What impact could Risevest court ruling have on Nigeria's tech ecosystem
The Federal High Court in Abuja has made a ruling in favour of Risevest, what impact could this have on Nigeria's tech ecosystem?
The Federal High Court in Abuja has made a ruling in favour of Risevest, a startup connecting users to wealth creation opportunities, home and abroad.
On August 17, 2021, the Governor of the Central Bank of Nigeria (Plaintiff/Respondent) obtained an interim freezing order of the bank accounts of Risevest, amongst others (Defendant/Applicant). Risevest appealed that decision and two months after, that order has been discharged. The startup now has "unfettered access" to their affected bank accounts.
For completeness, the Suit No: FHC/ABJ/CS/822/2021 - Governor, Central Bank of Nigeria V. Rise
WVest Technologies Limited & 5 Ors. The five others are: Bamboo Systems Technologies Limited, Bamboo Systems Tech. Ltd OPNS, Chaka Technologies Limited, CTL/Business Expenses, and Trove Technologies Limited.
The apex bank had alleged that the transactions of the named fintech companies violated its directive and contributed to the weakening of the naira against the US dollar. Thus, seeking the temporary freeze of the fintechs bank accounts, which can be seen as a measure to stifle their operations.
According to a reporting by Nairametrics, the lawyer representing Rise Vest Technologies, Mr. Seni Adio (SAN), had argued that the CBN had not shown any evidence that the defendant had participated in any unlawful conduct. The CBN had also failed to discharge its burden of proof in support of its claims.
On the other hand, the counsel for CBN, Mr. Mathew Onoja Esq., claimed that the ex-parte orders sought to be set aside were proper, lawful, and valid. He claimed that the August 17, 2021 decisions in the case were made in line with Section 97 (1) of the Banks and Other Financial Institutions Act (BOFIA) 2021, which allowed the Plaintiff/Respondent to invoke the Court’s jurisdiction via an ex-parte application.
Justice Taiwo O. Taiwo upheld Risevest's Adio’s argument in his ruling. He said the CBN could not depend on a simple circular to freeze a company’s bank account.
Justice Taiwo stated in his ruling, “I have perused the counter affidavit of the Respondent and I see that the reason for freezing the account of the applicant is based on the alleged infraction of the circular of the CBN. Can this court decide this application based on public policy as being urged on it by the learned counsel for the respondent? I think not. I hereby discharge the interim freezing order of this court made on August 17, 2021, made against the defendant/ applicant.", as reported by Nairametrics.
Implication of the ruling in favour of Risevest
Many Nigerian entrepreneurs and investors continue to live in the "fear" of the regulator.
We've seen entire business lines wiped out by a regulatory clampdown. Concepts like "cryptocurrency" are still deemed high risk areas, despite the launch of eNaira. Today, if you try to open a bank account they'd ask you to sign an "Attestation form". Such that, if you deal or enable cryptocurrency transactions the bank will close your account.
Well, per the Risevest ruling, there are three stakeholders:
- Everyone else
For Risevest, this implies they can access their bank account, receive credits and make debits.
However, for the CBN, the implication of this ruling would depend on how they perceive it—a defeat or call for further engagements with startups.
If they see it as a defeat, they'd become more aggressive, and less understanding. They will ensure to pass more things into law, amend existing laws with grievous penalties for defaulters. CBN could tap its regulatory counterpart SEC to see how they can further regulate the operations of Risevest, in order not to "let them off the hook". But remember that they would only do this if they perceive it as a defeat and want to be hostile. Nonetheless, passing things into law takes time—sometimes years—except when it's being sped up by the Government.
If the CBN sees this as a call for further engagements, then, we'd see more enabling policies, more communication from them about intention and working with startups.
Being a regulator is no mean job, many times you have to play the role of a "Devil's advocate" to protect the larger population. But there can definitely be a win-win for regulators and innovators.
Now, on the larger society, the implication of this ruling will depend on where you see in the society. Are you an entrepreneur? Are you a fintech entrepreneur or one operating in a highly-regulated space? Are you one of the other five fintechs whose account was frozen? Are you a startup investor? Are you a consumer?
See also: 5 legal issues you should consider before launching your startup
For most members of the society, this ruling helps to build confidence in the judicial system, at least the industrial one. For fintech entrepreneurs in Nigeria who might have thought in the past that when the regulator comes down on you, it's all over, now, it's a case of "maybe it's not all over". Investors due-diligence will focus more on the entrepreneur's understanding of the regulatory landscape in their operating country. Such that, so long they are on the right-side of the law, any other grievances that arise can be discussed or settled amicably in and/or out of court.
In addition, this writing has been on the wall for quite sometime now. Many startups by Nigerian founders have a foreign HQ. So, we expect to see more of that where startups hold their funds abroad. Another thing would be for continued and early engagement with regulators to have their "blessings". Furthermore, a startup could decide to create a wealth-tech platform that only democratises access to local investments. But this stifles choice and goes against what regulators typically fight for—consumer choice.
Finally, for the other wealth techs whose accounts were frozen alongside Risevest, this could set precedence. And arguments can be made on the basis of the court ruling in the case Governor, Central Bank of Nigeria V. Rise
WVest Technologies Limited & 5 Ors.
We raise a glass to entrepreneurship and progressive regulation in Nigeria and Africa.
Thanks Pelumi Omoniyi for your contributions