Introduction 

As of May 29, 2024, the Bola Ahmed Tinubu presidency clocked one year in its stewardship of Nigeria. This, perhaps, is a good time to examine the regulatory landscape drawn up by the new government since its inception. Please check here, here and here for the digests of the preceding months. 

In this May edition of our monthly regulatory digest, we highlight key pronouncements, regulations, and notices by key regulatory institutions, such as the Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC), National Information Technology Development Agency (NITDA), and Nigerian Communications Commission (NCC). We delve into the most impactful pronouncements from these leading institutions during May 2024 and how they are likely to affect the economy and business environment of the country. We will consider the implications for different sectors on issues such as financial inclusion and innovation, technological growth, and communication infrastructure. With this evolving regulatory landscape, businesses can make informed decisions to chart a successful course under the Tinubu administration.

1. Securities and Exchange Commission (SEC) Exposure of Proposed Rules on the Issuance and Allotment of Private Companies’ Shares

The SEC released draft Rules on May 7, 2024, aimed at regulating private companies' issuance and allocation of debt securities by permitting them to issue and allocate debt securities to the public. The SEC's draft Rules represent a significant step in establishing a more transparent framework for private company debt issuance in Nigeria. The focus on investor protection and clear eligibility requirements aims to create a more secure environment for companies and investors. The draft Rules contain provisions on company eligibility, the scope of the rules, procedure for allotment, and sanctions/penalties. It was released with a two-week deadline for public comments. It would be interesting to see the final copy of the Rules and the changes made. We have published a more elaborate article here.

2. Central Bank of Nigeria’s (CBN) Introduction of New Guidelines for Bureaux De Change Operations

The Central Bank of Nigeria (CBN) introduced new Regulatory and Supervisory Guidelines for Bureau De Change (BDC) operations, effective June 3, 2024. These guidelines aim to enhance the role of BDCs in Nigeria's foreign exchange market. Key changes include updated licencing requirements, new BDC categories, revised permissible activities, and enhanced financial, corporate governance, and AML/CFT/CPF standards.

The guidelines require existing BDCs to re-apply for licences under the new categories and meet updated capital requirements within six months. New applicants must follow electronic application procedures and provide specific registration information. The guidelines replace the 2015 operational guidelines and related directives, reflecting the CBN's commitment to a robust, compliant, and transparent foreign exchange market. A detailed article on this guideline will be published soon.

Central Bank of Nigeria (CBN)

1. Cybersecurity levy 

The Central Bank of Nigeria (CBN) issued a circular directing all financial institutions to adhere to the Cybercrimes (Prohibition, Prevention, Etc.) (Amendment) Act 2024, mandating a 0.5% levy on specified electronic transactions. The levy was required to be collected at the point of transaction and remitted to the National Cybersecurity Fund (NCF), overseen by the Office of the National Security Adviser (ONSA). The circular required financial institutions to commence deductions within two weeks and complete system reconfigurations within four to eight weeks, depending on their type. 

However, a subsequent circular from the CBN has withdrawn the previous directive related to the implementation of the Cybercrimes (Prohibition, Prevention, Etc.) (Amendment) Act 2024. Financial institutions are advised to disregard the earlier instructions and await further guidance.

2. CBN's Strategy to Double Remittance Flows: Approval for 14 New IMTOs

The Central Bank of Nigeria (CBN) has launched a strategy to double foreign-currency remittance flows through formal channels by granting Approval-in-Principle (AIP) to 14 new International Money Transfer Operators (IMTOs). The initiative aims to increase the supply of foreign exchange in the official market, promote competition and innovation among IMTOs, lower remittance transaction costs, and boost financial inclusion. Also, the strategy will enhance liquidity in Nigeria’s Autonomous Foreign Exchange Market (NAFEX) and support a market-driven fair value for the naira. The increase in IMTOs is part of the efforts by the CBN's remittance task force, created following a World Bank/IMF session, to work with the private sector and market operators to facilitate business in the remittance ecosystem. The task force will regularly meet to implement and monitor the strategy's impact on remittance inflows.

3. CBN Extends Suspension of Cash Deposit Processing Fees

The Central Bank of Nigeria (CBN) has extended the suspension of processing fees on cash deposits above certain thresholds until September 30, 2024. Previously imposed charges of 2% for individuals and 3% for corporates on cash deposits exceeding N500,000 and N3,000,000 respectively have been suspended. This directive, outlined in a letter to all banks and financial institutions, instructs them to continue accepting cash deposits from the public without imposing any charges until the specified date.

1. Regulatory Function: Following the directives of the Office of the Nation­al Security Adviser (NSA) and the Securities and Ex­change Commission (SEC) that the Naira be delisted from Peer-to-Peer trading platforms, the exchanges have begun implementing the same. During a meeting with the Blockchain Industry Coordinating Committee of Nigeria (BICCoN), the umbrella organisation for major blockchain and cryptocurrency associations in Nigeria, the Securities and Exchange Commission revealed its plans to delist the Naira from peer-to-peer (P2P) cryptocurrency trading platforms. This decision aims to prevent the current levels of manipulation occurring on these platforms.

The removal of the Naira from the platforms will limit their ability to manipulate exchange rates against the Nigerian currency. The directives were issued as one of the strategies to further strengthen the Naira's value.

1. Partnership/Collaboration: The National Information Technology Development Agency (NITDA) signed a Memorandum of Understanding (MOU) with Cisco to further advance Nigeria's digital transformation. Cisco’s Country Digital Acceleration (CDA) Programme is a global initiative that partners with government and private sector leaders to develop sustainable, secure, and inclusive communities powered by ethical and innovative technology solutions. The partnership will unlock the value of digitalisation in Nigeria and drive an inclusive future by implementing pilot projects in key areas, such as repurposing NCAIR to create an AI and cybersecurity experience and incubation centre; establishing a broadband innovation centre, and incubating defence technology solutions.

