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CBN Guidelines for the establishment and operation of a Payment Service Holdco

On 3 August 2021, the Central Bank of Nigeria (CBN) issued new guidelines (the Guidelines) with the aim to further regulate and set up a licensing regime for the establishment and operation of a payments-service holding company (PSHC) in Nigeria.


In December 2020, the CBN had issued a circular on categorisation, with regards to the licensing regime for operators in the payments solutions sector. This circular allowed an operator to combine Mobile Money Operations (MMOs) and switching services under a Holding Company (Holdco) structure with the subsidiaries substantially defined to prevent issues of comingling of funds.[1]

In accordance with this circular, the CBN has now released the Guidelines to regulate the Holdco established by operators such as PSHC, to better integrate the payments and financial ecosystem.


The Guidelines apply to stakeholders and companies intending to establish or re-structure in efforts to carry on operations as a Holdco (PSHC) within the payments sub-sector of financial technology in Nigeria.

Features of the PSHC

  • Corporate Identity: The PSHC must be registered with the Corporate Affairs Commission (CAC) as a corporate body and regulated by the CBN.
  • Board Composition: The PSHC must have a board, with members numbered between 8 to 10 or as provided in the relevant code of corporate governance.
  • Financial Capability: The PSHC must be financially capable of providing resources to augment the capital of the subsidiaries when needed e.g., during recapitalization or financial hardship.

Permissible Activities

A typical Holdco in this scenario is structured such that it will hold and manage equities in at least two companies. The said companies must be separately carrying out at least two of the functions in the approved subsidiaries list:

  • MMO
  • Switching and Processing Services
  • Payment solutions

The PSHC can also provide the following functions:

  • broad policy direction,
  • shared services[2]
  • technical/management services

These activities are permitted with regards to; human resources, risk management, compliance/legal, facilities, information and communication technology or other services allowed by the CBN or other relevant regulators. Essentially, the PSHC needs at least two subsidiaries and may choose to adopt this structure

Non-Permissible Activities

The CBN has prohibited the PSHC from carrying on the following activities:

  • Setting up, divestment and closure of any subsidiaries
  • Receiving incomes from sources not listed in the Guidelines. Listed sources include; dividends from subsidiaries or other entities, incomes from shared services, interests earned from funds or securities, intellectual property rights or other sources

CBN Regulatory Mechanism

Approval: The CBN issues two types of approval:

  • Prior Approval: The Guidelines provide that the intending PSHC must obtain the prior approval of the CBN where it seeks to acquire controlling interest[1] in an approved subsidiary. This approval is purely subject to the prerogative of the CBN.
  • Conversion Approval: Where the PSHC seeks to convert to a single area of regulated operations e.g., MMO or switching services, an application must be made to the CBN for an approval supported by audited financial statements covering three years under the current structure, divestment plans, and other relevant documents required by the CBN.

Oversight: The CBN reserves the rights to order the divestment of a PSHC from any of the subsidiaries where it feels that the affected subsidiary is being run in a manner not satisfactory or inimical. Perhaps, this can be appealed at the courts.

Licensing Regime: There are two steps with regards to licensing for a PSHC;

  • Approval in Principle (AIP): An application is submitted to the Director, Payments System Management Department before incorporation, supported by the following;
    • A non-refundable application fee of NGN 1,000,000.00 (USD2,442)
    • Evidence of meeting the minimum paid-up capital in the Guidelines
    • Business or feasibility reports stating the objectives, ownership, structure, funding, corporate governance etc.
    • Evidence of paying an application fee of NGN 1,000,000.00 (USD1,221)
    • Undertaking by promoters that the PSHC is adequately capitalized and that the PSHC shall be under the regulatory authority of the CBN[1] .
    • In case of foreign institutional investors, a no-objection letter from the relevant regulatory authority in the home country must be submitted.
    • In case of corporate promoters, a certificate of incorporation, board resolution, tax clearance certificates, audited statements and other documents required by the CBN must be submitted.
    • Draft copy of the Memorandum and Article of Association (MEMART)
  • Final Approval: This application must be made within a 6-month window of obtaining the AIP. Relevant documentation include;
    • A non-refundable fee of N 500,000.00 (USD 1,221)
    • Evidence of payment of capital obligations of all shareholders
    • Proof of investment in an approved subsidiary
    • Organizational structure showing units, leaderships, departments and reporting obligations, schedule of changes in the board management since the AIP was granted
    • Board and staff training programme
    • Proof of technical ability such as computers, equipment etc., to perform PSHC functions

