Inside Nigeria and Egypt's fintech alliance to deepen cross-border regulations

The Central Bank of Nigeria (CBN) has signed a fintech collaboration agreement with the Central Bank of Egypt (CBE) to double down on cross-border regulations and information sharing to drive innovation in both nations.

“We look forward to cultivating an innovative space for fintech startups and entrepreneurs in Egypt and Nigeria to accelerate financial inclusion, deepen our payment systems and drive economic growth across the African Continent,” says Aishah Ahmad, CBN Deputy Governor for Financial System Stability.

The collaboration was signed at the sideline of the Seamless North Africa 2023 conference in Cairo on Tuesday. The conference was hosted by the CBE and had in attendance over 4000 policymakers, payment service providers, financial institutions and technology startups from Egypt, Nigeria and across the African continent.

Nigeria has at least 200 fintech companies, meanwhile, Egypt has an estimated number of 177. These startups from both nations contribute significantly to venture funding in the African tech ecosystem, attracting the largest share of the funding.

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Although the terms of the deals are unclear, local reports say that the alliance aims to equip Egyptian and Nigerian fintech professionals with knowledge and abilities, cultivating an atmosphere of progress and creativity within the industry.

In February, Nigerian founded fintech Flutterwave expanded its operations into Egypt, the company obtained payment services provider and payments facilitator licenses from the National Bank of Egypt. “There is a massive remittance corridor between Europe, the Middle East and Egypt. We want to capture that corridor,” says Olugbenga GB Agboola, CEO and Founder of Flutterwave.

Flutterwave facilitates cross-border transactions in multiple currencies for global companies, including Uber, and the new licenses will help the company support to international businesses entering the Egyptian market or growing their operations in the country. Since its launch, the company has processed over 200 million transactions worth over $16 billion across 34 countries in Africa including Nigeria, Uganda, Kenya, and South Africa.

Within the last one year, another Nigerian company, a mobility fintech Autochek has made two acquisitions to mark its expansion into North Africa: In April, Autochek acquired a majority stake in AutoTager, an Egyptian automotive technology company that makes it easier to find and buy cars.

Although the number of Nigerian fintech companies operating in Egypt is unclear, a recent report by CBE shows that about 30 Egyptian fintechs operate in Nigeria, Saudi Arabia and the UAE. According to the report, government reforms have accelerated the growth of the country's fintech sector, as well as bank-to-fintech partnerships.

According to the report: “The accomplishments of fintech and fintech-enabled startups throughout the previous year represent the outcome of productive efforts exerted by the Egyptian Regulatory and Supervisory Authorities, derived from the framework of collaboration and integration between all stakeholders, through developing policies and regulatory legislation, or via launching supportive and enabling initiatives to become alluring to the fintech ecosystem.”

At the time of this report, the exact details about the deal between the CBE and CBN have not been clearly disclosed. However, these local regulators from the leading fintech markets intends to launch initiatives and also develop policies that will enable the fintech sector in both nations.

In 2021, the CBN published the CBN’s Framework for Regulatory Sandbox Operations to enable innovation, drive financial inclusion, and ensure consumer protection and also provide a platform for engagement between the regulator and fintech companies in the Nigerian payments space. “Regulatory sandboxes are a way to strike a balance between the rapid growth of fintech innovations and the need to mitigate the risks that arise from these emerging business models,” says Motunrola Bisi-AfolabiLegal and Regulatory Counsel at Paystack.

Earlier this year, the Securities and Exchange Commission (SEC) commenced applications for the SEC Regulatory Incubation (RI) program for fintechs operating or seeking to operate in the Nigerian capital market. The application closed in May 2023.

The RI program is designed to address the needs of new business models and processes that require regulatory authorisation to continue carrying out technology-driven Capital Market activities.

"It is conceived as an interim measure to aid the evolution of effective regulation which accommodates innovation by fintechs without compromising market integrity and within limits that ensure investor protection," according to SEC.

Egypt launched its first fintech regulatory sandbox in 2019, its first cohort for local fintechs commenced in the same year.