The Central Bank of Nigeria on the 22^nd of May 2023, revoked the operating license of some financial institutions. The CBN in making this decision communicated that these institutions failed to meet or comply with certain demands imposed on them by the Central Bank, and for some others, they simply have either remained inactive, insolvent, or ceased to carry on business for over six (6) months. This inactivity or non-compliance contravenes the Banks and Other Financial Institutions Act (BOFIA), 2020 and other regulatory guidelines for financial institutions in Nigeria.

At BlackBars LP we predict that this decision would drive players in the financial spaces towards

1. Consolidation and Merging of FinTech companies, in order to strengthen their businesses.
2. Creation of strategic partnerships among FinTech companies and other tech establishments to leverage each other’s strengths and develop growth strategies.
3. Development and more deal activities of New and emerging financial technology service providers and institutions
4. A resurgence of investment in financial technology companies.

Presently, the Nigerian financial technology space is dominated by fear resulting from the impact of the Silicon valley and Credit Suisse situation, and the difficulty of raising finance for businesses. Most Venture Capital and Private Equity firms are not inclined to invest in the Nigerian FinTech market at the moment.

It is our opinion that the following FinTech markets will experience some sort of change, demand or development soon.

1. Open banking

With the growing developments of open banking in Nigeria, we predict a lot of favours in open banking, as well as lots of partnerships and mergers to better improve and develop open banking in Nigeria as well as mitigate the data privacy risks and other risk concerns associated with open banking.

We predict that large players in this market may look to seize the opportunity to acquire smaller operators in the sector to better improve their offerings. Banks are not left out either, as banks may look to either form strategic partnerships or acquire the technology from these third-party providers to diversify and merge their own product offerings.

2. Neobanks

Neo-banks may see a rise in expansion and mergers in the coming years in Nigeria. Currently in Nigeria, neo-banks such as Kuda and Opay are current leaders in this market. However, we believe that there will be an increase in the establishments and operations of neo-banks in Nigeria. neo-bank is a digital bank that has its operations entirely online. Most neo-banks usually start as non-bank financial institutions (engaged in payment services and/or electronic money), before they evolve and secure a full banking license.

3. Regtech

Regulations and laws are a vital part of the business ecosystem in Nigeria. As such, businesses are constantly subjected and exposed to constantly evolving laws. And the demands to keep up and comply with each of these laws can be very tedious as businesses and companies are subject to ever-increasing levels of new laws and regulations.

Because of the clamour for KYC Compliance AND Anti-Money Laundering Procedures. There might be an influx of Regtech Companies to help and assist businesses with their Compliance Journey, by automating and managing their compliance demands with their integrated technology.

4. Greentech

With integrating ESG policies into the corporate governance structure and operations of most businesses, environmentally friendly financial tech establishments "green FinTech" might be on the rise, with more people being inclined to explore this sector. Also, it is projected that players in this field would not find it hard to raise capital from investors, as this is still a developing market with lots of economic and environmental gains.

5. Paytechs, embedded finance and BNPL

Paytechs have been a very predominant part of the Nigerian payments value chain, particularly, payment service providers. Because the market is saturated by Paytechs at the moment, we project a stifled investment regime in the coming months, with Paytechs being unable to raise the required funding for their business.

The ability of most Paytech companies to raise capital might be a key driver for mergers and acquisitions between Paytechs, with each business trying to keep its lights on.

6. Digital Currency (E-Naira)

The Nigerian Central Bank digital currency (CBDC) was a major development and introduction in 2021, with the launch of the E-Naira on 15^th October 2021, the Central Bank of Nigeria set in motion the next stage for the evolution and development of digital currencies.

From the BlackBars perspective, we believe that the technology around digital wallets will be in high demand as it embodies the proprietary to accommodate CBDCs.  Accordingly, we advise that the technological infrastructure for digital wallets must be constantly improved and developed to keep up with developments in CBDCs and to deal with practical risks associated with digital wallet technology.

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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