Following the new license categorizations of participants in the Nigerian payments ecosystem, the Central Bank of Nigeria (CBN) requires that any company that intends to operate in more than one license category is to set up a Payments Service Holding Company (PSHC) with the activities of its subsidiaries clearly defined.

Hence, on the 3rd of August 2021, the CBN issued Guidelines for Licensing and Regulation of PSHCs in Nigeria which detail the regulatory requirements for operations of PSHCs in Nigeria. The Guidelines are to facilitate understanding of the requirements for the adoption and operation of a PSHC in Nigeria while providing the definition and structure of a PSHC, licensing requirements, ownership and control, corporate governance, permissible and non-permissible activities, as well as supervision.  


The guidelines define a PSHC as a company whose principal object clause include the business of a holding company set up for the purpose of making and managing equity investment in two or more companies, being its subsidiaries across the following categories:

i.               Mobile Money Operations

ii.              Switching and Processing

iii.             Payment Solution Services

iv.            Any other activity as may be approved by the CBN

The arrangement requires a Non-operating PSHC to be formed and to hold equity investment in the separate companies in a “parent-subsidiary” arrangement and it shall serve as a source of financial strength for its subsidiaries while maintaining financial flexibility and capital-raising capabilities to support the subsidiaries. The parent-subsidiary shall not be involved in the day-to-day running of the subsidiaries. The PSHC is to be a corporate body registered with the Corporate Affairs Commission (CAC) and it shall be licensed and regulated by the CBN. It shall have a board size of between 5 and 10 or as the CBN Corporate Governance Guidelines determine.

The guidelines require that a PSHC must have a minimum of 2 subsidiaries which include a Mobile Money Operator (MMO) and a Switching Company. The structure allows for a PSHC to only have two hierarchies. A PSHC may have a subsidiary which is a parent company to another subsidiary.

A PSHC with approval from the CBN is also allowed to acquire a controlling interest in any permissible financial and/or technological company where controlling interest represents a minimum of 51% of authorized share capital.

Where a PSHC intends to change to mono-line payments service provider it shall seek the approval of CBN and submit along with the request:

a.    Annual audited financial statements of the immediate past three years under the arrangement/structure it seeks to discontinue

b.    Divestment plan from subsidiaries and

c.    Any other requirements may be determined by the CBN from time to time.

The CBN may also direct a PSHC to divest from a subsidiary where the CBN decides that the PSHC is being run in a manner which is detrimental to the subsidiary and/or the stability of the financial system.

Licensing Requirements

The promoters of the PSHC are required to submit a formal application for the grant of a license to the Director, Payment System Management Department. The Licensing process shall be in two phases: Approval-in-Principle and Final License.

A financial holding company, with a payment service provider as a subsidiary that has been licensed before the issuance of the guidelines, does not need to apply for a PSHC license.

Requirements for grant of Approval-In-Principle

The application is to be accompanied with:

a.    A non-refundable application fee of N 1,000,000 or any other such amount as specified by the CBN payable to the CBN through electronic transfer

b.    Evidence of meeting the prescribed minimum paid-up capital as defined in the guidelines, subject to the satisfaction of the CBN

c.    Detailed business plan or feasibility report which shall include: objectives of the PSHC and its intended subsidiaries, justification for the application, Biodata/resume of the proposed investors, indication of source of funding, Corporate Governance Charter of the PSHC, criteria for selecting board membership, Biodata and resume of directors and board members, list of senior management staff with their bio-data and their resumes, Government Issued Identification for the management staff and board members, Tax Identification Number (TIN) of the proposed company and Tax clearance certificate where applicable, schedule of services that will be shared in the group, five year financial projection of the PSHC showing growth and profitability with reasons for assumptions made in the projection, Details of Information Technology (IT) infrastructure to be deployed and Information and pictorial representation of the corporate group structure indicating shareholding perspective by the PSHC in each of the subsidiaries along with their principal businesses and registered head offices.

d.    A written and executed undertaking by the promoters of PSHC to be adequately always capitalized for the character and volume of the business and to be under the supervisory authority of the CBN as an Other Financial Institution (OFI)

e.    A no-objection letter from the regulatory body in the home country for regulated foreign institutional investors.

f.      Shareholders’ agreement providing for disposal/transfer of share as well as authorization, amendments, waivers, reimbursement of expenses, etc.

g.    Statement of intent to invest in the PSHC to be made by each investor in the PSHC

h.    Technical Services Agreement where applicable

i.      Draft copy of the company’s Memorandum and Articles of Association (MEMART).

