Legal Examination of Requirements for Obtaining a Digital Money Lending License in Nigeria

CONTRIBUTOR: VICTOR ATANG

INTRODUCTION

The regulation of money lending in Nigeria operates within a dual-layered legal architecture state-level control for traditional money lending activities and federal oversight for digital operations. This layered framework reflects both the historical context in which money lending was domesticated and the evolving realities of digital finance, which now demands a unified and responsive legal system to ensure fairness, accountability, and consumer protection. The Nigerian legal system, though relatively advanced in financial services regulation, is still undergoing reform to accommodate the disruptive impact of digital lending technologies.[1]

Traditionally, money lending is regulated by various states through specific laws such as the Lagos State Moneylenders Law and its equivalents in other states. These laws provide for the licensing of persons or entities engaging in the business of lending money to individuals or businesses at interest. The requirement of a money lending license is rooted in the desire to shield the public from exploitative lending practices and to ensure that lenders operate transparently and responsibly. However, there exists no unified national law on money lending, thereby creating jurisdictional disparities and procedural inconsistencies from state to state. For instance, while Lagos State has a relatively advanced regulatory procedure with clear documentation requirements, other states may adopt less structured or outdated frameworks, creating an uneven regulatory landscape.[2]

With the advent of fintech and the rapid proliferation of mobile and web-based lending platforms, the business of money lending has shifted significantly from traditional brick-and-mortar practices to digital spaces. This shift challenges the sufficiency of existing state laws, which were not designed to regulate virtual transactions that often transcend state boundaries. As a result, while a money lending license remains the legal entry point for both physical and digital lenders, additional oversight has become necessary to address the unique risks of digital platforms, particularly data abuse, algorithmic profiling, aggressive recovery tactics, and privacy violations.[3]

To respond to these developments, the Federal Competition and Consumer Protection Commission (FCCPC) emerged as the federal authority tasked with regulating the digital arm of the lending business. Drawing its mandate from the FCCPC Act 2018, the Commission assumed a proactive stance in 2022 by introducing the Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending. This regulatory intervention seeks to establish a uniform code of conduct for digital lenders across Nigeria, irrespective of the state in which they are physically located. The Guidelines serve as a quasi-legislative tool, mandating that all digital money lenders register with the FCCPC and comply with specific obligations relating to data protection, dispute resolution, transparency, and consumer rights.[4]

While the FCCPC Guidelines are innovative, their legal status as subsidiary legislation raises questions about their enforceability in the absence of a principal Act specifically codifying digital money lending. Nevertheless, they serve a vital regulatory purpose in filling the legislative vacuum and offering an interim standard until more robust legislation is enacted. The Guidelines not only enhance consumer protection but also compel lenders to align with broader statutory frameworks such as the Nigerian Data Protection Act (NDPA), Cybercrimes Act, and other ancillary regulations.[5]

In essence, Nigeria’s legal regime governing digital money lending is currently fragmented, balancing between state-level licensing and federal regulation of digital conduct. While this dual structure enables flexibility and adaptability, it also produces overlap and uncertainty for stakeholders who must navigate different rules depending on their operational model. The rise of digital lending necessitates a rethinking of the regulatory framework, with an urgent need for harmonisation, legislative coherence, and enforceability mechanisms to ensure that innovation does not outpace legal safeguards.

Procedural and Documentary Requirements for Digital Money Lending Registration

Starting a digital money lending business in Nigeria requires going through a structured legal and regulatory process. This process is important because it ensures that only companies that are serious about following the rules and protecting consumers can operate in the space. It combines basic legal requirements for running a business with specific rules for digital lending, especially those related to data protection and consumer rights.[6]

The first step is to register the company with the Corporate Affairs Commission (CAC). This registration gives the company legal status under Nigerian law, meaning it can enter into contracts, own property, and be held accountable for its actions. At this stage, it is also important that the company’s stated purpose includes money lending, so it is legally permitted to operate in that field.[7]

Once the company is registered, it must obtain a money lending license from the state where it plans to operate. Each state in Nigeria has its laws on money lending; for example, Lagos State operates under the Lagos State Moneylenders Law. This state license allows the company to offer lending services physically (i.e., in person or through offices). However, getting this license is only the beginning for digital lenders.

To operate digitally; such as through mobile apps or online platforms, the company must also register with the Federal Competition and Consumer Protection Commission (FCCPC). In 2022, the FCCPC introduced the Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending. Under these guidelines, digital money lenders must complete a registration form and submit several important documents. These include the company’s Terms of Use, Privacy Policy, Code of Conduct, and details about the business structure, including any related companies or partners. These documents show that the company understands and is prepared to follow the rules that protect consumers and ensure ethical lending.[8]

An important part of the digital registration process is data protection compliance. Because digital lenders collect and store a lot of personal data, they must follow Nigerian data privacy laws. As part of registration, the company must apply for an Audit Trust Mark from the Nigerian Data Protection Commission (NDPC). In addition, it must get a Compliance Audit Report and a Privacy Impact Assessment Report from an approved Data Protection Compliance Organisation (DPCO). These reports help identify how the company handles data and whether it protects customer information properly.[9]

The cost of registration includes several components. The FCCPC charges a registration fee of N500,000.00 (Five Hundred Thousand Naira) per app. There are also fees for the services of professionals and DPCOs, which vary depending on the provider. If a company started operating before 2023 but did not register with the FCCPC by the 2022 deadline, it must also pay a penalty fee of N500,000.00 (Five Hundred Thousand Naira),

In general, the whole registration process takes about two to three weeks, provided that all documents are submitted correctly. At the moment, there is no requirement for renewal, but companies must still meet some post-registration obligations. For instance, if there is any change in the information the company submitted during registration, it must inform the FCCPC within 14 days. Also, if the company wants to launch more lending apps, it must notify the Commission in advance.

Failure to register properly or update the FCCPC as required can result in serious consequences, such as fines, blacklisting, or removal of the company’s apps from platforms like Google Play Store or Apple Store, which could shut down the company’s digital operations entirely.

Legal Implications, Challenges, and Compliance Obligations

The digital money lending space in Nigeria, while offering innovative access to credit, comes with significant legal risks and obligations that stakeholders must understand and manage. One of the most immediate and serious consequences of non-compliance is the imposition of penalties and blacklisting. Digital lenders that fail to register with the FCCPC or operate without a valid money lending license risk having their operations shut down and their apps removed from digital platforms like the Google Play Store. This not only results in financial losses but can also damage the lender’s reputation and consumer trust.[10]

Operating without the proper licenses, whether at the state level for physical money lending or the federal level for digital operations, may even attract criminal liability. In some jurisdictions, offering lending services without legal authority is an offence, potentially punishable by fines or imprisonment. Therefore, regulatory compliance is not merely a bureaucratic process, it is a legal safeguard against prosecution and reputational damage.

Data protection presents another key legal concern. As digital lending platforms collect large volumes of sensitive personal and financial information, they are required to comply with the Nigerian Data Protection Act (NDPA) and guidelines issued by the Nigerian Data Protection Commission (NDPC). Lenders must implement strong cybersecurity measures and privacy policies and ensure their systems are subjected to regular audits. Failure to do so can lead to enforcement actions by regulators and civil liability from data subjects, especially where breaches result in harm or identity theft.[11]

Consumer protection duties also play a central role in the legal responsibilities of digital money lenders. Under the FCCPC Act and its 2022 guidelines on digital lending, lenders must uphold fair practices, transparency, and ethical collection methods. This includes clear communication about loan terms, interest rates, and penalties. Practices such as harassing borrowers, threatening public shaming, or accessing users’ contacts without permission are violations that could result in sanctions, public warnings, or business closure.[12]

A deeper challenge within the legal landscape is the lack of a unified national framework for money lending regulation. The division between state-issued money lending licenses and federal-level oversight for digital operations has created a fragmented regulatory structure. This duality breeds uncertainty, especially for companies looking to expand across multiple states or develop nationwide platforms. It also raises constitutional concerns regarding the appropriate level of government; state or federal, to regulate lending activities, particularly where digital platforms transcend geographic boundaries.[13]

Post-registration compliance is an area that many digital lenders overlook. Even after being registered, companies must keep the FCCPC informed of major changes, such as a change in business structure or the launch of new lending apps. They must also respond promptly to compliance monitoring exercises. A failure to update regulators or submit follow-up documentation could attract administrative penalties or cancellation of registration.

CONCLUSION

In summary, while the digital lending sector holds immense potential for financial inclusion, it also requires strict compliance with a patchwork of legal requirements. The risks of non-compliance go beyond monetary penalties—they affect the very legitimacy and sustainability of a digital lender’s operations.

To strengthen the industry and boost confidence among stakeholders, there is a pressing need for coordinated legislation. A codified federal framework that integrates state-level requirements, perhaps through cooperation between the National Assembly and state legislatures, would go a long way in reducing legal confusion. Such a framework should clearly define digital lending, harmonize licensing procedures, establish data protection benchmarks, and set nationwide consumer protection standards.

For digital lenders themselves, success in this space requires more than just offering credit, it demands a focus on ethical conduct, legal structuring, and consumer trust. Lenders must align themselves with stakeholders, including regulators, customers, and technology partners, and develop systems that are not only scalable but also legally sound. Responsible lending, fair interest rates, and respect for privacy rights are not only legal obligations—they are the foundation for long-term success and sustainability in Nigeria’s digital finance market.

REFERENCE

  1. Veraz Advocates, “Laws governing Money Lending Companies in Nigeria” Available @ https://www.verazadvocates.com.ng/2023/08/02/laws-governing-money-lending-companies-in-nigeria/ accessed 22nd April, 2025
  2. Ibid; Moneylenders Law, Chapter M7, Laws of Lagos State 2004.
  3. A.O. Olubunmi, “New Digital Money Lender Regulations in Nigeria: Some Legal Issues” (Proshare: 2022) Available @ https://proshare.co/articles/new-digital-money-lender-regulations-in-nigeria-some-legal-issues?menu=Regulators&classification=Read&category=Regulators accessed 22nd April 2025
  4. Ibid
  5. Ibid
  6. M.B. Adisa, “How to Obtain A Digital Money Lending License In Nigeria” (Mondaq; 2022) Available @ https://www.mondaq.com/nigeria/financial-services/1255952/how-to-obtain-a-digital-money-lending-license-in-nigeria accessed 21st April 2025
  7. Ibid
  8. Ibid
  9. Ibid
  10. M.O. Iji & Ors, “X-Ray on Digital Money Lending in Nigeria” (S.P.A. Ajibade: 2023) Available @ https://spaajibade.com/an-x-ray-on-digital-money-lending-in-nigeria/ accessed 22nd April 2025
  11. E. Utebor, & O.T. Joshua, “Digital Lending and the Challenges of Data Protection in Nigeria’s

    Financial Sector” (2023) Vol. 01 (2) Journal of Sustainable Development and Green Technology (JSDGT) PP. 31-38.

  12. Ibid
  13. Ibids

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