GUIDE TO SETTING UP A MONEY LENDING BUSINESS IN NIGERIA.

In Nigeria, the business of money lending is carried out by both individuals and companies. If you’re looking to register a money lending business in Nigeria, you should note that commercial money lending activities in Nigeria requires licensing by either the Central Bank of Nigeria (applicable to Banks and Other Financial Institutions) or the Ministry of Home Affairs of various states (applicable to money lenders that are non-financial institutions). Commercial money lending activities, are regulated by the Money Lending Laws of various States which makes it mandatory to carry out such form of business with a license.

There are restrictions on interest rates money lending operators can charge in their transactions. It is therefore important that you take note of what is obtainable in your location, should you choose to commence such business. In addition, corporate entities in the business of money lending should take note of the minimum share capital requirements by relevant regulatory agencies for setting up such companies.  

PROCEDURES FOR OBTAINING A MONEY LENDER’S LICENSE IN NIGERIA.

There are generally three stages to obtaining a money lending license in Nigeria, although some of these stages below may not be applicable in some states.

Stage 1 – Apply to the Magistrate Court within the location in which you are to carry out business.

Prepare a written application in the prescribed form to the Chief Magistrate within the location where the business will be carried on with the applicant’s letterhead. Such application should be accompanied with the following documents;

a. Certified copies of companies statement of share capital and particulars of directors ( formerly known as CAC Forms 2 and 7)

b. Memorandum and Articles of Association of the company

c. Certificate of Incorporation

d. Tax and Police Clearance

e. Evidence of Maintenance of a current bank account

Upon submission of the above documents, the applicant receives; (I) Letter from the Chief Magistrate Court Registry to the Permanent Secretary, Ministry of Home affairs confirming due compliance and recommending the issuance of the money lending license certificate to the applying individual/ corporate body in question. (II) FORM B and C of the Money lender’s ordinance.

Stage 2 – Apply to the Ministry of Home Affairs and Tourism.

This stage involves the following;

  • Pay a fee for the purchase of the application form needed to process and obtain Money lender’s certificate.
  • Collect an invoice for payment of a specified amount from the Ministry for payment of money lender’s fee, which is paid to a designated Government account.
  • Submit the Application with the covering letter, Form B and Form C from the Magistrate Court, the Police report from Commissioner of Police, a 3-year Income Tax Clearance Certificate, the PAYE (Pay-As-You-Earn) Certificate, the Certificate of Incorporation and the evidence of payment of application fee.

Stage 3 – Visitation/ Inspection by Government Officials.

This last stage involves physical assessment and the visitation of the designated office by government officials. Upon visitation, in case the organization in question is already operating in money lending, the books will be inspected in addition to the workplace. Upon satisfaction by government officials that the business complies with the statutory requirements, the applicant will be given with the Money lending license.

If you have obtained the money lender’s license, you are expected to renew such license annually as the said license lasts for a period of one year.  In addition, corporate entities in the business of money lending should take note of the minimum share capital requirements by relevant regulatory agencies for setting up such companies.  

PROCEDURES FOR OBTAINING A MONEY LENDING LICENCE IN CROSS RIVER STATE.

The rules or principle guiding money lenders business is prescribed in the Money Lenders Law, CAP M7 Laws of Cross River State of Nigeria. The procedure to obtain a money lending certificate is provided for in Section 5 of the Money Lenders Law of Cross River State which states;

“A person intending to apply for a certificate under this law shall, fourteen days at least before his application, give notice of his intention by registered letters sent by post to the magistrate having jurisdiction over, and to the officer in charge of police at, the place at which he proposes to carry on business, and shall in the notice set forth his name and address and the address at which he proposes to carry on his business.”

In Cross River State, an application is made to the Chief magistrate which is accompanied by the following documents;

  • In the case of a registered company; Certified copies of company’s statement of share capital and particulars of directors (formerly known as CAC Forms 2 and 7) and in the case of a registered business name, Certified copy of CAC Form 1
  • Certificate of registration
  • Tax clearance certificate
  • Payment receipt of required statutory fees.

Section 6 states the conditions in which grant of certificate may be refused. They are;

(a) that satisfactory evidence has not been produced of the good character of the applicant, and in the case of a company, of the persons responsible for the management thereof;

(b) that satisfactory evidence has been produced that the applicant, or any person responsible or proposed to be responsible, for the management of his business as a moneylender, is not a fit and proper person to hold a certificate;

(c) that the applicant, or any person responsible or proposed to be responsible for the management of his business as a moneylender, is by order of a court disqualified for holding a certificate;

(d) that the applicant is disqualified under section 9 for the grant of a moneylender’s license;

(e) that the applicant has not complied with the provisions of any regulation made with respect to applications for certificates.

CONCLUSION.

With the rise of fintech startups carrying out the business of money lending in various states in Nigeria, it is of essence that these startups are aware of the regulatory requirements for carrying out such operations in Nigeria.

We hope you found this article useful? For further enquiries, you may reach out to us here, and we’ll get back to you immediately.

Cynthia Tishion
Cynthia is a lawyer and currently serves as Head of Corporate / Commercial Services at LEX – PRAXIS. With her passion for business and entrepreneurship, she is actively engaged in creating awareness on the legal aspect of businesses through various platforms such as writing, public speaking engagements.

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