Fintech Companies Accounts Freeze Could Worsen Investors Perception

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The recent freeze order obtained by the Central Bank of Nigeria (CBN) on accounts of fintech companies allegedly operating without obtaining approval could send a negative signal to investors, local and international, some analysts have said.

Recall the CBN obtained a freezing order on accountings belonging to Bamboo Systems Technology Limited, Rise Vest Technologies Limited, Bamboo Systems Technology Limited OPNS, Chaka Technologies Limited, CTL/Business Expenses, and Trove Technologies Limited for operating without proper licenses.

In recent times, the apex bank has been keeping its eyes on loopholes to ensure reduced pressure on the local currency amidst scarce inflow amidst dollar scarcity in Nigeria. The apex bank in July stopped weekly sales of dollars to Bureau de Change on the allegation of various infractions including money laundering.

The latest in the CBN quiver is the card played on some fintech companies that are using seamless networking operations to deliver investment services to Nigerians that wish to take investment positions in dollar or other hard currencies denominated assets.

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Unending devaluation and steep inflation rate have eroded the store of value of the Nigerian local currency, lowering the purchasing power amidst a dearth of Treasury inflation-protected securities in the fixed income market.

“Oversight function of CBN is weak otherwise these companies should not have been able to operate in the first place without proper registrations, licenses from relevant agencies”, sources told MarketForces Africa.

Some critics believe that the move will impact the economy in the short to medium term and could dent the country’s effort to attract investment.

Reacting to the development, Cordros Capital analysts said in a report that the move can be regarded as a desperate to preserve the value of the naira, the CBN obtained a court order to freeze the account of some Fintech companies in the country.

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The order was on the back of allegations that the Fintech companies are operating without asset management licenses and utilizing FX sourced from the Nigerian FX market for purchasing foreign bonds/shares in contravention of the CBN circular referenced TED/FEM/FPC/GEN/01/012, dated 1st July 2015.

“For us, this development could further worsen foreign investors’ perception of the country’s investment climate and may constrain private investment in the Fintech space”, the firm said.

The firms that were affected include Bamboo Systems Technology Limited, Rise Vest Technologies Limited, Bamboo Systems Technology Limited OPNS, Chaka Technologies Limited, CTL/Business Expenses, and Trove Technologies Limited.

These platforms offer Nigerians access to stocks, bonds and other securities in both local and international markets, and have in recent years grown in popularity in the Nigerian fintech space, especially amongst young people.

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In April, the Securities and Exchange Commission said investment services offered by the firms were illegal but later Chaka announced it has fixed the issue with the regulator.

A few months after, the CBN now accuses the Chaka and other companies of engaging in “illicit forex transactions” and says it will need time to complete its investigation, a court order cited by The Cable said.

The paper quotes a motion ex parte by the CBN through its counsel Michael Kaase Aondoakaa, as saying that “the investigation being carried out concerns what has been discovered to be serious infractions by the defendants/respondents in connection with some foreign exchange transactions.

“And non-documentation by the defendants/respondents in violation of the extant laws and regulations, particularly the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act and the Central Bank of Nigeria foreign exchange manual.”

“That more specifically, there is a grave allegation that the defendants/respondents are engaged in illegal foreign exchange transactions, accessing/procuring of foreign exchange via their banks from the Nigerian foreign exchange market via several bureaux de change, international money transfer operators and have transferred cash deposit of more than S10,000.00 to various accounts overseas contrary to provisions of extant laws and regulations and also traded in foreign securities and cryptocurrencies in contravention to CBN Circular referenced TED/FEM/FPC/GEN/01/012 and BSD/DIR/PUB/LAB/014/001 dated February 5, 2021, and July 01, 2015.

“It is evident that Rise Vest Technologies Limited, Bamboo Systems Technology Limited, Chaka Technologies Limited and Trove Technologies Limited are complicit in operating without a license as asset management companies and utilising FX sourced from the Nigerian FX market for purchasing foreign bonds/shares in contravention of CBN’s directive.”

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