Legal
Last updated: June 06, 2024
Do I need a license?
Lending to family and friends has been part of humanity for ages. For this, you do not need a license.
However, to run a formal lending business in Nigeria, you need to have a form of license as lending is a regulated business. There are many ways to be licensed:
- State money lending license
- License by the Central Bank of Nigeria
1. State money lending license:
Money lending in Nigeria is regulated by the Moneylenders Laws of the various states. These Laws are generally similar from state to state and are variations of the original Moneylenders Act of 1958 which was repealed in 1990 and replaced with the individual Moneylenders Laws of the different states.
The Moneylenders Law of Lagos state excludes “any person whose main business is not lending and who lends money solely incidental to the conduct of such business” (Moneylenders Law, 1990, sec.4). This means that if money lending is NOT your sole business/occupation/source of income, then you cannot be classified as a money lender and hence, do not require a license to legally run your side-hustle. Note, however, that despite not being required to obtain a license to lend money ON THE SIDE, you are still regulated by the Moneylenders Law of the state in which you operate and must make sure that all your dealings are within the law.
The Moneylenders Law of Lagos state excludes “any person whose main business is not lending and who lends money solely incidental to the conduct of such business” (Moneylenders Law, 1990, sec.4). This means that if money lending is NOT your sole business/occupation/source of income, then you cannot be classified as a money lender and hence, do not require a license to legally run your side-hustle. Note, however, that despite not being required to obtain a license to lend money ON THE SIDE, you are still regulated by the Moneylenders Law of the state in which you operate and must make sure that all your dealings are within the law.
2. Who can apply for a Moneylenders license?
According to the Moneylenders Law of Lagos state, the following categories of entities can apply for a Moneylenders License:
- An Applicant applying under his true names
- An Applicant applying under the name of a firm/company in which he is a partner provided that the company is not required by the Companies and Allied Matters Act — Part B — Business Name to be registered.
- An Applicant applying under a business name for a business that is solely his, or in which he is a partner, provided that the business has been registered for three years or more as a money lending business under the Moneylenders Law and under the Companies and Allied Matters Act — Part B — Business Names.
- Taking deposits and maintaining current and savings accounts from natural and legal persons;
- Provide retail banking services, including mortgage products;
- Provide finance and credit facilities and more as defined in the CBN Scope, conditions & minimum standards for commercial banks regulations.
3. License by the Central Bank of Nigeria
Apart from a Moneylender license, you can run a formal lending business if you are issued any of the following operating licenses by CBN:
- Microfinance Banks (MFBs) license allows MFBs to provide microfinance services, such as savings, loans, domestic funds transfer, and other financial services that are needed by the economically active poor, micro, small and medium enterprises to conduct or expand their businesses as defined in the Guidelines for Microfinance Banks (MFBs) in Nigeria.
- Financial Company License means a company is licensed to carry on a Finance Company business. Finance Company Business means the business of providing financial services to individual consumers and to industrial, commercial, or agricultural enterprises as defined in the Guidelines for Financial Companies in Nigeria.
- Commercial Banking license
- Taking deposits and maintaining current and savings accounts from natural and legal persons;
- Provide retail banking services, including mortgage products;
- Provide finance and credit facilities and more as defined in the CBN Scope, conditions & minimum standards for commercial banks regulations.
Next steps
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