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OVERVIEW OF THE EXPOSURE GUIDELINES FOR CONTACTLESS PAYMENT IN NIGERIA, 2022

The Covid-19 pandemic and the resultant lockdown triggered significant changes in the payment industry. Specifically, it amplified the need for contactless payment and ushered in a wave of unprecedented innovation and product development in the payment industry globally.

Given the record traction in the Nigerian payment market; the Central Bank of Nigeria (CBN), recognizing the need for a tailored regulatory framework to support the burgeoning sector growth, in January 2021, issued the Framework for Quick Response (QR) Code Payment; and more recently, in October 2022, released the Exposure Draft of the CBN Guidelines for Contactless Payment in Nigeria.

The Guideline defines contactless payment as: “the consummation of financial transaction without physical contact between payer and the acquiring device(s)”. This means that secure payments can be made with tags, debit/credit cards, smart cards, mobile and other devices that use Near-Field Communication (NFC), Radio Frequency or QR Codes.

In a bid to preserve the integrity, safety and stability of the Nigerian financial system and to facilitate the safe and secure use of Contactless payment, the Guideline amongst other things provides for:
i. the roles and responsibilities of various stakeholders within the contactless payment eco- system;
ii. the minimum standard/specification for all contactless payment terminals, applications, and processing systems;
iii. guidelines for the provision of Value-Added Services; and
iv. the power of the CBN to prescribe and enforce sanctions and penalties for breach of the Guideline.

KEY STAKEHOLDERS IN THE CONTACTLESS PAYMENT ECOSYSTEM

The Guideline clearly articulates the role and responsibilities of the various stakeholders in the contactless payment eco-system, prescribing standards and specification for all forms of market technology and systems whilst also prescribing processes and principles that will govern their relationship with each other.

A.  Acquirers
An Acquirer is a CBN-licensed institution that facilitates the acceptance of payments from customers to merchants through contactless payment devices such as Point of Sale Terminals (POS), Mobile Applications, and QR Codes amongst others. An Acquirer will typically be the account bank of a merchant who is utilizing the contactless payment system for fee collection from its customers.
The guideline requires all Acquirers to:
i. ensure that all deployed contactless payment devices deployed are certified by CBN and meet prescribed specifications/standards.
ii. operate an agnostic acceptance policy such that all cards, capable of contactless payment, issued in Nigeria shall be accepted irrespective of the issuer.
iii. conduct customer KYC (Know Your Customer) and train Customers compliance with applicable Regulations.
iv. take measures to prevent the use of their networks and devices in violation of Anti-Money Laundering Laws.
v. execute a Contactless Payment Agreement with all Customers prior to granting access to the Acquirer’s contactless payment platform.

In a bid to protect unwary or naive customers from the perpetuation of fraud, the guideline restricts Acquirers from admitting or profiling agent banking terminals operators to its Platform or facilitating contactless transactions on their behalf.

B. Issuers
Like the Acquirers, only CBN-licensed institutions are permitted to act as Issuers for contactless payments. An Issuer is responsible for issuing contactless payment enabled cards, tags, or mobile applications to consumers (consumers being people who procure cards, tags, tokens or contactless payment enabled mobile apps to facilitate payments to merchants or other service providers. Examples of CBN-licenced institutions in Nigeria that already issue contactless payment enabled cards and devices include the First Bank of Nigeria, United Bank for Africa, and Providus bank. These cards have embedded Radio Frequency Identification (RFID) technology which communicates with card readers to enable payment transfers. Issuers are required to ensure, that all tokens and devices issued by them for payment by Customers meet prescribed standards and specifications. Furthermore, Issuers are required to obtain and properly document Customer’s consent prior to enabling Customer’s device for contactless payment. Specifically, the guideline prohibits unsolicited activation of contactless payment service on any payment enabled device owned by any Customer. Relatedly, prior to activating contactless payment service for any Customer, an Issuer is required to verify and identify such Customers by his/her Bank Verification Number (BVN).

C. Payment System and Card System Administrators
Payment/Card System Administrators are operators of card and payment systems (such as Mastercard, Visa, Remita, and Flutterwave). Whilst Issuers are responsible for issuing cards and other enabled devices to Customers, the Payment/Card System Administrators oversees the administration and use of issued cards for payment. Payment System and Card System Administrators are required to comply with the Guideline generally and act in accordance with prescribed processing specifications whilst ensuring that their systems and schemes are interoperable.

D. Switching Companies
Switching Companies are CBN-licensed institutions that oversee the routing of transaction data, interbank payment clearing and settlement, payment authentication and authorisation and risk management. The Nigeria Interbank Settlement System (NIBSS) is the Central Switch for the Nigerian Financial Market. Other than the NIBSS; Interswitch, eTranzact, and Flutterwave are some of the other licensed Switching Companies. The Guideline mandates Switching Companies to ensure that contactless transactions via approved payment instruments issued in Nigeria are successfully switched and to undertake periodic risk assessment to mitigate against money laundering and financing terrorism within the system.

E. Payment Terminal Services Providers
Payment Terminal Service Providers are CBN-licenced institutions that deploy contactless payment enabled Payment Terminals (Point of Sale Terminals) for use within the financial ecosystem. Payment Terminal Services Providers are by the Guideline, required to assure the quality and functionality of all contactless payment enabled terminals issued by them through optimal maintenance, availability of a 24/7 support infrastructure. It is recommended that response time for repair or replacement should not exceed 48 hours from the time of escalation.

F. Payment Terminal Service Aggregator
A Payment Terminal Service Aggregator (“PTSA”) oversees the interconnectivity of all payment terminals deployed with the Nigerian Payment Ecosystem. The Nigeria Interbank Settlement Scheme is the sole PTSA in Nigeria. It ensures that all terminals used in the e-payment ecosystem and all devices deployed in Nigeria are brand-agnostic and would accept all cards issued by any bank or other licensed card schemes without discrimination. NIBSS ensures the standardization of technical and operational specifications of all devices deployed within the Nigerian financial system. The Guideline requires the PTSA to certify that all Point-of-Sale terminals used for contactless payment meet required standard for the payment industry. It is also required to implement a documented risk management process to identify threats before, during and after all payment transactions.

G. Merchants
These include businesses (large institutions or SMEs), that employ contactless payment devices as a means of receiving payment from customers. Merchants are by the Guideline, required to ensure that devices deployed for contactless payments are of the required specification, they are also required to exercise due diligence in effecting all payment transactions as they remain liable for any fraud resulting from negligence or connivance during a contactless payment transaction.

The Guideline further, requires all merchants who accept contactless payments to display the contactless payment symbol visibly in their location. They are also required to undertake second level authentication for transactions of a value which is higher than the stipulated limit per day via the customer’s Personal Identification Number (PIN) OR token code.

H. Customers
A customer is anyone making payment through a Contactless payment method. The Guideline requires Customers to exercise due diligence during contactless payment transactions whilst leaving them in full control to opt-in or out of any contactless payment service.

BENEFITS AND CHALLENGES
Prior to the release of the Draft Guideline, the only existing regulation in the contactless payment ecosystem was the Framework for Quick Response (QR) Code Payment in Nigeria, January 2021 (“Framework”). The Exposure Guideline is therefore a solid improvement on the hitherto QR Code Framework as it specifically sets out market requirements for the use and operation of all forms of contactless payment technology.

Apart from the wider scope of the Guideline, the general adoption of contactless payment will have an overall far-reaching effect on the economy as it will create a smarter, faster, more efficient and easy-to-use mode of payment which requires less manpower. It will also promote health and safety and reduce potential disease transmission at points of sale.

It is also necessary to mention that the posture of the Guideline is generally User-Centric, as the CBN mandates that use of contactless payment service must be elective whilst holding all participants within the value chain to regulatory service levels.

Without doubt, the benefit of the Guideline is enormous, yet a big impediment remains the introduction of transaction limit for contactless transactions, the Exposure Draft specifically provides for a NGN5000 (five thousand naira) transaction limit for a single transaction and a cumulative daily transaction limit of NGN30,000 (thirty thousand naira) per User. Transactions that fall outside this limit require an additional layer of authentication. Whilst the intention of the limit is noble and driven by the need to protect Users from significant impact should fraud, theft, impersonation, funds misappropriation occur; the threshold seems too low considering commercial realities in present day Nigeria. To guarantee that the contactless payment system remains a viable alternative for users therefore, it is imperative for the CBN to consider an upward review of the prescribed limit.

Finally, the Guideline envisages growth and innovation in the contactless payment ecosystem and therefore provides a protocol for innovative use cases. Where any stakeholder intends to offer novel or value-added service falling within the contactless payment niche, it is required to procure and obtain the prior approval of the CBN.

CONCLUSION

Contactless payment is fast becoming a preferred mode of payment across the Globe. UK Finance magazine reports that contactless payments accounted for over a quarter of all payment transactions in the United Kingdom in 2021. It is therefore expected that the introduction and implementation of the Guideline, shall in days to come foster public trust, deepen the contactless payment eco-system and consequently accelerate the speed of its adoption in Nigeria.