Where the CBN is satisfied with the application by the promoters, they shall grant an Approval-in-Principle (AIP).

Requirements for granting a final license

The promoters of the PSHC no later than 6 months after the grant of the AIP shall apply to the CBN for grant of a final license along with:

a.    Non-refundable licensing fee of N 5,000,000 (Five Million Naira) or such other amount that the CBN may specify from time to time payable to the CBN via electronic transfer

b.    Evidence of promotion or investment of a payment service company

c.    Evidence of promotion or investment of a payment service company

d.    Evidence of location of Head-office for the take-off of the PSHC

e.    Schedule of changes if any in the Board, Management, IT infrastructure and significant shareholding since the grant of AIP

f.      Evidence of ability to meet technical requirements and modern infrastructure facilities like office equipment, computers, telecommunications to perform PSHC operations and meet CBN and other regulatory requirements

g.    Organizational structure showing functional units, responsibilities, reporting relationships and grades of heads of departments/units

h.    Board and Staff training programme

Requirements for commencement of Operations

The PSHC is to inform the CBN when it is ready to begin operations and the information must be sent in along with:

1.    Shareholders’ register

2.    Share certificate issued to each investor

3.    Enterprise Risk Management Framework

4.    Internal Control Policy

5.    Minutes of pre-commencement board meeting

6.    Opening statement of affairs signed by directors and auditors

7.    Date of commencement of Activities

Upon commencement, the PSHC is expected to comply with all relevant guidelines and regulations issued by the CBN and extant laws, maintain adequate accounting systems and records which capture the financial condition of the PSHC and ensure that it and all its subsidiaries are adequately capitalized at all times.

Corporate Governance

To strengthen the governance structure of the PSHC, the following shall apply:

The board shall include at least a person with the necessary skill required to run the business of the subsidiary and all appointments to the board and management shall be done in line with extant regulations. Regulations on disqualification of members shall be those that apply to Other Financial Institutions. They are to comply with CBN Corporate Governance Guidelines, the Securities and Exchange Commission (SEC) Corporate Governance Guidelines for publicly quoted companies and listed entities in Nigeria where applicable. Also, they are to include their audited financial statements among the contents of their website.

Ownership and Control

The guidelines prescribe certain rules of operation to accompany the ownership and control of PSHC’s:

1.    The guidelines prescribe that prior approval must be sought from the CBN for any shareholding of 5.0% and above or any change in ownership in control of the PSHC. If the shares are obtained through the secondary market, then the PSHC must seek approval within 7 days of the acquisition;

2.    All subsidiaries of a PSHC are prohibited from obtaining shares in the parent company and in other subsidiaries of the PSHC;

3.    Where a PSHC loses control of any of the two payment service subsidiaries for a period of 6 consecutive months, it shall cease to be a PSHC, and it shall return its license to the CBN. Where it only has two subsidiaries and it loses a controlling interest in one of them, for a consecutive period of 6 months, then it shall cease to be a PSHC, and it shall return its license to the CBN;

4.    A PSC that has lost controlling interest in a subsidiary and lost its license shall within 6 months or a period specified by the CBN shall divest itself from the subsidiary so the subsidiary can continue running.;

5.    Where a PSHC loses interest in a subsidiary and its subsidiaries include a switching and processing company and Mobile Money Operators, both companies shall continue to operate independent of each other.

For the Change in Ownership Structure:

1.    No officer of a PSHC without consent from the CBN is allowed to enter any contract which changes the structure of the PSHC whether in the form of the control of the PSHC, transfer of more than 5% and above in the PSHC, reconstruction of the PSHC and the employment of a new management agent:

2.    If the transfer is effected through the secondary market, then the PSHC must notify the CBN not later than 7 days after the transfer.

Permissible Activities

The activities of a PSHC shall be restricted to the holding of equities in financial and technological subsidiaries that facilitate and/or enhance innovative digital financial services. The PSHC with prior consent from the CBN is also allowed to provide broad policy directives, shared services and or/enter management or technical service contracts with any of its subsidiaries in the following areas:

a.    Human Resource Services;

b.    Risk Management Services;

c.    Internal Control services;

d.    Compliance services;

e.    ICT;

f.      Legal Services;

g.    Facilities;

h.    And any other services as may be approved by the CBN from time to time.

The CBN indicated that the services are to be provided on an arm’s length basis and such transactions must be carried out with the consent of the Board of Directors.

