key responsibilities include Tax assessment, tax collection, tax policy implementation, enforcement of tax laws, issuance of tax clearance certificates, revenue accounting, etc. The following are significant taxes you’re required to pay: Withholding tax (WHT), which is an amount deducted at source from payment accruing or made to individuals or corporate entities in respect of income receivable for service(s) rendered; Value Added Tax (VAT) on your earnings; Companies Income Tax (CIT) on the profit of your loan business; Capital Gains Tax (CGT) etc. A lender who plays coy with taxes or tries to evade them risks business foreclosure.

State Revenue Service

An example is the Lagos Inland Revenue Service (LIRS). State revenue services have key responsibilities similar to FIRS. However, they cover only a particular state. 

National Information Technology Development Agency (NITDA)

This is a governmental agency responsible for the development, regulation, and promotion of information technology (IT) in the country. One of its key responsibilities is setting rules and standards that curtail data abuse by unethical lenders. In 2021, NITDA collaborated with the FCCPC to tackle the unceasing data abuse by unscrupulous moneylenders.

National Pension Commission (PENCOM)

When you have full-time employees on your payroll, you must remit their pension through PENCOM. PENCOM’s main responsibilities include pension regulation, licensing and registration of Pension Fund Administrators and Custodians, supervision and monitoring to ensure pension compliance, and overseeing the management of retirement savings accounts.

Nigeria Social Insurance Trust Fund (NSITF)

The Nigeria Social Insurance Trust Fund is a Nigerian government agency established to provide social insurance coverage and protection for employees against the risk of occupational accidents, injuries, and diseases. It was created to ensure workers’ welfare and provide compensation for employees or their dependents in the event of work-related incidents. 

Credit bureaus

The Credit bureaus are quasi-regulators (CRC, FirstCentral, CreditRegistry) whose primary purpose is to gather data related to individuals’ borrowing and credit behaviour, compile this information into credit reports, and provide these reports to authorised parties such as lenders, financial institutions, and other entities involved in extending credit. They, however, control how a lender handles the data collected to ensure ethical handling. Remember, a borrower’s right to data privacy is not negotiable.

Google Play Store

Although not a typical lending regulator, Google Play Store plays a crucial role in ensuring that unethical lenders/loan sharks have no hiding place in their domain. Some of their regulatory requirements include: 

• Adherence to and completion of the LIMITED INTERIM REGULATORY/ REGISTRATION FRAMEWORK AND GUIDELINES FOR DIGITAL LENDING, 2022 (as may be amended from time to time) by the Federal Competition and Consumer Protection Commission (FCCPC) of Nigeria. Find out how to get your FCCPC license. 
• Obtain a verifiable approval letter from the FCCPC. 
• Loan Aggregators must provide documentation and certification for digital lending services and contact details for every partnered digital money lender. Find out how to boost your loan app rating on the Google Play Store.

Apple App Store

While the App Store isn’t a traditional lending regulator, it plays a role in protecting the Nigerian lending ecosystem. The App Store prioritises borrower safety.  So, your loan app must meet their security standards to avoid getting flagged or removed. They also require that apps used for financial trading, investing, or money management should come from the financial institution performing such services or must use a public API offered by the institution in compliance with its Terms & Conditions. Find out how to boost your loan app rating on the Apple App Store.

Staying on the right side of the law with compliance

Understanding and adhering to these regulations may seem like a hassle, but it’s the key to staying out of trouble, so it’s worth the hassle. To help you navigate regulatory compliance, stay updated by regularly monitoring updates from all of the regulators we mentioned above. The road of compliance is never one you can walk alone, so we strongly advise that you tag along with industry experts who are knowledgeable and constantly up-to-date on lending regulations. 

Remember, responsible lending is a win-win. It earns borrower trust, minimises regulatory risks, and paves the way for a healthy and sustainable lending industry in Nigeria. If you have more questions on lending regulations and compliance, contact us at [email protected].