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Season 1 Episode 10 – Anniversary Special: DealHQ Partners 4 years of enabling Businesses in Africa

Simply is a sponsored podcast of DealHQ Partners, where we engage thought leaders on trending issues around law and business in the most simplistic manner.

On Episode 10, we are joined by our Lead Advisor and founding partner – Tosin Ajose who takes us on a journey down memory lane. She shares insights on the Firms values, foundational goals, the challenges of starting up and building a sustainable legal enterprise, and the Firm’s unique winning culture.

 

Listen here:   linktr.ee/DealHQ

 

 

AN OVERVIEW OF THE NIGERIAN SECURITIES AND EXCHANGE COMMISSION RULES ON ISSUANCE, OFFERING PLATFORMS AND CUSTODY OF DIGITAL ASSETS

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An Overview of the Nigerian Securities and Exchange Commission Rules on Issuance, Offering Platforms and Custody of Digital Assets

In a bid to commence the regulation of digital assets backed securities issuances and the licensing and registration of market participants, the Securities and Exchange Commission (SEC/The Commission) on the May 15, 2022, published its New Rules on Issuance, Offering Platforms, and Custody of Digital Assets (“the Rules”). The SEC has defined a digital asset as any digital token that represents assets such as a debt or equity claim on an Issuer.

Following the Central Bank of Nigeria’s circular in February 2021; prohibiting banks and other financial institutions from undertaking cryptocurrency transactions, facilitating payments or settlement for crypto currency transaction; many cryptocurrencies enthusiast have switched to settlement of cryptocurrency transactions via peer-to-peer platforms whilst the market continues to grow in upward geometric progression. Even though the SEC definition of digital assets extends far beyond cryptocurrencies; the publication of the new rules represents a positive shift which is expected to bolster market confidence, establish standards of operations, and encourage ethical practices that will protect the investor community whilst entrenching fair market practices.

The Rules apply to all Issuers seeking to raise capital via any form of digital asset offerings and other market participants within the Digital Assets value chain.

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Mergers & Acquisitions – Practice Guide(Nigeria)

Over the past two years, the M&A landscape has experienced unprecedented levels of uncertainty. The period will undoubtedly be recognized as a reference point, much like the 2008 financial crisis. The 2022 Nigeria M&A Practice Guide is an outlook on the global and local M&A landscape since the outbreak of the Covid-19 pandemic in 2020. It discusses the reaction of the market during the heat of the pandemic and after. It also highlights hot-spot sectors for M&A in 2022 whilst mapping investor behavior and how this will influence investment decisions in 2022.

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PAN AFRICAN PAYMENTS SETTLEMENT SYSTEM (PAPSS)

PAN AFRICAN PAYMENTS SETTLEMENT SYSTEM (PAPSS): DELIVERING A FINANCIALLY INTEGRATED REGIONAL MARKET.

PAPSS is a cross-border payment and settlement market infrastructure established by– the African Export-Import Bank (“Afreximbank”) in collaboration with the West African Monetary Institute (WAMI) and African Continental Free Trade Area (“AFCFTA”) secretariat. The PAPSS platform was launched on the 13th of January 2022 in Accra, Ghana after a successful testing phase in the West African Zone which comprises Gambia, Ghana, Guinea, Liberia, Nigeria, and Sierra Leone.

Heavy reliance on exchange currencies such as the US dollars, Euros and Pounds (“FX”) for payments processing, clearing and settlement on cross-border transactions has been a major impediment to regional trade. The PAPSS platform now seeks to enable easy and seamless payment processing, clearing and settlement for cross-border transactions in local currencies and in real-time, cutting out the need for FX and international settlement counterparties.

With the establishment of PAPSS, the need for international banks and conversion of local currencies to FX has been eliminated as funds can now be transferred directly between trade counterparties in their local currency. The system automatically validates fund transfers (checks for compliance and legality between trade countries) at near-instant speed thereby allowing for real-time settlement between initiator bank and recipient bank in any applicable currency.

PAPPS is an inclusive platform that integrates all payment service providers outside of the traditional banking systems including payment service providers, card schemes, and other intermediaries. Outside of business transactions, the platform also enables efficient and secured money flow within the retail end of the market by facilitating  salary payments, money transfers, shopping, or investment payment exchanges. This will bolster regional mobility and e-commerce, giving Africa the chance to truly morph into a single borderless market.