Non-Permissible Activities

In restricting the activities of a PSHC, the CBN stated that a PSHC shall not:

a.    Establish, divest, or close any subsidiaries without the prior consent of the CBN

b.    Derive or receive income from sources other than dividends from subsidiaries, income from shared service where applicable, interest from idle funds from government investments or licensed financial institutions, patents, royalties and copyrights, Profit on divestment from subsidiaries/associated and any other source approved by the CBN.

Internal Management of Subsidiaries

As stipulated by the CBN, no PSHC is allowed to:

a.    Give itself any power or functions of its board of directors or internal management responsibilities and obligations of its subsidiaries

b.    Interfere in the day-to-day activities or administration and approval process of its subsidiaries

c.     Require its subsidiaries or any of its agents to take directives or act on its (PSHC’s) instruction in its internal decision-making process

d.    Have any of its officers or employees while in the employment of the PSHC also work for any subsidiary except in the case of shared services arrangements and also to engage the services of any employee of any of its subsidiaries

e.    Purchase/dispose assets from/to its subsidiaries, without the prior written consent of the CBN

Intra-Group Transactions

PSHCs are not allowed to engage in transactions or maintain business relationships with its subsidiaries except it is at arm’s length. They are also not allowed to borrow from the Nigerian Banking system for the purpose of capitalizing itself or its subsidiaries.

Appointment of Directors and Top Management

In line with the provisions of the CBN Corporate Governance Guidelines, the Company and Allied Matters Act and the Financial Reporting Council of Nigeria’s Code of Corporate Governance, PSHC are not allowed to appoint as a director:

a.     any person who is a director of any of its subsidiaries except with the CBN’s consent. Where such appointments are made, the aggregate number of directors from the subsidiaries and associates must not be more than 30% of the membership of the board of Directors of the PSHC at any given time.

b.    persons who have served as directors for the maximum allowable period stipulated by the CBN into any subsidiary until after a minimum period of 3 years after the expiration of their tenure as director.

No director of a PHSC shall be a director of a subsidiary unless with the consent of the CBN and such appointments must not make up more than 30% of the membership of the subsidiaries.

Intra-Group transfer of Non-Current Assets shall be carried out in a transparent manner and at arm’s length.

Minimum Paid-Up Capital and Capital Reserves

A PSHC is required to have a minimum paid-up capital which shall be more than the sum of the minimum regulatory capital/total equity of all its subsidiaries as the CBN may prescribe from time to time where the PSHC owns 100% of the subsidiary.

Where the PSHC does not own 100% of the subsidiaries, its minimum paid-up capital shall exceed the summation of its proportionate holdings in the subsidiaries. Excess capital in one subsidiary shall not be used to make a shortfall in another subsidiary. The PSHC’s capital is to be applied to the subsidiaries.

Payment of Dividends

The PSHC shall only pay dividends on shares if:

a.    all expenses and losses incurred not represented by tangible assets have been completely written off

b.    Adequate provisions have been made to the satisfaction of the CBN for actual and contingent losses

c.    It has complied with the capital requirements.

Acquisition of Subsidiaries

The CBN must be satisfied that the PSHC has adequate capital resources (free funds) to carry out an acquisition of a subsidiary.

The consideration for the acquisition shall be on cash basis only or any other arrangement proposed by the PSHC and approved by the CBN.

Investment in Non-Current Assets

A PSHC must ensure that it has adequate free funds to support any acquisition of non-current assets (property, plants and equipment, IT infrastructure, etc.)

Limit on Contingent Liabilities

A PHSC’s contingent liabilities on behalf of its subsidiaries shall not exceed 20%of the PSHC’s shareholders’ funds unimpaired by losses.

Minimum Capital Requirements of Subsidiaries

 A PSHC must ensure that its subsidiaries comply with the minimum capital requirements for each license category in the group.


A PSHC and its subsidiaries shall be supervised by the CBN.

The supervision shall be on a consolidated basis. PSHC shall be required to render returns to the Payments System Management Department of the CBN on a quarterly basis, or in frequency and format prescribed by the CBN.

The returns shall include information on:

a.    Compliance with corporate government guidelines

b.    Whistle blowing

c.    Assets and liabilities of the PHSC and its subsidiaries

d.    Risk management

e.    Internal control

f.      Intra-group transactions


The guidelines introduce some material structural changes to all payment processing companies that provide or intend to provide two or more of the listed payment services. It seeks to add more transparency, structure and oversight to the Financial Technology ecosystem in the country.  This guideline requires that all operators and stakeholders comply with the regulations to ensure seamless operation. 

Published by David

Head, Legal Team