On 3rd August 2021, the recent Central Bank of Nigeria (“CBN”) released the Guidelines for the Establishment and Regulation of Payments Service Holding Companies (“PSHC”) in Nigeria.
On 3rd August 2021, the recent Central Bank of Nigeria (“CBN”) released the Guidelines for the Establishment and Regulation of Payments Service Holding Companies (“PSHC”) in Nigeria. The Guidelines requires companies that intend to offer both switching and processing and mobile money services to set up a PSHC structure.
The Guidelines defines PSHC as a company whose principal object clause is to be a holding company set up for the purpose of making and managing equity investment in 2 (two) or more companies, being its subsidiaries, which are payment service providers across the following categories:
1. Mobile Money Operations (“MMO”)
2. Switching and Processing
3. Payment Solution Services.
(A) Share capital
The minimum issued share capital of a company seeking to apply for an MMO license is N2,000,000,000.00(Two Billion Naira) (approximately US $ 3, 703, 704 (Three Million, Seven Hundred and Three, Seven Hundred and Four United States dollars) at 540 naira per dollar.
The PSHC and MMO are in the same category with the switching and processing and payment solution services subsidiary companies in terms of the minimum share capital requirement of N 2, 000,000,000.00 (Two Billion Naira) share capital which must be deposited with CBN before the completion of the license application process.
(B) Procedure for Obtaining a Mobile Money Operator License
The licensing requirement as provided in the CBN guideline requires the promoters of the companies to submit a formal application for the grant of a License addressed to the Director, Payments System Management Department of the CBN.
The licensing process shall be in two phases: Approval-in-Principle(AIP) and Final License stage.
(C)Requirements for Grant of Approval-In-Principle(AIP)
The application shall be accompanied with the following:
1. A non-refundable application fee of N1, 000,000.00 (One Million Naira) (approximately US $ 1, 852 (One Thousand, Eight Hundred and Fifty Two United States dollars) or such other amount that the CBN may specify from time to time; payable to the CBN, through electronic transfer.
2. Evidence of meeting the prescribed minimum paid-up capital subject to the satisfaction of the CBN.
3. Detailed business plan or feasibility report which shall, at a minimum, include:
a. Objectives of the PSHC and those of the subsidiaries it intends to establish/acquire.
b. Justification for applying for the payments service holding company.
c. Ownership structure in a tabular form indicating the name of proposed investor(s), profession/business and their percentage shareholdings.
d. Bio-data, resume/curriculum vitae of proposed investors.
e. Indication of sources of funding of the proposed equity contribution for each investor.
f. Where the source of funding the equity contribution is a loan, it shall be a long term facility of, at least, a 7-year tenor, and shall not be obtained from the Nigerian banking system or foreign subsidiaries of Nigerian banks.
g. Corporate Governance Charter of the PSHC stating the roles and responsibilities of the board and its sub-committees, among other things.
h. Criteria for selecting board membership.
i. Bio-data and detailed resumes of directors and board composition.
j. List of identified top/senior management staff, bio-data and detailed resumes stating qualifications, experiences, records of accomplishment, etc.
k. National or Government issued identity documents (International Passport, etc.) bio-data and Bank Verification Numbers (BVNs) of proposed Board and management staff of the company.
l. The Tax Identification Number (TIN) of the company and its Tax Clearance Certificate where applicable.
m. A schedule of services that will be shared in the group.
n. Five-year financial projection on the operations of the PSHC indicating expected growth and profitability, and details of the assumptions that form the basis of the financial projection.
o. Details of Information Technology (IT) infrastructure proposed to be deployed.
p. Information on and pictorial representation of the corporate group structure with shareholding percentage by the PSHC in each of the subsidiaries and their principal businesses and registered Head offices.
q. A written and duly executed undertaking by the promoters that the PSHC shall be adequately capitalized for the volume and character of its business at all times, and that the PSHC shall be under the supervisory authority of the CBN, as an Other Financial Institution (OFI).
4. For regulated foreign institutional investors, the CBN shall require a no objection letter from the regulatory body in the home country.
5. Shareholders’ agreement providing for disposal/transfer of shares as well as authorization, amendments, waivers, reimbursement of expenses, etc.