The PAPPS Infrastructure is driven by synergies between the Central Banks of the AFCFTA member countries with these reserve banks acting as secondary clearing agents for their respective countries whilst the AFREXIM Bank remains the primary clearing agent and will also be responsible for providing settlement guarantees and overdraft facilities required to preserve the integrity of the Marketplace. Interbank Settlement will be facilitated in USD with a multilateral netting arrangement between the Central Banks at 11:00 UTC daily.

In a bid to align and consolidate financial/trade policies of the different participating countries and to achieve financial oversight whilst preserving market integrity, the Central Banks remain at the apex of financial activities in the various participant countries, prescribing the minimum liquidity threshold for Direct Participants (these are financial institutions that maintain a settlement account with the relevant Central Bank, they are responsible for proving the needed liquidity to secure the pre-funding arrangement required to achieve Real-Time Gross Settlement in the PAPPS marketplace), the Central Banks also have the prerogative to prescribe nature and form of transactions eligible for settlement on the platform.

The new regional payment system is a laudable initiative which without doubt has the capacity to integrate Africa by enhancing payment efficiencies across the region and significantly reducing the incidental cost of currency conversion which prior to PAPPS cost the region circa USD5Billion per annum. Nonetheless, for the new market infrastructure to deliver economic prosperity to the region on a massive scale, it remains imperative that African Countries boost their export potential through improved manufacturing/production capacity and to bridge the massive infrastructure gaps needed to enable the mobility of goods and services across the region.

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WHAT YOU SHOULD KNOW ABOUT THE APPROPRIATIONS ACT, 2022

Parameters and Fiscal Assumptions

The 2022 “budget for Economic Growth and Sustainability” was signed into law by President Muhammadu Buhari on Friday, 31st December 2021, two weeks after the National Assembly passed the bill.

The allocations in the budget were guided by six strategic objectives of the National Development Plan of 2021 to 2025, which are: diversifying the economy, with robust MSME growth; investing in critical infrastructure; strengthening security and ensuring good governance; enabling a vibrant, educated, and healthy populace; reducing poverty, and minimizing regional, economic, and social disparities.

Key Elements of the Budget: Expenditure Summary

The total estimated aggregate expenditure is N17.13tn which is N735.85bn more than the initially proposed sum of N16.39tn and represents a 17.57% increase over N14.57tn for 2021. The increase in the proposed expenditure is attributed to the introduction of 6,576 new projects and the reduction of the allocation to 10,733 projects by law makers.

  • Statutory transfer
  • Recurrent (non-debt) which is the largest expenditure is estimated to amount to N6.91tn, is 40.3% of total expenditure and 17.3% higher than the 2021 Budget.
  • Debt Service
  • Aggregate Capital Expenditure of N5.47tn accounts for 31.9% of total expenditure.
  • Sinking fund

N3.61tn is estimated for debt service and this represents 22% of total expenditure. This is a 15.7% increase from the N3.12tn allotted for debt service last year. This increase in public debt is a result of borrowings to put the economy back on track after 2 recessions.

Key Elements of the Budget: Revenue Summary

The estimated aggregate revenue to fund the 2022 budget is N10.7tn which is 32% higher than the 2021 estimate of N8.1tn. The major revenue generation strategies are as follows:

  • Enhancement of tax and excise revenues through policy reforms and tax administration measures;
  • Review of the policy effectiveness of tax waivers and concessions;
  • Boost of customs revenue through the e-Customs and Single Window initiatives (implementation of the African Continental Free Trade Agreement may be a major driver for this strategy); and
  • Safeguard revenues from the oil and gas sector.

The government has also expressed its intention to strengthen the existing framework for concessions and Public Private Partnerships. There will also be a review of the Finance Act to input measures to aid the Strategic Revenue Growth Initiative (SGRI).

Key Elements of the Budget: Deficit, Financing, and Critical Ratios

The 2022 budget has a total fiscal deficit of about N6.39tn. This represents about 3.5% of the projected GDP of N184tn (this amount was stated by the Minister of Finance at the public presentation of the budget in October,2021), slightly above the 3% threshold set by the Fiscal Responsibility Act 2007 (FRA).

The President, however, insisted that this was necessary to tackle the security problems prevalent in the country.

Finance Act 2021

In order to achieve the revenue projections in the 2022 budget, the Finance Act took effect from the 1st January 2022 and introduces amendments to some tax laws.

The Finance Act amends the: Capital Gains Tax Act (CGTA); Companies Income Tax Act (CITA); Fiscal Responsibility Act (FRA); Personal Income Tax Act (PITA); Stamp Duties Act (SDA); Federal Inland Revenue Service (Establishment) Act [FIRSEA]; Tertiary Education Trust Fund (Establishment) Act [TETFEA]; National Agency for Science and Engineering Infrastructure Act (NASENI Act); Value Added Tax Act (VATA); Nigerian Police Trust Fund (Establishment) Act [NPTFEA]; Finance (Control and Management) Act [FCMA], and Insurance Act.

