The regulation of fintech in Nigeria has evolved into a sophisticated tiered system that distinguishes between Mobile Money Operators (MMOs), Payment Service Banks (PSBs), and Microfinance Banks (MFBs). This article examines the specific operational boundaries and licensing requirements mandated by the Central Bank of Nigeria (CBN) to foster financial inclusion. By understanding these nuances, investors can determine which structure best supports their goals, whether they aim to provide digital wallets, high-volume payment processing, or traditional credit facilities to underserved populations.

Each license type carries distinct restrictions, such as the prohibition on PSBs from providing loans or the capital adequacy ratios required for MFBs. Adhering to these statutory frameworks is essential for maintaining compliance and securing consumer trust in the digital economy. This guide serves as a strategic resource for navigating Nigeria’s complex fintech landscape.

Overview

In our February 3, 2020 article, we had written on the differences between a Mobile Money Operator (MMO) license, a Payment Service Bank (PSB) license and a Microfinance Bank (MFB) license. The article was aimed at supporting Fintechs in determining which of the existing Central Bank of Nigeria (CBN) licenses is compatible with their services or proposed products.

Since our article, the CBN has issued various regulations and policies affecting MMOs, MFBs and PSBs. In view of this, we have updated our table on the different licenses to reflect the regulatory update.

	MMO	PSB	MFB
Minimum share capital	NGN 2 billion	NGN 5 billion	Unit (Tier 1) – NGN 200 million Unit (Tier 2) – NGN 50 million State MFB – NGN 1 billion National MFB – NGN 5 billion
Service Area	No restriction	25% of its operations in Rural Areas	Unit (Tier 1) – operating in urban areas with 5 offices in 5 Local Government Areas (LGAs). Unit (Tier 2) – operating in rural areas with two branches in 1 LGA. State – operating in one state. National – operating in all the states.
Loan	Not permitted	Not permitted	Permitted provided that: • No single loan will exceed 1% of the sharecapital of the MFB; and • subject to 80% Micro loan of the total loan portfolio.*Micro loans are credit facilities not more than NGN 500,000 for Unit (Tier 1) and NGN 1 million for other categories.
Bank accounts and Wallets	Bank Account-Based Card Account-Based (Credit, Debit and Pre-paid) e-Wallet	Account and e-Wallets	Bank accounts
Cards	Limited to card processing	Debit and Pre-paid cards	Debit and Credit cards
Transaction limit	Depending on KYC level level 1 – NGN 50,000 (balance of NGN 300,000) level 2 – NGN 200,000 (balance of NGN 500,000) level 3 – NGN 5,000,000 (unlimited balance)	Depending on KYC level level 1 – NGN 50,000 (balance of NGN 300,000) level 2 – NGN 200,000 (balance of NGN 500,000) level 3 – NGN 5,000,000 (unlimited balance)	No Limit
Foreign Currency transaction	Can receive and sell foreign exchange from inbound transfer. Prohibited from remittance.	Can receive and sell foreign exchange from inbound transfer. Prohibited from remittance.	Prohibited from foreign exchange transactions
Airtime and USSD service	Permitted (subject to NCC approval)	Permitted (subject to NCC approval)	Permitted (subject to NCC approval)
QR Code Payments	Permitted	Permitted	Permitted
Connection with the Nigeria Inter-bank Settlement System (NIBSS)	Required	Required	Required
Connection with the CBN Real Time Gross Settlement (RTGS)	Required	Not required	Not required
Agent Banking	Permitted	Permitted	Permitted
Who can Operate	Existing Banks and any company can apply for an MMO license.	Limited to the types of companies listed below:Banking AgentsTelecommunication companiesRetail chainsPostal Service and Courier CompaniesMMO (converting to PSB)Switching CompaniesFinancial Technology companies Financial Holding companies	Any company can apply for an MFB license.

If you require clarity or further information on the licenses above, contact Pavestones at info@pavestoneslegal.com.

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