HOW TO OBTAIN MONEY LENDERS’ LICENSE IN LAGOS AND ABUJA

HOW TO OBTAIN MONEY LENDERS’ LICENSE IN LAGOS AND ABUJA

Introduction

The need for ease in businesses and transactions makes it necessary for individuals and business owners to access credit facility, that is, loan. Most times, these loans are needed as a matter of urgency and the procedures and intense scrutiny of the banking sector becomes a hindrance to access such quick loans.

Are there persons or institutions that facilitate this type of loans? Are they legally recognized? What procedures are in place to ensure that they are legally carrying out these loan businesses? Are there consequences for carrying out the business of money lending without following the due process stipulated by the Law? These questions will be the subject of discussion in this article as focus will be placed on obtaining the required license to carry out money lending businesses in Lagos and Abuja.

What is Money Lending?

The Merriam-Webster Dictionary defined Money Lending as the act or occupation of lending money at interest[1]. Hence, money lending means lending of money to individuals, entities or corporations for a higher level of interest. It is the practice of lending small amounts of money for short-term and that too at higher interest rates[2]. The interest rate here is very high. This is not surprising, as money lenders usually do not require collaterals to give out these loans, and as such, have to make up with the high interest rate.

Who are Money Lenders?

Having explained what money lending is, it follows that the meaning of money lenders will not be far-fetched. Simply, money lenders are individuals who are into the business of money lending. They are individuals or group of individuals who lend small amounts of money at higher interest rates compared to financial institutions. The reason why money lenders charge a higher rate of interest than banks is that the lending risks are relatively higher[3].

The Moneylenders’ Law of Lagos State defines moneylenders. It provides that moneylenders include – every person whose business is that of moneylending or who carries on or advertises or announces himself or holds himself out in any way as carrying on that business, whether or not he also possesses or owns property or money derived from sources other than the lending of money and whether or not he carries on the business as a principal or as an agent, but shall not include-

1. any society regarded under the Co-operative Societies Law; or
2. any body corporate, incorporated or empowered by special enactment to lend money in accordance with such enactment; or
3. any person bona fide carrying on the business of banking or insurance or bona fide carrying on any business, not having for its primary object the lending of money, in the course of which and for the purposes whereof he lends money; or
4. any pawnbroker licensed under the Pawnbrokers Law where the loan is made in accordance with the provisions of the Pawnbrokers Law and does not exceed the sum of forty naira[4].

On who is a moneylender, the Court in Eboni Finances and Securities Limited Vs. Wole-Ojo Technical Services Limited and 2 others[5] held as follows:

“The definition of a money lender under the law is wide. It encompasses every person whose business is that of money lending and any person who lends money on interest or who lends a sum of money in consideration of a larger sum being repaid.” (P. 474, paras. C-D).

The Court went further to state who is not a moneylender. It held thus:

“Three categories of persons cannot be called money lenders within the meaning of the Money Lenders Law of Lagos State. They are a banker, an insurer and a person who does not have for its primary object the lending of money. Primary means first, main or most important. It therefore follows that a person will not be designated as a money lender even though he is involved in money lending in so far as the primary object of his business is not money lending. In this case, the primary object of the appellant’s business is financial services and not money lending and therefore the Money Lenders Law will not apply”. (P.474, paras. E-F).

It is also important to note that save as excepted in paragraphs (a), (b), (c) and (d) of the definition of moneylender in Section 2 of the Moneylenders Law of Lagos State, any person who lends money at interest or who lends a sum of money in consideration of a larger sum being repaid shall be presumed to be a moneylender until the contrary is proved[6].

Laws Governing Moneylenders in Nigeria.

There are several laws that govern moneylenders in Nigeria. But it is important to note that each state of the Federation reserve the right to make its own law governing moneylenders. Hence, the principal legislation governing moneylenders is the Moneylenders Law of each state. The following laws govern/regulate moneylenders in Nigeria.

1. Money Lenders Law of various states: This is the primary law that governs money lending activities within the various states. The law sets out the licensing requirements and regulations, maximum interest rates, and process of debt recovery, for money lenders operating within the state.[7] In Lagos State, under the Moneylenders’ Law of Lagos State (MLLS), any person who wishes to carry on the business of moneylending must obtain the moneylending license from the State’s Ministry of Home Affairs or Magistrate Court within the magisterial district the moneylender wishes to operate.[8]

2. Companies and Allied Matters Act (CAMA): The law mandates anyone seeking to carry on any business activities in Nigeria to incorporate/register same. It follows then that anyone seeking to carry on the business of moneylending has to incorporate or register his moneylending business with the Corporate Affairs Commission.

3. Central Bank of Nigeria Act: The Central Bank of Nigeria (CBN) is the primary regulatory body for financial institutions in Nigeria. The CBN Act gives the Central Bank the authority to regulate money lending activities, set interest rates, and enforce compliance with regulations. The CBN also regulates the moneylenders in that, it issues Consumer Protection Regulations, the regulations stipulate the minimum standard on fair treatment of consumers, disclosure and transparency, and deployment of debt recovery processes, customer feedback, and protection of customers’ personal information. An example of such regulation is the Central Bank of Nigeria Consumer Protection Framework 2016[9].

4. Federal Competition and Consumer Protection Act (FCCPA): The FCCPA establishes the Federal Competition and Consumer Protection Commission (FCCPC), which is responsible for protecting the rights of consumers in relation to financial services. The Council has the authority to investigate complaints, enforce compliance with regulations, and impose sanctions on financial institutions or moneylenders that violate consumer rights. The FCCPC mandates all digital moneylenders to submit their source of funds. The Commission also directed that all telecommunication companies and banks providing hosting services or other key services to digital moneylending without the approval of the Commission must cease the provision of such services. The Commission also directed all banks, platforms, technology providers, and payment systems to obtain evidence of regulatory approval before providing services to moneylenders[10].

5. Nigeria Data Protection Regulation: The National Information Technology Development Agency issued the Regulation in 2019. Moneylending companies are by this Regulation mandated to file an audited report through a licensed data protection compliance organization (DPCO) before they can legally carry on their business. The DPCO must be certified in data science and cybersecurity. The Nigeria Data Protection Bureau was created by the Federal Government in 2022 to oversee the implementation of the Regulation[11]

How to Obtain Moneylenders’ License (Lagos and Abuja)

It is necessary to emphasize the importance of obtaining a Moneylenders’ license for individuals or institutions who intend to carry on moneylending businesses. The acquisition of a money lenders’ license establishes the company’s legitimacy. Only licensed money lenders have the power to file any action in court against a defaulting borrower in the case of a default by the borrower.

Lagos State

To operate as a lawful moneylender in Lagos State, an individual or company must first obtain the Money Lenders’ License in Lagos. A money lender’s license is issued in the state where the money lending company or individual wishes to operate.[12] The Magistrate Court will first issue a money lending certificate, which the State Ministry of Home Affairs will subsequently process into the money lending license [13].

The procedure are as follows:

1. The applicant must register as a Limited Liability Company with the Corporate Affairs Commission (CAC) with at least two directors.

2. An application is made in the appropriate format to the Chief Magistrate of the Magisterial District where the lending company is located.

3. A Money Lenders Certificate (Form B) and a letter addressed to the Permanent Secretary of the Ministry of Home Affairs are given to the applicant after a successful application, verifying due diligence and suggesting the issuing of a Money Lenders License.

4. An application is then made to the Police for a Clearance report on the directors of the Money lending Company.

5. The applicant would then make an application to the Lagos State Ministry of Home Affairs and attach the following supporting documents:

1. Three (3) years Tax Clearance Certificate (TCC) for the Company and at least two directors.

1. Office address of the company or the individual.

1. Corporate Affairs Commission (CAC) incorporation documents.

1. Police Clearance Certificate for two directors of the company.

1. A reference letter from a commercial bank in Nigeria.

1. Proof of payment of Application of application and processing fees.[14]

Upon submission of the application, the Ministry will carry out a physical inspection of the place of business and the license will subsequently be issued once the applicant is deemed to be fit and proper to act as a money lender. The certificate is valid for one year and subject to renewal.[15]

Abuja

The procedures as obtained in Lagos is also applicable here. The difference however is that the application for License is directly made to the Chief Magistrate Court wherein the application is assigned to a Magistrate. Once the assigned magistrate approves the application for license, the certificate as well as the license will be issued to the applicant. The procedures are as follows:

1. Application letter to the Chief Magistrate Court accompanied by the following:

1. A cover letter (that is, an Application Letter for Moneylenders License addressed to the Chief Magistrate on a Letterhead paper with the company seal affixed to the letter).
2. Certified True Copy of CAC Form 2
3. Certified True Copy of CAC Form 7
4. Memorandum and Articles of Association of the company.
5. Certificate of Incorporation
6. Tax Clearance of the Individual or Corporate Body [Obtained from Federal Inland Revenue Service- FIRS] and if it’s a new company- proof that the directors of the company are registered tax payers.
7. Police Clearance of the applying individual/ Corporate body [in Abuja, it is obtained from Zonal Intelligence Bureau, The Nigeria Police, Zone 7 Headquarters, Abuja].
8. Evidence of Maintenance of current account under a licensed Bank.
9. Proof of payment of Application fees[16].

