On 13th January 2021, the Central Bank of Nigeria (CBN) introduced the Framework for Regulatory Sandbox Operations, as part of its statutory mandates to introduce regulations, guidelines and framework that drive financial inclusion in Nigeria. Ideally, the framework was introduced to satisfy customers’ appetite for payment solutions and technologies in the financial service sector. Basically, a regulatory Sandbox allows ‘firms to conduct live tests of new, innovative products, services, delivery channels, or business models in a controlled environment, with regulatory oversight, subject to appropriate conditions and safeguards.’[1]

The definite objectives of the Regulatory Sandbox Operation in Nigeria are outlined as follows:

  1. To increase the potential for innovative business models that advance financial inclusion;
  2. To reduce time-to-market for innovative products, services, and business models;
  • To increase competition, widen consumers’ choice and lower costs;
  1. To ensure appropriate consumer protection safeguards in innovative products;
  2. To clearly define the roles and responsibilities of stakeholders and the operations of the Sandbox for the Nigerian Payments System industry;
  3. To ensure adequate provisions in regulations to create an enabling environment for innovation without compromising on safety for consumers and the overall payments system; and
  • To provide an avenue for regulatory engagement with FinTech firms in the payment space, while contributing to economic growth.

The framework seeks to promote competition, ensure consumer protection, and provide regulations for the payment space in FinTech firms. It provides that Sandbox cohorts will be held per year to encourage innovation that can improve the design and delivery of payment services. However, the number of innovators to be accepted into a cohort is subject to CBN’s resource capacity to support innovators.

The eligibility criteria to be a Sandbox participant include developing a solution that is innovative, useful and has enough resources to support testing in the Sandbox.[2] While the Sandbox application process is open to both existing CBN licensees (financial institutions with FinTech initiatives) and other local companies,[3] applications to the Sandbox process would involve an invitation placed on the CBN website, and local newspaper advertisement. Receipt of such application shall be acknowledged to Applicants within 5 working days after submission. The Bank will inform an applicant of its eligibility and approval to participate in the Sandbox, 45 working days after the closure of the application window. A Letter of Approval (LoA) would then be issued to the Innovator which would allow Sandbox participants to test their innovation upon entry into the Sandbox. The CBN may evaluate and review the approval to participate in the Sandbox at any time before the end of the testing period. However, it must give a 45-day notice in writing to the participant. [4] The above procedure is encapsulated under four operational phases of the Sandbox viz- filing, reporting, exit conditions and approval for expiration, and/or evaluation and review of an approval.

The framework also provides consumer safeguards to mitigate the risk to consumers participating in the testing exercise and confidentiality from participants.[5] Specifically, applicants are required to identify the potential risks that may arise from the testing of the products on financial institutions and consumers.

Furthermore, the framework provides a list of documents that will accompany application trials into the Sandbox. The documents are as follows:

  1. Board Approval (where applicable)
  2. Certificate of Incorporation
  • The company profile and functional contact: e-mails, telephone numbers, office and postal addresses
  1. Memorandum of Association Shareholding structure of the Company
  2. Forms CAC 1.1 (Application for Registration)
  3. CVs of Board and Management of the Company
  • Organogram of the Company
  • Project plan alongside a detailed business proposal
  1. Key outcomes that the testing is intended to achieve
  2. A document that outlines the strategy of the Sandbox trials, including current and potential engagements, geographical spread, and benefits to be derived
  3. AML/CFT Policy (Anti-Money Laundering and Countering the Financing of Terrorism)
  • Evidence of patent certificates or registration of patent rights, where applicable xiii. All firms shall supply any other information that the CBN may require from time-to-time.

With regards to ensuring regulatory compliance with the Sandbox Operations, the CBN is responsible for the admission of eligible participants into the Sandbox process, issuance of requisite approvals and licences, monitoring stakeholders to ensure compliance, among other responsibilities.[6]

The framework is not averse to confidentiality as it makes provision for the non-disclosure of confidential information. During the Sandbox operations, ideas and details which are disclosed to other participants are kept confidential. This encourages participants to freely share their ideas and other detailed disclosure and specifications to ensure a seamless exercise.[7]

[1] Introduction, Framework for Regulatory Sandbox Operations 2021

[2] Para 1.3

[3] Para 1.4

[4] Para 3.4

[5] Para 7.0

[6] Para 5.0

[7] Para. 8.0


1 Comment

Olusola Abikanlu · January 26, 2021 at 10:01 pm

This is a very good piece, highly informative.

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