Fintech startups in Nigeria encounter multiple hurdles in obtaining licenses, which significantly slows their growth. Licensing is critical for operational activities.
Types of Licenses and Their Requirements
Nigerian fintech startups need to choose a business model and secure the appropriate license from the Central Bank of Nigeria (CBN). Major license categories include: - Payment Solution Services - Mobile Money Operators - Switching and Processing Licenses - Regulatory Sandbox.
Switching and processing licenses entail steep capital requirements—startups must demonstrate ₦2 billion in shareholder funds and escrow another ₦2 billion with the CBN, refundable only after final approval.
Long Licensing Times and Their Impacts
CBN processing timings can vary, but practical experience reveals much longer durations. Startups anticipate approvals ranging from 6 to 18 months, depending on document quality. One founder noted, "Getting licensed is not easy anywhere, at least in the US and Nigeria. But there are guidelines that helped us understand the requirements with US licensing, which is missing here." Licensing delays hinder product launches and diminish investor trust.
Paths to Improve the Licensing System
Changes to the licensing system are necessary to speed up processes and enhance access to capital. Reports suggest that offering clearer timelines and licensing approaches comparable to countries like Kenya and Ghana—where licenses are processed in months—would benefit startups. Regulators need to view startups as partners in achieving financial inclusion goals.
The challenges of obtaining licenses for fintech startups in Nigeria continue to impede their development and obstruct access to necessary funds. Without changes to the licensing system, startups risk falling behind their international competitors.