Conclusion

So, what do we expect to see this year?

  • Early passage of the budget will aid government in achieving its objectives.
  • Enforcement of amendments introduced by the Finance Act, 2021.
  • Removal of petrol and electrical tariff subsidies may contribute to inflation.
  • Government driving heavy revenue generation by paying particular attention to tax compliance and remittances.
  • There may be a downward review on tax incentives like Pioneer Status and tax incentives for petroleum companies.
  • Revenue generation from the growing investment in the Nigerian technology ecosystem by the introduction of taxes to foreign technology companies with significant economic presence in Nigeria.
  • Leveraging on implementation of the African Continental Free Trade Agreement (AfCFTA) to enhance customs revenue.
  • Focus on tackling insecurity.
  • Introduction of major projects in the education and health sectors.

HOW TO GET STARTED

Do you need to know more about the Appropriation Act? Our Finance  team is available to support you.

You may contact our team on: Email: info@dealhqpartners.com Telephone: +234 1 4536427 or +234 9087107575

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DealHQ Partners Law Undergraduate Essay Competition 2021

The 2021 DealHQ Partners Law Undergraduate Essay Competition is now open to 300 – 500 level law undergraduates across all Nigerian Universities.

Qualified candidates are required send in their submissions on or before 6th of October, 2021 to essays@dealhqpartners.com

To participate, Candidate must:

  1. Be a law student between 300-500 level in a Nigerian university with a valid student identity card;
  2. Follow all DealHQ  Partners’ Social Media Pages (LinkedIn, Instagram, Twitter, Facebook, Youtube);
  3. Submit an essay in word and pdf format  on the topic “AFCFTA: The Role of Law and Policy in Driving Competitiveness for Nigerian Businesses
    • i.  Maximum of 2500 words (excluding infographics, graphs or charts which may be included to reinforce your thoughts or related data)
    • ii.  Font: Candara
    • iii. Font size: 12
    • iv.  Line spacing: single
    • v.   Alignment:  all text must be justified
    • vi.  Data references must be from verifiable sources
    • vii. Essay must be marked with candidates full name (as seen on Student ID Card) and Matriculation Number

4. Send entries accompanied with a scanned copy of student ID and social media handle to: essays@dealhqpartners.com on or before 11th of October, 2021.

  • -Top 20 entries will make it to the pre-qualification stage.
  • -Top 10 entries will make it to the Formal Review Stage
  • -Top 5 entries will make it to the final presentation/award stage
  • -Winners will be announced in October 2021.

*Strict adherence with submission guidelines is required, Defective submissions will be disqualified.

WHAT YOU NEED TO KNOW ABOUT THE “E-NAIRA”

WHAT YOU NEED TO KNOW ABOUT THE “E-NAIRA”

In response to the global rise in the use of digital payment solutions and the cryptocurrency market, the Central Bank of Nigeria (“CBN”) has created the eNaira, in a project termed “Project Giant”, which will be launched on 1st October 2021. In furtherance of this, the CBN engaged a global fintech firm Bitt Inc, as the technical partner for the development of the digital currency. The rationale behind the eNaira is to promote and facilitate the cashless culture amongst Nigerians while keeping up with contemporary economies of the world and maintaining the value of the Nigerian currency/foreign reserve. The eNaira is expected to aid financial inclusion, improve payment efficiency, improve revenue and tax collection, and aid targeted social interventions.It is noteworthy that various central banks worldwide are currently developing and issuing their central bank digital currency (CBDC). Some of these countries include China (digital yuan), Ghana (eCedi), Tunisia (eDinar) Senegal (eCfa), Tunisia (Petra), Dubai (emCash) amongst others.

CBDCS AND CRYPTOCURRENCIES

Although a digital currency, the eNaira is different from other cryptocurrencies using blockchain technology, such as Bitcoin and Ethereum, in that it is issued and regulated by a sovereign authority. The eNaira users will not be anonymous, i.e., the users will undergo an onboarding exercise and will provide identifying information such as BVN or NIN, as the case may be. The personal account details and transaction activity of every user of the eNaira system will be monitored by the CBN.

In addition, the eNaira is fiat currency and is not subject to the volatility associated with the digital currency market; the value of the eNaira will be at par with the value of the Naira and will be subject to the appreciation and devaluation of the Naira currency.