Upon submission of these documents and payment of the prescribed fees, the application will be assigned to any Magistrate within the jurisdiction. If the application succeeds, the Money Lenders Certificate and License is issued to the Applicant by the assigned Magistrate for a period of one (1) year and shall be renewable at the expiration of the license.[17]

Consequences for Carrying out Money Lending Business without License.

Where one carries out a money lending business without complying with the relevant laws, such one carries on an illegal business and is punishable by law. Also, if there are any issues/wrongs/liabilities arising from such business of money lending in contravention to the provision of the relevant laws, such issues/ wrongs/liabilities will be unenforceable in any Court of Law. The Supreme Court, in Mr. Romanus Uzoukwu V. Mrs. Nnenna Idika[18] held as follows:

“By the provision of section 1(3) of the Money Lenders Law, save as excepted in section 2 and in the section, a person who lends money at interest or who lends a sum of money being repaid shall be presumed to be a money lender until the contrary is proved. The section only raises a rebuttable presumption of money lending which may be legal or illegal. It is clearly illegal where there is no license produced and the business will be declared illegal. The Money Lenders Law is made for the protection of the public and failure to comply with its provision makes the transaction illegal. A transaction in violation of the money lenders Law is illegal. It is an illegal contract, a contract against public policy. Ex turpi causa non oritio actio. No action can be founded on a base cause. The court will not aid persons to enforce a transaction criminalized by the Money Lenders Law. In the instant case, the parties were in pari delicto and the money that exchanged hands under the illegal transaction was irrecoverable. The gains and losses resulting from the illegal transaction lay where they fell”.

Conclusion

It is undeniable that moneylenders provide a quick, flexible and easily accessible loan to individuals and businesses. It is however important that the activities of moneylenders are checked, hence, the importance of the statutory bodies that play vital roles in the regulation of money lending businesses. This is put in place to guarantee the protection of persons or businesses who seek the services of moneylenders. The principal legislation guiding money lending businesses in the respective states of the Federation is the Moneylenders’ Law of each state. These laws ensure that only qualified persons/institutions with the required licenses carry on money lending businesses to its customers. It behooves on individuals, businesses, companies or institutions to properly inquire and ensure that any moneylender which they intend to deal with, has the required license to carry on the money lending business and has also complied with any other requirements that are necessary as required by the necessary existing statutory bodies.

 

 

[1] Merriam-Webster, “Moneylending” Merriam-Webster.com Dictionary, Available Online at https://www.merriamwebster.com/dictionary/moneylending  Accessed on 11^th Aug, 2023.

[2] Unacademy, “Who are Money Lenders” Available Online at https://unacademy.com/content/bank-exam/study-material/general-awareness/who-are-moneylenders/ Accessed on 14^th August, 2023.

[3] Ibid

[4] Section 2, Moneylenders Law of Lagos State, Cap M7 Laws of Lagos State (hereinafter referred to as Moneylenders Law of Lagos State).

[5] (1996) 7 NWLR (Pt. 461) 464

[6] Section 4, Moneylenders Law of Lagos State.

 

[7] Resolution Law Firm, “Laws Governing Money Lending Companies in Nigeria” Available online at https://www.mondaq.com/nigeria/corporate-and-company-law/1304496/laws-governing-money-lending-companies-in-nigeria#:~:text=The%20CBN%20also%20regulates%20the,protection%20of%20customers’%20personal%20information. Accessed on 14^th August, 2023.

[8] Ibid

[9] Ibid

[10] Ibid

[11] Ibid

[12] Section 7 (1) and (2), Moneylenders Law of Lagos State.

[13] Sidebrief Inc. “Nigeria: Obtaining A Money Lenders License in Lagos. The Good, Bad And Ugly” Available online at https://www.mondaq.com/nigeria/directors-and-officers/1239714/obtaining-a-money-lenders-license-in-lagos-the-good-bad-and-ugly. Accessed on 18th August, 2023. 

[14] Kudi Konsult, “How to Get a Moneylenders License in Nigeria” Available online at https://kudikonsult.com/how-to-get-a-money-lenders-license-in-nigeria/. Accessed on 18^th August, 2023.

[15] Ibid

[16] I C Nweke, “How to Get a Money Lenders License in FCT Abuja” Available Online at https://dnllegalandstyle.com/2021/how-to-get-a-money-lenders-license-in-fct-abuja/ Accessed on 18^th August, 2023.

[17]Kudi Konsult, “How to Get a Moneylenders License in Nigeria” Available online at https://kudikonsult.com/how-to-get-a-money-lenders-license-in-nigeria/. Accessed on 18^th August, 2023.

[18] (2022) 3 NWLR (Pt. 1818) 403