Guidelines for Licensing and Regulation of Payments Service Holding Companies in Nigeria
On 3rd August 2021, the Central Bank of Nigeria (CBN) issued a circular forwarding the Guidelines for Licensing and Regulation of Payments Service Holding Companies in Nigeria (the “Guideline”). The Guideline was released further to the CBN circular dated 9th December 2020 outlining the New License Categorisations for the Nigerian Payments System which also directed that companies seeking to combine the activities under the Switching and MMO categories will be required to operate only under a holding company structure with the subsidiaries clearly delineated to prevent comingling.
The Guideline directs companies seeking to operate more than one license category to set up a Payments Service Holding Company (PHSC) with the activities of the subsidiaries clearly delineated. The affected licensing categories for the setup of a PHSC are (a) Mobile Money Operations (MMO); (b) Switching and Processing; (c) Payment Solution Services (PSS) and (d) other activities as may be approved by the CBN. Under the Guideline, a PHSC is a company whose principal object clause include the business of a holding company set up for the purpose of making and managing investment in two or more companies being subsidiaries holding the relevant payment service provider license. The Guidelines were issued to set out permissible and non-permissible activities of PSHCs, and the requirements for the operation, ownership and control, licensing, and corporate governance of PSHCs.
Key Takeaways from the Guidelines
Business and Incorporation: A PSHC is required to be a non-operating entity whose principal object clause include the business of a holding company set up for the purpose of making and managing investment in two or more companies being subsidiaries holding the relevant payment service provider license. The PSHC shall be incorporated in Nigeria and licensed by the CBN. A PSHC shall have a board of 5 – 10 members or as may be determined by the CBN Corporate Governance Guidelines.
Structure: A PSHC is permitted to have two hierarchies. That is PSHC may have a subsidiary which is a parent of another subsidiary (intermediate company). The PSHC may acquire controlling stake in any financial and/ or technological company, subject to the prior approval of the CBN where controlling interest represents a minimum of 51% of the share capital.
Licensing Requirements: The promoters of a PSHC shall submit a formal application addressed to the Director, Payments System Management Department, for the grant of a license. The application shall be accompanied by the required application documents.