MONEY LENDING REGULATIONS IN NIGERIA
PAYDAY LICENSE IN LAGOS NIGERIA
The money lending laws & regulations in Nigeria regulate the moneylending operations in Nigeria. Money Lending also known as payday loan is the service of lending money at interest rates or lending a sum of money in consideration of a larger sum of money being repaid. The Money Lending Law of the various states in Nigeria regulates business and licensing of money Lending. The money-lending license can be granted to an individual or a corporate body in Nigeria.
For an individual or company to become a legitimate moneylender, the individual or company must obtain the Money Lender License to practice in Nigeria.
In Nigeria, transactions are regulated by separate legislations across various states. Prior to 1990, money lending was regulated concurrently by the Federal Government of Nigeria and by the various State Governments through the Moneylenders Act and the Moneylenders Laws of the various States respectively. However, the Moneylenders Act has since been repealed leaving the regulation of money lending to the Moneylenders Laws of the various States of Nigeria. Basically, the Business of Money Lending is regulated by the Money Lending Law of the various States in Nigeria. `
Money lending under Section 4 of the MONEY LENDERS LAW Chapter M7 Laws of Lagos State provides that;
“a person who lends money at interest or who lends a sum of money in consideration of a larger sum of money being repaid shall be presumed to be a money lender until the contrary is proved”.
Section 2 of the Money Lenders Law defines a money lender as “includes every person whose business is that of money lending or who carries on or advertises or announces himself or holds himself out in any way as carrying on that business whether or not that person also possesses or earns property or money derived from sources other than the lending of money and whether or not that person carries on the business as a principal or as an agent.
The said section, however, exempts certain categories of people from money lending activities. They include;
- any cooperative registered under the cooperative societies law
- Anybody corporate incorporated or empowered by special law to lend money in accordance with the law.
Steps and Procedure for applying for a Money Lending License
The Applicant must make an application to the Chief Magistrate within the jurisdiction where the business will be carried on, on the applicant’s letterhead with the Company’s Seal attached.
The following supporting documents must be attached to the written application:
- A cover letter with the Company seal affixed to it
- Office address of the Individual applicant or Company
- Certified True Copy of the CAC Form 1.1. or CO2 & CO7.
- Memorandum and Article of Association of the Company. The objects in the company’s memorandum must include financial service or money lending business.
- Certificate of Incorporation of the Company
- Tax Clearance for the individual applicant or Corporate Body, if it is a company newly incorporated, then provide evidence that the company is a registered taxpayer
- Police Clearance for the Individual applicant or Company
- Evidence of maintenance of a current account with a commercial bank
Upon application to the Magistrate, the applicant will be issued a Money lending certificate.
After obtaining the money lending certificate, the applicant is to make a formal application to the Ministry of Home Affairs and Tourism with the following documents:
- An application letter to the Ministry
- Money Lending Ordinance (Form B) 1938, issued from the Magistrate Court
- A duly completed Magistrate Form C
- Police report from the Commissioner of Police Showing fingerprints of the Directors of the Company or Individual Applicant
- 3 years Income Tax Clearance Certificate for each individual applicant or Directors of the Company
- PAYE (Pay as You Earn Certificate), Tax Clearance of at least 2 Directors or Evidence of Company Taxes
- Certificate of Incorporation of the Company
- Evidence of payment of application fee into the Lagos State Account.
- Evidence of maintenance of a current bank account with a reputable bank
The Applicant is to make a payment of the official fee into the Lagos State Account. The steps that must be followed at Lagos State Ministry of Home Affairs include the followings:
- The next step is to obtain an invoice from the Ministry of Affairs and Tourism Revenue Collection Department for the payment of N50, 000 Money Lenders Fee.
- Upon obtaining the form, complete the form and pay into the Department’s Account.
- Submit the application for Regularization Form, attaching the following documents.
- The Final stage the visitation and physical inspection of the intended office by government officials. Upon visitation, if the company in question is already operating in the money lending activities, the books will be inspected in addition to the office.
- If the company complies with the statutory requirements and upon the government officials’ satisfaction, the applicant will be issued with the Money Lending License Certificate.
In conclusion, an individual or company will only be a legitimate moneylender, if the Money Lender License to practice in Nigeria is obtained. One of the benefits of being a licensed moneylender is that a moneylender can exercise its right to recover a debt from a defaulting borrower by instituting an action in court to recover the principal loan and accrued interest. And because of the lengthy process involves in processing a money lending license, it is always advisable to appoint a solicitor for the processing of the license.
By Corporate & Commercial Law Department at Resolution Law Firm