E-NAIRA DESIGN FEATURES 

In a bid to set out the eNaira as distinct, the CBN introduced certain features in the eNaira Design, these features include:

  1. It is a legal tender;
  2. It is subject to parity of value, which is pegged to the value of Naira;
  3. It operates on a tiered structure for consumers;
  4. It operates with an account-based wallet;
  5. It possesses a transaction limit for customers, determined by their applicable tier;
  6. It maintains a tiered AML/KYC approach (NIN, BVN as unique identifiers);
  7. It is a non-Interest bearing CBDC;
  8. It ensures settlement finality; and
  9. It is value-based.

HOW WILL E-NAIRA OPERATE

As the eNaira is an electronic currency, consumers will be required to download the electronic wallet and get onboarded into the system through an invitation link received from their financial institution. Once the process has been successfully completed, users will be able to commence electronic financial transactions with the eNaira. Users can fund their eNaira wallet through their financial institution.

E-NAIRA PARTICIPANTS 

There are several stakeholders involved in the operation of the eNaira model which take on the following roles:

  1. Monetary Authority (CBN): The CBN has the sole responsibility to mint, issue, distribute, redeem, destroy the eNaira and act as digital currency manager by executing and managing digital currency transactions. It will also manage the storage of transaction data on the Hyperledger Fabric Blockchain, the blockchain ledger the eNaira will operate on.
  2. Financial Institutions: Financial Institutions facilitate the participation of end users in the eNaira technology. They serve digital currency managers by carrying out the following roles:
    1. Requesting eNaira from the CBN and issuing to users;
    2. Managing digital currency across branches;
    3. Conducting Know-Your-Customer (KYC) activities;
    4. Conducting identity and Anti- Money Laundering (AML) compliance activities.
  1. Government/ Government Agencies: The government and relevant government agencies are end-users of the eNaira technology and may use the platform for the following purposes:
    1. Processing out going payments such as salaries and interventions; and
    2. Receiving incoming payments from consumers.
  2. Businesses and Merchants: Merchants and business will use the eNaira technology to process potentially swifter and lower cost payments from consumers. The eNaira will support payment options such as POS, remote pay and other online payment capabilities.
  3. Consumer (Banked and Unbanked Consumer): Individual consumers whether having a bank account or not are allowed to engage in several transactions involving other consumers or directly with financial institutions using the eNaira. They will be able to send and receive eNaira in their eNaira wallets and also process payments.

THE E-NAIRA WALLET

In a bid to safeguard the eNaira and for convenience, a special feature is being introduced, which is the eNaira wallet, a virtual enclosure where every consumer or user of the eNaira platform can comfortably track and manage available eNaira funds. It is expected that there will be no service charge for wallet-to-wallet transactions.

It is important to note that the licensed Financial Institutions shall be responsible for providing their customers with their eNaira Wallets.

PAYMENT FEATURES

Users will be able to engage in a number of payment transactions with the eNaira, including:

  1. E-Naira wallet to eNaira wallet payments;
  2. E-naira wallet to bank account payments;
  3. Bank account to eNaira wallet payments;
  4. User E-naira wallet to Ministry, Departments and Agency (MDA) eNaira wallet payments;
  5. MDA eNaira wallet to user eNaira wallet payments;
  6. E-Naira to cash conversion;
  7. cash to eNaira conversions;
  8. FX to eNaira conversion (through the Central Bank); and
  9. FX to eNaira Wallet payment (through International Monet Transfer Operators).

ON-BOARDING A CONSUMER ON THE E-NAIRA SERVICE

As a way of popularizing the eNaira initiative within the Nigerian citizenry, the several financial institutions, particularly banks, are directed to encourage the participation of their customers in the eNaira service and send out invitation codes to verified and validated customers. This makes the process easier as customers with already generated codes have a rather seamless onboarding.

RETENTION OF E-SETTLEMENT SYSTEMS

Under the eNaira system, existing infrastructure for electronic settlement systems such as the NIBSS and other switching platforms will be retained and integrated into the implementation of the eNaira.

CONCLUSION

Although the eNaira project is novel and still budding, it is interestingly one project that appears promising especially for the Nigerian economy. There are a number of obvious challenges to its widespread acceptance such as the high rate of technology illiteracy amongst the citizenry, the unrestrained monitoring of transaction activities in the eNaira system, which almost defeats the point of digital currency as is widely accepted, and lack of access by users to the ledger records. There are however some positives. Other than ensuring potentially swifter and cheaper payments, the eNaira provides relative value stability (subject always to the inflationary nature of the Naira), will be an officially accepted legal tender, and possesses an anti-fraud management system for the protection of users.

