On the 16th of June 2021, the Securities and Exchange Commission (SEC) announced the initiation of its Regulatory Incubation Program (“the RI Program”) which started operations in Q3 of 2021.

The aim of the RI Program is to enable new FinTech models and processes that require regulatory authorization operating or seeking to operate in Nigeria to continue carrying out fully or partially technology driven capital market activities. 

The RI program creates a space where FinTech companies seeking operation and those already in operation may begin operations while being assessed by the SEC to determine whether such business is one which can be allowed to continue to participate in the Nigerian Capital Market.

The SEC stated that:

“The RI Program has been conceived as an interim measure to aid the evolution of effective regulation which accommodates the innovation by FinTechs without compromising market integrity and within limits that ensure investor protection.”

In the recent past, there have been instances where the proposed business models of FinTech companies seeking to begin operation in Nigeria have fallen outside of existing SEC regulations. This has led to a failure to launch for those companies.

In line with the above, the SEC has published Guidelines for the operation of the RI program which is specifically for Fintech entrepreneurs and companies.

SEC’s Regulatory Incubation Guidelines

The Guideline states the reason for the development of the regulatory incubation is to promote the SEC’s objective of regulating innovation and the ‘FGN’s Ease of doing business’ (Executive Order 001.), which is a policy that aims to remove regulatory restrictions which might make it difficult for businesses in Nigeria to operate and help businesses thrive

This is to be accomplished in the FinTech ecosystem by allowing the operation of some new models of FinTech operations providing capital market services in a limited and supervised space before they are fully established and operational in Nigeria.

The Guidelines provide for:

Pre-Qualification Requirements

  1. The use of innovative technology to offer a new type of product or service or applying innovative FinTech to an existing product or service.
  2. The business shall involve an activity that falls within the scope of activities regulated by the SEC.
  3. Readiness to take-off with live customers and operate within the purview of the SEC Regulatory Framework.
  4. Commitment to applying for registration as soon as rules are provided by the commission.
  5. The product or service shall be one that addresses a compliance or supervisory problem or brings potential benefits to consumers or industry and the applicants shall ensure that the product is safe for investors.
  6. Completion of the FinTech Assessment Form and discussion of the proposal with the Commission at an early stage.

The Regulator Incubation Operations

Mandates that applicants must possess relevant technical skills, integrity, care and diligence, undertake to comply with all rules and regulations and provide monthly reports to the Securities and Exchange Commission.

The RI Program Restrictions and Conditions

Upon being approved for the RI program, participants are prohibited from carrying out any business other than that presented to the SEC and making misleading or misrepresenting statements to their customers. Also, approved applicants are to on-board a maximum of 100 clients who will be duly informed of the products and services they offer. 

However, FinTech companies that are already in existence and operational are not required to on-board any more clients during the one-year period. At the end of the incubation period, participants considered eligible are advised to apply to register and if found ineligible, mandated to terminate operations immediately. 

Termination/Removal from Regulatory Incubation

The SEC may terminate participation in the regulatory incubation process at any time if the FinTech operator is found to be wanting of eligibility for the program, has breached any law or conditions of the guidelines, deviates from the implementation plan or fails to register after the one-year period of the incubation process.

The Guideline further provides for an implementation plan, mandates applicants to complete an application form and pay a processing fee of N200,000.


The RI Program, just like the Sandbox Program of the Central Bank of Nigeria has been commended for supporting and promoting innovation and economic growth in FinTech, while adequately vetting prospective or contemporary FinTech operators for the protection of the interests of Investors/customers.

Operational FinTechs can seize this opportunity and make it one where products and services that have been kept at bay, due to regulatory concerns, are rolled out and tested. 

Published by David

Head, Legal Team