HOW TO OBTAIN A MONEY LENDERS LICENSE IN LAGOS STATE

INTRODUCTION

Obtaining a money lender’s license is a prerequisite to operate as a moneylender in Nigeria. Any individual or company seeking to function as a moneylender must apply to the relevant authority to obtain money lenders license. This means you cannot operate as a money lender without first obtaining a valid Money Lenders License. A Money Lenders License is an official permit issued by the Lagos State Ministry of Home Affairs, allowing individuals or companies to legally give out loans for profit. This regulation aims to protect both lenders and borrowers, ensure transparency, and prevent illegal lending practices.

In this exploration, the article seeks to provide the legal requirements and procedure for obtaining a Money Lenders License in Lagos State.

WHO IS A MONEY LENDER?

Section 2 of Money Lenders Law of Lagos State, defines a money lender as;

“A money lender includes every person whose business is that of moneylending or who carries on or advertises or announces himself or holds himself out in any way as carrying on that business, whether or not he also possesses or owns property or money derived from sources other than the lending of money and whether or not he carries on the business as a principal or as an agent; but shall not include –

1. Any society registered under the Co-operative Societies Law or
2. Any body corporate, incorporated or empowered by special enactment to lend money in accordance with such enactment or;
3. Any person bona fide carrying on the business of banking or insurance or bonafide carrying on any business, not having for its primary object the mending of money, in the course of which and for the purposes whereof he lends money.
4. Any pawnbroker licensed under the Pawnbrokers Law, where the loan is made in accordance with the provisions of the Pawnbrokers Law and does not exceed the sum of forty naira.”

KEY POINTS DERIVED FROM THE ABOVE DEFINITION

1. Any person whose business is that of lending money at interest or who advertises or holds himself out as carrying on that business.
2. This definition encompasses both individuals and corporate bodies engaged in the regular business of providing loans for profit.
3. However, certain financial institutions are exempted from the definition of money lenders because they are regulated under separate statutory frameworks. These institutions include commercial banks licensed by the Central Bank of Nigeria, insurance companies, cooperative societies, and development finance institutions.

The rationale for this exemption lies in the fact that such institutions are already subject to comprehensive regulatory oversight under statutes such as the Banks and Other Financial Institutions Act (BOFIA)

WHY IS LICENSING IMPORTANT FOR MONEY LENDERS IN NIGERIA?

Where a person engages in lending activities without being licensed under the Moneylenders Law, the courts may refuse to enforce the loan agreement entered into by that person.

PRECONDITIONS TO QUALIFY FOR OBTAINING A MONEY LENDERS LICENSE

1. A company must be incorporated.
2. The minimum share capital is N20 million
3. Where such a company has a foreigner as either a director or shareholder, the minimum share capital is N100 million
4. The company’s registered address must be in Lagos State
5. Minimum of 2 directors by the company

HOW TO OBTAIN A MONEY LENDERS LICENSE IN LAGOS STATE

The process of obtaining a money lender license typically involves two main stages.

The first stage is the issuance of a Money Lender Certificate by a Magistrate Court. The applicant must file an application before the court, supported by relevant documents, including police clearance and evidence of good character.

Once the court is satisfied that the applicant is a fit and proper person to engage in the business of money lending, it issues a certificate confirming the applicant’s eligibility.

The second stage involves obtaining a money lender’s license from the relevant state authority, usually the Ministry of Home Affairs or the Ministry of Commerce.

 REQUIREMENTS FOR OBTAINING A MONEY LENDER’S CERTIFICATE IN LAGOS STATE

1. Company incorporation documents (i.e., Certificate, MEMART, Articles of Association)
2. Minimum of 2 directors
3. Directors must be domiciled in Lagos State
4. Police Character Report and fingerprint certificate/Police Clearance Certificate
5. Affidavit
6. 3 years (including the current year) Tax Clearance Certificate of the Company
7. Evidence of 3 years (including the current year) Tax clearance of at least two directors
8. Evidence of Payment of the relevant application fee

Upon verification by the Magistrate Court, and approval, the Magistrate Court Ordinance Form B and C is issued to the applicant for final licensing by the authorized Government Agency.