Also, NITDA is set to collaborate with other organisations to bring the benefits of digital technologies to the grassroots in line with the recently reviewed Strategic Roadmap and Action Plan (SRAP 2.0) 2024-2027. These collaborations are in line with the agency’s ongoing effort to transform Nigeria into a globally recognised hub of technology and innovation to drive economic diversification and boost productivity across all sectors.

2. Digital Infrastructure: The Director General (DG) of NITDA, in line with the agency’s Strategic Roadmap and Action Plan (2024-2027), announced its goal to achieve a 70 percent digital literacy level by 2027 and inaugurated and reconstituted the National Blockchain Policy Steering Committee (NBP-SC) to validate trends in blockchain technology and incorporate new stakeholders for inclusive adoption and implementation. The agency plans to promote digital transformation through innovation and accessibility, thereby creating an enabling environment that fosters creativity to drive progress via the implementation of the National Digital Literacy Framework (NDLF) and the National Blockchain Policy (NBP) and enhancing widespread access to digital education.

This further solidifies the agency’s vision to empower Nigeria digitally and enhance economic growth through technological innovations.

1. Establishment of the Nigeria Startup House: The President recently approved the conversion of a Federal Government property in San Francisco, USA, into the Nigerian Digital Technology Exchange Programme Hub (Nigeria Startup House). This initiative aims to achieve the five (5) Pillars of Knowledge, Policy, Infastructure, Innovation, Entrepreneurship & Capital (IEC), and Trade outlined in the Ministry's Strategic Blueprint. It is hoped that this will boost Nigeria's economy by attracting Foreign Direct Investment, enhancing the visibility of Nigeria’s startup ecosystem, and drawing funding and expertise from global markets and organisations. The Nigeria Startup House will be owned by the Federal Government. However, it will be managed by a consortium of Nigerian digital technology companies, which will provide private funding for its operations.
2. Setting up a Special Purpose Vehicle (SPV): The Ministry plans to establish a Special Purpose Vehicle (SPV) to support the deployment of 90,000 kilometres of fibre-optic cable. This project aims to enhance Nigeria’s existing connectivity infrastructure, significantly increasing internet accessibility. Upon completion, this network will become Africa’s third longest terrestrial fibre optic backbone, followed by those in Egypt and South Africa. The immediate advantages of this improved internet connectivity will boost internet penetration in Nigeria to over 70%, potentially lowering internet access costs by more than 60% and integrating at least 50% of the 33 million Nigerians currently without internet access. Additionally, this initiative is expected to contribute up to 1.5% to GDP growth per capita, potentially increasing Nigeria’s GDP from $472.6 billion in 2022 to $502 billion within the next four years.

1. Temporary suspension of communication licences: The Nigerian Communications Commission (NCC) announced the temporary suspension of the issuance of three communications licences, including the Interconnect Exchange Licence, Mobile Virtual Network Operator Licence, and Value Added Service Aggregator Licences. According to the Commission, the temporary suspension was necessary to enable the Commission to conduct a thorough review of several key areas within these categories, including the current level of competition, market saturation, and current market dynamics. Consequently, the Commission will not accept new applications in these categories. However, pending applications will be considered on their merits.
2. Public inquiry on draft regulation and guidelines: On May 21 to May 22, 2024, the NCC held a public inquiry on the draft Telecommunications Networks Interconnection Regulations (as amended), the draft Guidelines on Procedure for Granting Approval to Disconnect Telecommunications Operators (as amended) and the draft Guidelines on Dispute Resolution (as amended) in accordance with the Nigerian Communications Act. To ensure transparency and inclusivity in the law-making process, the NCC published the draft regulations and guidelines in April 2024 for stakeholder comments until May 10, 2024. The public inquiry, which was held at the Commission’s headquarters in Abuja, allowed stakeholders to deliberate on the comments and further discuss the relevance and effectiveness of the amended regulations and guidelines in addressing emerging issues and challenges in the digital economy.

A Federal High Court in Lagos State has upheld the Central Bank of Nigeria’s regulation that requires customers to disclose their social media handles as part of the Know Your Customer (KYC) procedure conducted by financial institutions.  The court ruled that this requirement does not violate privacy rights and is consistent with constitutional provisions.

Recall that on June 20, 2023, the CBN released the Central Bank of Nigeria Customer Due Diligence Regulations 2023. The regulation aims to guide financial institutions in adhering to relevant laws and standards regarding customer identification and verification. A notable addition to the KYC procedure is the inclusion of social media handles as part of customer verification process.

The inclusion of social media information is intended to strengthen the identification process by providing financial institutions with additional data points to verify the identity of their customers. This step is part of broader efforts to enhance transparency and security within the financial system, ensuring compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.

May 2024 has seen significant regulatory developments across various sectors in Nigeria, mirroring the government's proactive efforts to enhance the country's economic situation. 

During the month, several guidelines and draft regulations were released that have the potential to advance the regulatory environment and have implications for stakeholders in different sectors of the economy. Additionally, government agencies have increased stakeholder engagement regarding their policy initiatives.

As regulatory bodies adjust to changing trends and stakeholder needs, collaboration and transparency will continue to be essential in achieving sustainable development and ensuring regulatory effectiveness. The combined efforts of all stakeholders are crucial in navigating the complexities of the regulatory landscape and driving Nigeria towards its development goals.

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