 

HOW TO GET STARTED

Do you need to know more about the eNaira? Our Technovation team is available to support you. You may contact our team on: Email: info@dealhqpartners.com Telephone: +234 1 4536427 or +234 9087107575

Click here to download PDF

 

Season 1 Episode 2 – AFCFTA: Leveraging Technology to achieve regional competitiveness

Simply is the sponsored Podcast of DealHQ Partners, where we engage thought leaders on trending issues around law and business in the most simplistic manner.

Our Tosin Ajose joins Mrs. Nkemdilim Uwaje Begho, the CEO of Future Software Resources Limited and a Non-Executive Director in Stanbic IBTC Bank who is recognized as a  seasoned digital transformation executive and one of Forbes top 10 female tech founder in Africa in conversations around the Africa Continental Free Trade Agreement and the role of technology in achieving competitiveness in Africa’s new borderless and integrated market.

This episode examines the role of digital in fast-tracking the gains of AFCFTA, how technology and innovation will facilitate connectedness and a truly homogeneous market, big data, data share, and regional collaboration, and how Nigeria can position itself for competitive advantage in the free zone

 

Listen here:   linktr.ee/DealHQ

 

 

UNDERSTANDING NON-FUNGIBLE TOKENS(NFTs)

 

WHAT ARE NON-FUNGIBLE TOKENS?

Non-Fungible Tokens are cryptographic tokens created using blockchain technology. They represent and uniquely describe a valuable digital asset with special distinct features that allow for traceability and identification of the underlying asset which it represents (this underlying asset could be digital or a tangible real-life asset such as a vehicle, a gadget, a literal work or real estate).
The non-fungibility of these cryptographic tokens distinguishes them from other common cryptocurrencies such as bitcoin or ethereum which are created in multiples, each having the same features as all the others in circulation and each coin being of equal value. An NFT is encoded with an “indivisibility feature” i.e. the token cannot be broken into smaller elements of a whole such as you would a bitcoin (which can be broken into 100,000,000 satoshis) with each bearing a corresponding value of the fraction of a bitcoin. Each NFT is unique, exclusive and can only be transferred as a whole.

Nonfungible.com a website that tracks NFT marketplaces represents that the current NFT Market is worth over USD250 Million. For a market that was completely non-existent before 2017, it is expected that the market will balloon in geometric progression because of the boundless opportunity it opens for the trade of digital assets in a secure and efficient manner. Especially the possibility of easily converting all forms of assets into NFTs.

WHAT ARE THE KEY FEATURES OF A NON-FUNGIBLE TOKEN?

i. Uniqueness
The metadata attached to an NFT allows it to be defined by its unique features such that it can be clearly distinguished from other assets.

ii. Rarity
For NFTs it is impossible to create or reproduce the subject asset (there will always, only be a single version of the asset on the blockchain). This specifically is what influences the value of NFTs and makes them desirable to collectors.

iii. Indivisibility
An NFT cannot be split into smaller units of a whole. An NFT can only be held or transferred as a whole.

iv. Value
Only assets likely to be deemed valuable in the NFT marketplace may be converted to NFTs.

ARE ALL NFTS BACKED BY A TANGIBLE UNDERLYING ASSET?

An NFT is usually backed by an underlying asset which could be digital (such as digital art) or tangible real-life assets (such as an automobile or real estate). As previously explained the distinctive information relating to the asset is encoded into metadata on a blockchain platform. It is important for a buyer to understand the exact nature of the asset that is being acquired and to ensure that the smart contract purchased actually transfers legal and beneficial interest in the intended underlying asset and that the metadata are not a mere description of the same. It has been the case that some undiscerning buyers have acquired a mere description of an asset rather than the asset itself

WHAT NATURE OF LEGAL INTEREST DO I ACQUIRE WHEN I BUY AN NFT?

The Buyer of an NFT often expects to acquire the original, rare, and unique form of the underlying asset which the cryptotoken represents (if it is an artwork the original copy as digitally signed by the artist with a digital proof of authenticity and uniqueness in the form of metadata). The asset itself may not always be encoded into the Ethereum blockchain itself.
In simple terms, the NFT buyer acquires simply a smart contract on blockchain which contains metadata with the name of the asset, description of the asset, and a URI (Uniform Resource Identifier which provides technical details about how the asset works and in some cases link to an IPFS (InterPlanetary File System) a protocol that allows for the creation of permanent, immutable links to the blockchain where the asset is emplaced.

HOW IS THE VALUE OF AN NFT DETERMINED?

An NFT’s value is driven by demand and the value placed on it by potential buyers. There is therefore no empirical basis for determining its value, it remains very speculative. Offer prices are often driven by sentiments and its inherent features of rarity and uniqueness. A popular example is a digital collage created by the artist Beeple which after being converted to an NFT was traded for USD69Million at a public auction that started with a usd100 bid called the beginning of the Digital Collectibles craze. Or Jack Dorsey’s (Founder of Twitter) first tweet which he converted to an NFT and sold for USD2.9Million.

HOW DOES THE NFT MARKET PLACE OPERATE?

The NFT Marketplace is a virtual platform/website where NFTs can be traded, and where market participants take a sell or buy position and transact with each other via their digital wallets using cryptocurrencies as the medium of exchange. Whilst most marketplaces will trade a wide range of NFTs some operate as niche markets trading only one homogeneous category of NFTs a good example is Looking Glass Factory, a site that trades only digital holograms.

Some of the most common NFT marketplaces are:
i. Opensea, which is acclaimed as the largest NFT marketplace trading a variety of NFTs including art, virtual worlds, sports, trading cards, and other forms of collectibles. On Opensea, collectibles can be listed at a fixed price or for auction;
ii. Rarible, another popular marketplace that is community owned. It trades several categories of NFTs including art, photography, games, metaverses, music, domains, and memes amongst others;
iii. SuperRare is a marketplace for people to buy and sell unique, single-edition digital artworks. Each artwork is authentically created by an artist in the network and tokenized as a crypto-collectible digital item that you can own and trade;
iv. Atomic Market another popular platform is a shared liquidity marketplace that feeds other marketplaces. It allows its users to tokenize and create the digital asset and thereafter sell or auction the asset;                                         v. Another common platform “valuables” is a niche market solely for trading tweets.

NFT marketplaces have become mainstream in the crypto space whilst NFTs have become the most trending asset class of 2021, sparking the interest of traditional investors and several high net worth individuals.

HOW ARE NFTs CLASSIFIED?

The subject of the classification of NFTs remains quite unsettled, however as the market deepens we expect more clarity around their classification. A school of thought argues that NFTs are securities in respect of which local securities law should apply, others argue that they are simply a digital identifier of any form of asset whose legal title is transferrable. The test of whether an NFT will be classified as security will depend on:
i. The purpose for which it was created: If the NFT is being created and sold as a way for members of the public to earn investment returns with a line of recourse to the issuer it will be more likely to be considered a security. Especially if the smart contract has features of an investment contract.
ii. How it is traded: where an NFT is traded on a marketplace that operates similarly to exchanges and capital trade points shares where other securities or commodities are traded, it is likely to be classified as security especially where there exists is a secondary market feature on the trading platform.

WHAT FORMS OF INTELLECTUAL PROPERTY RIGHTS ARE ATTRIBUTABLE TO NFTs?

The storage of NFTs on a blockchain ledger provides a way for asset holders to establish proof of ownership and possession with the innate benefit of immutability and security. It is important to understand the bundle of intellectual property rights which may be applicable NFTs or transferrable to a buyer.

Patent: Where the mining of an NFT or the cryptotoken involves innovation that solves a technical problem, it may be possible to patent the innovation subject to meeting the applicable registration criteria. The patent right is likely to remain proprietary to the creator.

Copyright: In relation to copyright, the metadata related to an NFT are by themselves a creative expression over which the creator automatically acquires exclusive copyright. There is a marked distinction between ownership of the NFT and ownership of the content in the metadata. Where not expressly assigned in the ‘smart contract’ between the creator and the buyer, any incidental copyright remains with the owner. The owner of the copyright remains the only party who can reproduce, make derivative works of, perform, display or distribute copies of the content. Where an NFT relates to artistic or literary work, it is curious what nature of interest is transferred to a buyer if he is not granted the intellectual property right in the work whether in form of a full assignment or a license to use.
Trademarks: In relation to trademarks, NFT creators may protect the name or other graphic property in the work by registering the name or the visual representation.

CONCLUSION
Even though Non-Fungible Tokens are gaining popularity and momentum as a digital asset class, it is no gain saying that the market is new and evolving. Market regulations are therefore still at infancy. At best, the law and regulation applicable to the class of underlying asset will apply to all related transactions. It remains important to exercise caution and seek professional advise when dealing in NFTs especially to guarantee that a buyer of an NFT actually acquires the intended interest in the subject underlying asset.

 

HOW TO GET STARTED

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You may contact our team on: Email: info@dealhqpartners.com Telephone: +234 1 4536427 or +234 9087107575

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