Nigeria Fintechs Struggle with Lengthy Licensing Delays and High Capital Requirements

Fintech startups in Nigeria must align their business models with specific Central Bank of Nigeria (CBN) licensing categories, including Payment Solution Services, Mobile Money Operator, Switching and Processing, and Regulatory Sandbox licences [1]. The licensing process is rigorous, involving detailed documentation such as audited financials, corporate records, business plans, KYC/AML policies, and external certifications. Startups must also meet significant capital requirements, with Switching and Processing licences demanding ₦2 billion in shareholder funds and an additional ₦2 billion escrowed with the CBN [1]. The Payment Solution Service Provider (PSSP) licence, by comparison, requires a capital of ₦100 million [1].

Processing timelines are a major challenge. According to industry reports, the PSSP licence can take between three to six months for final approval [1]. Switching and Processing licences often take 6 to 8 months, while Payment Service Provider (PSP) and Mobile Money Operator (MMO) licences can stretch between 5 to 18 months, depending on the quality of documentation, clarity of requirements, and the CBN’s workload [1]. Practical experiences suggest delays often exceed official guidelines, with some startups taking up to a year to secure or renew licenses [1].

These delays impose significant financial and operational strain on startups. Founders face long waits, intricate documentation, and capital lock-ins before they can launch services. For example, Eyowo, a neobank, received a clean compliance audit in March 2023 but faced months of uncertainty after CBN auditors flagged areas for improvement, forcing the company to halt new user registrations [1]. The fintech eventually secured approval-in-principle but only after agreeing to re-incorporate as “Entrepreneur MFB” and implementing significant internal changes [1].

Startups often adopt workarounds to navigate the delays. Some, like Paga, spend extended periods negotiating regulatory approvals while continuing product development [1]. Others rely on partnerships with licensed entities, as explained by Akinsola Jegede, founder of VitalSwap. While such partnerships allow startups to operate, they limit the range of products they can offer and increase third-party costs [1]. This approach also influences strategic decisions, with some startups shifting focus toward international markets to mitigate domestic regulatory challenges [1].

The CBN has made efforts to streamline the process, including launching the Business Facilitation Act of 2023, which mandates default approvals if agencies fail to respond within specified timeframes [1]. The agency has also introduced the Licencing, Approval and Other Requests Portal (LARP) for Microfinance Bank applications, aiming to replace manual submissions with a digital system [1]. However, these changes have not yet resolved the broader delays and complexities in the licensing process.

Critics argue that Nigeria lags behind its regional peers. In Kenya, the Central Bank issues a Payment Service Provider licence in 90–120 days, while Ghana has cut approval windows to six months [1]. South Africa’s Financial Sector Conduct Authority (FSCA) allows sandbox participation within 60 days. These efficiencies enable faster market entry, fostering innovation and competitiveness. Nigeria’s delays, in contrast, create a bottleneck that stifles growth and investor confidence [1].

Analysts suggest that Nigeria can adopt a tiered licensing approach, offering provisional approvals within 90 days contingent on meeting capital and compliance milestones [1]. Publishing timelines and approval status online, as Ghana does, could also enhance transparency. More fundamentally, regulators must view startups as partners in advancing financial inclusion rather than adversaries. The CBN has experimented with a regulatory sandbox, but it requires scaling and integration into a broader licensing framework [1].

With over 200 fintech startups operating and venture funding into Africa reaching $3.5 billion in 2023, streamlining licensing is critical for unlocking growth [1]. Until regulatory processes become clearer and more predictable, Nigeria risks falling further behind in the regional fintech race. Every month of delay means lost opportunities—both for startups and for the 38 million unbanked adults in the country who could benefit from digital financial services [1].

Source: [1] What and how long does it take to get a fintech licence in Nigeria? https://coinmarketcap.com/community/articles/68add3f54d4cc92881e169c1/