REQUIREMENTS FOR OBTAINING FINAL MONEY LENDERS LICENSE IN LAGOS STATE

1. Company incorporation documents with a minimum of 2 directors
2. Payment for the application form
3. Police report from the Commissioner of Police showing the finger prints search for at least two directors
4. Magistrate Court Ordinance Form B and C
5. 3 years tax clearance certificate (including the current year) of the directors/company
6. Signage/Company’s logo (to be displayed within the office premises)
7. Payment of the license fee
8. Reference letter from the company’s bank
9. A copy of the company’s SCUML certificate
10. Director’s CV or statement of work history with (position held, reason for leaving, number of years under employment)
11. Company’s source of funds and its financial records and statements
12. Disclosure of all necessary information, income, and assets
13. A mandatory visitation or inspection of the company’s premises. This applies to both new and renewal applications

NOTE: Where the applicant is a foreign company;

1. Foreign companies applying must have a Nigerian resident as a director in their incorporation documents.
2. Expatriate quota, tax, and immigration documents of foreigners are required

WHAT IS THE VALIDITY PERIOD FOR A MONEY LENDER’S LICENSE?

The license is valid for one year. It expires on 31^st December of the year it was issued. Renewal of the license is a mandatory requirement.

REQUIREMENTS FOR RENEWAL OF MONEY LENDERS LICENSE IN LAGOS STATE

1. Magistrate Ordinance (FORM B and C)
2. 3 years’ tax clearance certificate (including the current year) of the director and shareholder
3. 3 years tax clearance certificate (including current year) of the company
4. Signage/Company’s logo (To be displayed within the office Premises)
5. A photocopy of the previous license issued
6. Evidence of Remittance of Employee’s PAYEE to LIRS (Lagos Inland Revenue Service)
7. Payment for the renewal form
8. Payment for the renewal fee
9. Minimum of 3 to 6 months of the company’s bank statement
10. Company SCUML certificate

Additional requirements

1. A physical inspection is carried out during renewal to check the company’s records of all transactions and the interest rate charged
2. Notification of change of address to the agency is required (Where there is a change of Business address)
3. The physical address change/Renewal must not be done less than a year from the date the first license was issued.
4. The agency must be notified where there is a change of director, and such notice must be backed by amended incorporation documents
5. A company’s director cannot serve as a director in another money lending company at the same time
6. Foreign directors/Investors must present all Immigration related documents such as business permits, CERPAC, Expatriate Quota Returns, Evidence of the Mandatory State Social Health Insurance (ILERA-EKO), etc,

FCCPC REGISTRATION REQUIREMENTS FOR DIGITAL LENDING PLATFORMS IN NIGERIA

Under the current legal framework, all digital lending platform in Nigeria must be registered with the Federal Competition and Consumer Protection Commission (FCCPC). Failure to register with the FCCPC may lead to the permanent blacklisting of the digital lender’s business and the removal of its digital apps from online platforms such as Google Play Store and Apple Store, etc., which will make the lender unable to transact its business in Nigeria.

The process of registering with the FCCPC is summarized as follows:

1. The digital lender is to obtain an Audit Trust Mark from the Nigerian Data Protection Commission.
2. Obtain a compliance Audit Report and Privacy Impact Assessment from a duly registered Data Protection Compliance Organization (DPCO).
3. Obtain and complete the requisite digital lender’s registration form from the FCCPC. The completed form is to be accompanied by some documents, which include:
   • Incorporation documents of the applicant.
   • The company’s terms of use and privacy policy
   • The company’s code of conduct
   • Brief description of the business and details of its groups, subsidiaries, and affiliates.
   • Evidence of a feedback and complaint resolution mechanism
   • Evidence of payment of the registration fee
4. Obtain and complete the requisite declaration form from FCCPC.

The application is to be submitted to the FCCPC together with the required documents. In practice, the FCCPC allows some flexibility in the registration process by allowing applicants to begin the digital lender’s registration process while waiting for the Audit Trust Mark, the Compliance Report, and the Privacy Impact Assessment Report.

WHY YOU NEED A LAWYER FOR OBTAINING A MONEY LENDER’S LICENSE IN LAGOS STATE

Getting a Money Lender’s License in Lagos State can be complicated due to many rules and procedures. It is best to hire a lawyer who has experience with this process. A lawyer will make sure you follow all the legal requirements, prepare and file the necessary documents, communicate with the right authorities and court registry, and handle any issues that come up. This will help you get your license smoothly and on time, while reducing the chances of delays, mistakes, or breaking any laws.

CONCLUSION

The process of obtaining a Money Lender’s License in Lagos is governed by a comprehensive regulatory framework aimed at ensuring the lawful and professional operation of money lending businesses. Compliance with the applicable legal requirements and procedural guidelines is essential for securing the license and operating within the bounds of the law. By fulfilling these obligations, applicants can establish a legitimate and reputable money-lending enterprise that supports financial inclusion and economic development in Lagos State.

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