Operational Requirements: The CBN is legally empowered to be notified in the following manner:

  • Pre-commencement: All PSHC must inform the CBN when it is ready to commence activities accompanied with a register of shareholders, shared certificates, enterprise risk management framework, internal control policy, minutes of pre-commencement board meeting, opening statement of affairs signed by directors and auditors and date of commencement of activities.
  • Post commencement: After kickstarting operations, the PSHC is required to follow CBN guidelines/circulars, accounting system and adequate capitalization at all time while the Holdco is a going concern.

Conduct and Prudential Regulation: The aim of this part is to increase the stability of the entities involved and regulate behaviours and outcome of the entities;

  • Capitalization: where the PSHC owns 100% of the subsidiaries, the minimum paid-up capital of the PSHC must exceed the sum of the required capital of its subsidiaries. For instance, all switching services operators and MMOs must have a minimum paid-up capital of N2 Billion each. Hence, a PSHC with both entities as subsidiaries must have a paid-up capital or at least N4 Billion.
  • Dividends: There must be no payment of dividends except loses incurred and other capital expenses have been written off, capitalization obligations met and the CBN is satisfied.
  • Miscellaneous: The PSHC must ensure there is funds to support all non-current assets acquisition and subsidiaries meet capitalization obligations. However, it must ensure that it is not unduly exposed financially such that it carries more than 20% of the PSHC’s shareholders funds un-impaired by losses.
  • PSHCs and all subsidiaries are to be regulated primarily by the CBN, especially through the Payments Systems Management Department of the CBN.  Further regulation may be by relevant entities such as the Federal Inland Revenue Service, the SEC and the CAC etc.; with regards to the applicable areas such as shares, tax[1] or corporate activities.

Corporate Governance

  • Board Composition: The PSHC Board must appoint at least 1 individual with requisite experience in the businesses of the subsidiaries.
  • Regulation: The appointment, disqualification and oversight functions over the board and all management positions must be in line with the Assessment Criteria for Approved Persons’ Regime for Financial Situations; CBN guidelines for other financial institutions, relevant codes of corporate governance, and other regulations released by relevant regulators. 
  • Website: The PSHC must upload its audited financial statements on its website.
  • Ownership and Control: The PSHC must also follow these rules of ownership and control
  • Prior approval of the CBN must be obtained for a shareholding of 5% and above or any change in ownership. Where the acquisition is through a secondary market[1], the approval must be obtained within 7 days.
  • All the Subsidiaries are not allowed to acquire shares in the PSHC or sister subsidiaries of under the same PSHC.
  • A PSHC that loses ownership or control of either of its two subsidiaries for more than 6 consecutive months, will cease to be a PSHC and need to return to the CBN for license cancellation. In cases like this, the PSHC must divest wholly from the subsidiaries within 6 months. Where the subsidiaries involved are an MMO and switching services, they can continue to operate independently.


This regulation is a worthy development in one of the fastest growing sectors in Nigeria, with financial technology leading the service industry which is about 56% of the economy[7].  This is also an area that is quite complicated due to the advanced level of technology required with the operations. The idea of regulating a Holdco further brings certainty and simplicity especially to the investors.

In 2010, an identical development with regards to Holdco structures for banks was devised by the CBN. This allowed commercial banks to divest and explore other service offerings while remaining related or connected. We hope that this will further stimulate investment activities in the financial technology space in Nigeria.   

Author: Ibrahim Moshood, Associate, Centurion Law Group

Key Contact: Oneyka Cindy Ojogbo, Centurion Law Group Team Lead, Nigeria: