HOW TO SET UP INTERNATIONAL MONEY TRANSFER SERVICES IN NIGERIA

With Nigeria’s annual remittances predicated to be USD 34.89 billion in 2023, and with about USD 2.9 billion investment funds going to African startups, 62% of which went to fintechs in 2021 as reported by Briter Bridges, a large presence of Nigerians living in diaspora, there are huge market opportunity prospects for individuals and organizations wishing to provide international money transfer services in Nigeria.

As provided by the Guidelines for the Operation of International Money Transfer Services in Nigeria, 2014, (IMTO Guidelines), companies wishing to set up international money transfer services in Nigeria are required to be licensed by the Central bank of Nigeria (CBN). Please note that these guidelines are reviewed from time to time. It’s therefore important to ensure you obtain current information on the requirements whenever you wish to obtain a license.

WHAT LICENSES SHOULD I OBTAIN IF I WISH TO PROVIDE MONEY TRANSFER SERVICES IN NIGERIA?

Currently, there are four license options for carrying out money transfer services in Nigeria. They are;

a. Mobile Money (MM) License

b. International Money Transfer Service (IMTS) License

c. International Mobile Money Remittance Services (IMMRS) License

d. Payment Services Bank (PSB) License

For the purpose of this article, we would restrict our focus on the International Money Transfer (IMTS) License requirement.

WHAT SCOPE OF SERVICES ARE INTERNATIONAL MONEY TRANSFER OPERATORSs REQUIRED TO PROVIDE?

As provided by the guidelines, IMTOs are permitted to carry out the following activities;

1. Accept monies for the purpose of transmitting them to persons resident in Nigeria or another country.

2. Cross-border personal money transfer services, such as, money transfer services towards family maintenance and money transfer services favoring foreign tourists visiting Nigeria.

3. Cross border money transfer services between individuals only. Cross border transfer services between individuals and a corporate customers are prohibited to safeguard against corporate customers who might exploit such services by structuring their payments into small amounts to avoid the statutory reporting threshold requirements on their transactions.

IMTO operators are prohibited from carrying out the following activities;                 

1. Act as an authorized dealer in gold or other precious metals 2. Engage in deposit taking and/or lending money 3. Maintain current accounts on behalf of customers 3. Establish letters of credit 4. Act as a custodian of funds on behalf of customers as this type of transaction has its license requirement 5. Engage in institutional transfers 6. Buy foreign exchange from the domestic foreign exchange market for settlement.

WHAT ARE CBNs LICENSE REQUIREMENTS FOR OBTAINING INTERNATIONAL MONEY TRANSFER SERVICE LICENSE IN NIGERIA?

It’s important to emphasize the fact that as provided by the guidelines, no person or institution is permitted to provide international money transfer services except such person / institution has been duly licensed by the CBN.

To apply for the license, an application is submitted to the office of the Director, Trade and Exchange Department of the Central Bank of Nigeria, Abuja alongside the following documentary requirements;

i. Board of director’s approval to offer International money transfer services.

ii. Copy of the applicant’s certificate of incorporation

iii. Memorandum & Articles of Association (certified copy), of which the primary object clause shall indicate provision of Money Transfer Services.

iv. Shareholding structure of the Company

 v. Forms C02 (Return on Allotment of shares) and C07 (Particulars of Directors)

vi. Profiles of the Board and Management of the Company to include: CVs, functional contact e-mails and telephone numbers, ownership, governance and management structure

vii. Organogram of the company

viii. Business Plan, to include: (a). Nature of the Business (b). Features of the scheme (c). Internal control systems and monitoring procedures (d). Security features that will be put in place (e). 3 years financial projections/market analysis for the Company (f). Transaction and other charges that will be borne by customers (g). Profit sharing agreement among the parties (h). Diagrammatic illustration of transaction flows (i). Consumer Protection and Dispute Resolution Mechanism

ix. Information Technology Policy of the Company including:(a). Privacy Policy (b). Information Ownership/Disclosure/Loss Policy (c). Backup and Restore Policy (d). Network Security Policy (e). Encryption Policy (f). Confidential Data Policy (g). Password Policy (h). Third Party Connection Policy (i). Incidence Response Policy (j). Physical Security Policy

x. Enterprise Risk Management Framework

xi. Contingency and Disaster Recovery Plan(business continuity plan)

xii. Draft agreements with the participating parties

xiii. Tax Clearance Certificate for three (3) years xiv. Project Deployment Plan (time, location, operation, etc.)

xv. Credit reports from a licensed credit bureau for the shareholders and key officers of the money transfer services operator

xvi. Any other information as may be required by the CBN from time to time

xvii. A non-refundable application fee of N500,000 (Five Hundred Thousand Naira) or such other amount that the Bank may specify from time to time, payable to the “Central Bank of Nigeria” by electronic transfer.

xviii. Evidence of meeting the minimum paid up share capital of: a. N2,000,000,000 (Two Billion Naira) for Nigerian companies; and 6 b. N50,000,000 (Fifty Million Naira) or its equivalent for Foreign companies, plus the guarantee of the parent company

xix. Presence in at least seven (7) different countries.

HOW MUCH WOULD IT COST TO OBTAIN AN INTERNATIONAL MONEY TRANSFER SERVICE LICENSE IN NIGERIA?

An applicant is required to pay a non-refundable fee of N500,000 (five hundred thousand naira). This amount may be reviewed by the Central Bank of Nigeria (CBN) from time to time. The company is expected to show evidence of meeting up with the minimum share capital requirement of; N2,000,000,000 (Two Billion Naira) for Nigerian companies and  N50,000,000 (Fifty Million Naira) or its equivalent for Foreign companies, and the guarantee of the parent company.

Please note that the above share capital requirement does not mean that such amount would be paid. It only implies that the statutory charges with respect to such share capital amounts must be paid up.

WHAT ARE THE LICENSE REQUIREMENTS IN CASES WHERE A MONEY TRANSFER OPERATOR WISHES TO BRING IN A FOREIGN TECHNICAL PARTNER?

An applicant who wishes to engage in partnership with a foreign technical partner in setting up a global or regional money transfer platform is required to obtain a letter of no objection from the CBN.

The technical partner must however satisfy the following conditions: (a) Be a registered entity, licensed in its home country to carry on money transfer activities (b) Have a minimum Net Worth of US$1 million, as per the latest audited financial statement, or as may be determined by the CBN from time to time (c) The Overseas technical partner should be well established in the money transfer business, with a track record of operations (d) There should be an MOU that clearly delineates liabilities in the event of disputes and/or process failures.

WHAT IS THE TRANSFER LIMIT FOR INTERNATIONAL MONEY TRANSFER OPERATORS?

IMTOs are permitted to carry out outbound transfers with transfer limit of USD 2000 or its equivalent per transaction, while inbound transfers are limited to USD 500 per cash withdrawal, except it’s paid through an account.

CONCLUSION

With the impact of COVID -19 on cash transactions in Nigeria, there is no doubt that now is the best time to take advantage of the opportunity the large Nigerian market presents itself especially in view of the favorable cashless policies currently promoted by the Central Bank.

Furthermore, the current CBN guidelines are likely to be reviewed as new advancement emerges within the money transfer sector. It is therefore advisable to seek adequate counsel to ensure you are aware of the current requirements for obtaining the license should you wish to obtain it in the future.

Finally, it is clear that the huge minimum share capital requirement for obtaining the International Money Transfer Service license could be daunting for early stage startups. However, this shouldn’t be a source of discouragement for early stage founders and organizations wishing to render services in this category as there are creative legal options available for companies wishing to venture into this sector. If you need guidance in this regard, you may reach out to us HERE. We look forward to hearing from you.

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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