6. Statement of intent to invest in the PSHC to be made by each investor in the PSHC.
7. Technical Services Agreement, where applicable.
8. Draft copy of the company’s Memorandum and Articles of Association (MEMART). At a minimum, the MEMART shall contain the following information:
a. Proposed name of the PSHC.
b. Object clause which shall be limited to the permitted activities of its license.
c. Subscribers to the MEMART.
d. Procedure for amendment.
e. Procedure for share transfer or disposal.
f. Appointment of directors.
g. Where the promoters of the PSHC are corporate investors, the CBN shall require them to forward the following additional documents.
a. Certificate of Incorporation.
b. Board resolution supporting the company's decision to invest in the equity shares of the proposed PSHC.
c. Names, biometrics, BVNs and addresses (business and residential) of owners, directors and their related companies, if any.
d. Audited financial statements and reports of the company, including Tax Clearance Certificate for the immediate past 3 years.
e. Certified True Copies of the company’s CAC forms showing the details of allotment and particulars of directors.
f. Any other document/information that the CBN may require from time to time.
If satisfied with the application of the promoter(s), the CBN may grant an Approval in Principle (AIP).
Duration
The AIP stage usually takes a period of between2-3 months to process.
(D)Requirements to Incorporate an MMO company
Companies in Nigeria are incorporated at the Corporate Affairs Commission (CAC). The requirements for incorporating a company are as follows;
(i) 2(two) unique names of the proposed company to be reserved at the CAC;
(ii) Name, address, phone number, email and means of identification of at least 2Directors, one of which must be a Nigerian or a foreigner with business permit to carrying on business in Nigeria;
(iii) Name, address, phone number, email, means of identification of at least one Shareholder and in the case of corporate shareholder its incorporation Certificate and Board Resolution to acquire shares in the proposed company;
(iv) Objects of the proposed company;
(v) Nigerian address, phone number and email of the proposed company;
(vi) Special Articles of Association of the proposed company ;
(vii) Name, address, phone number, email, means of identification of Company Secretary;
(viii) Approval in Principle from CBN;
(ix) Payment of statutory filing fees and stamp duty.
The incorporation stage will take a period of 7-10business days.
(E)The Requirements for Granting a Final License
Within six (6) months after obtaining the AIP and incorporation of the company, the promoters of a proposed PSHC shall submit an application to the CBN for the grant of a final license.
1. Non-refundable licensing fee of N5,000,000.00 (Five Million Naira) (approximately US $ 9, 259), or such other amount that the CBN may specify from time to time, payable to the Central Bank of Nigeria by electronic transfer.
2. Evidence of promotion or investment of a payment service company.
3. Evidence of payment of capital contribution by each shareholder.
4. Evidence of location of Head Office (rented or owned) for the take-off of the PSHC.
5. Schedule of changes, if any, in the Board, Management, IT infrastructure and significant shareholding since the grant of AIP.
6. Evidence of ability to meet technical requirements and modern infrastructural facilities such as office equipment, computers, telecommunications, etc. to perform PSHC operations and meet CBN and other regulatory requirements.
7. Organizational structure, showing functional units, responsibilities, reporting relationships and grade (status) of heads of departments/units.
8. Board and staff training program.
The Final Licence stage usually takes a period of between 2-3 months to process.
(F)Requirements for Commencement of Operations
Upon obtaining the Final Licence, the PSHC shall inform the CBN of its readiness to commence activities and such information shall be accompanied with one copy of each of the following:
i. Shareholders’ Register.
ii. Share certificate issued to each investor.
iii. Enterprise Risk Management Framework (ERMF).
iv. Internal Control Policy.
v. Minutes of pre-commencement board meeting.
vi. Opening statement of affairs signed by directors and auditors.
vii. Dateof Commencement of Activities.
(G) Conclusion
In order to manage financial risks and for efficiency of the business, the CBN expect promoters of a Mobile Money Operator company to form at least 3 (three) companies; first, the PSHC which is the holding company; second, a mobile money operator subsidiary and third, the switching and processing subsidiary. Each of the 3 (three) companies shall have a minimum share capital of N 2, 000, 000, 000(Two Billion naira).
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