A court recently placed restrictions on the bank accounts of six online investment companies. Four of these companies recorded about N15 billion turnover in two and a half years, a report by the Central Bank of Nigeria (CBN) indicates.

That figure may be relatively small compared to deposit money banks, but in interviews with PREMIUM TIMES, experts say it foretells the huge impact that the activities of financial technology (fintech) companies will have on the Nigerian economy in the near future, and why regulators must start paying serious attention to them.

Tope Fasua, an economist, said “it shows that they are beginning to have some systemic importance in which case it may have a reverberating effect on the whole economy.”

That is “why regulators must continue to be extremely careful, in terms of their regulation and understanding of what the fintech companies do,” he added.

Tope Fasua

Martin Nwoga, an information technology transformation expert, said the figure, sourced by our reporter from a CBN investigative report, was insignificant when compared, for instance, with “the N5.6 trillion turnover of UBA in 2020.”

But, echoing Mr Fasua’s concern, Mr Nwoga said “it is a fast-growing number and can become significant over the next five years.”

It “puts our people at risk because these funds are not governed by the relevant financial regulators,” Mr Nwoga said, adding that it might lead to “depleting of the funds available for loans in the regularised financial institutions.”

The four companies with a total N15 billion turnover from January 1, 2019 to April 27, 2021, are among the six fintech companies recently accused by the CBN of illegal foreign exchange and cryptocurrency trading, among other infractions.

All the firms have denied any wrongdoing.

The firms are Rise Vest Technologies Limited, Bamboo Systems Technology Limited, Chaka Technologies Limited, and Trove Technologies Limited.

CBN’s report on the investigation of their activities indicates that Rise Vest had a turnover of N1.97 billion between January 1, 2019 and April 27, 2019.

Bamboo Systems Technology Limited, according to the report, recorded $0.4 million and N479.10 million turnovers between September 24, 2019 and April 27, 2021.

Chaka Technologies Limited recorded $0.91 million and N9.26 billion between January 1, 2019 and April 27, 2021, the report stated.

It added that Trove Technologies Limited recorded $1.42 million and N3.27 billion between May 1, 2019 and April 27, 2021.

The naira components of the turnovers for the four companies summed up to N14.979 billion while the dollar components for the three with records of foreign exchange dealings added up to $2.73 million.

The two other companies whose financial dealings were not captured in the CBN investigative report are Bamboo Systems Tech. Ltd Opns and CTL/Business Expenses.

CBN allegations, court’s freezing order

Following an ex parte application filed by the CBN on August 4, the Federal High Court in Abuja on August 17 ordered the freezing of 15 accounts of the six firms in five commercial banks.

Federal High Court Headquarters, Abuja

In asking the judge, Ahmed Mohammed, to issue the freezing order, CBN said in its filing that “the investigation being carried out concerns what has been discovered to be serious infractions by the defendants/ respondents.”

Specifically, the CBN in its application, which relied on the report dated July 5, specifically accused them of engaging in illegal foreign exchange transactions, among other infractions.

It also alleged that the firms were “accessing/procuring foreign exchange via their banks from the Nigerian foreign exchange market via several bureau de change, and international money transfer operators”.

It added that under the alleged scheme, the firms had transferred cash deposits of more than $10,000 to various accounts overseas “contrary to provisions of extant laws and regulations.”

It also accused them of trading in foreign securities and cryptocurrencies in “contravention of CBN circular referenced TED/FEM/FPC.GEN/01/012 and BSD/DIR/PUB/LAB/014/001 dated February 5, 2021 and July 01, 2015.”

“The aforesaid transactions undertaken by the defendants/respondents using their bank accounts has caused and is causing significant financial loss to the members of the public if left unchecked in order to mitigate,” stated an affidavit deposed to by Christiana Gyang, a Senior Supervisor in the Governor’s Department of the CBN.

The judge ordered that the firms’ identified bank accounts be frozen for 180 days, but said the affected companies were free to challenge the order before the period lapses.

He, however, adjourned the matter till February 20, 2022, to coincide with the end of the six-month period.

Some of the companies, in the wake of the court order, assured their customers of the security of their funds, and signalled they would be taking up the matter.

The ‘Report of the review of the activities of Rise Vest Technologies Limited & others’ submitted in court to support the request provides a glimpse into the ownership of four of the firms and other firms they were dealing with, among other details.

Rise Vest Technologies Limited

Rise Vest, according to the CBN, was incorporated in October 2019 “with objects of technological and business consultancy.”

The shareholders of the company at incorporation were Eke Eleanya Urum and Rise Vest Technologies Limited (USA).

It partners with companies involved in payment settlements as well as internal and international remittances, the CBN said.

An Infograph

The regulator added that information on the company’s website “indicated that it is an asset management company, which provides a platform for customers to invest in foreign instruments using an app called ‘Risevest’.”

Based on the CBN’s review, the firm “consummated its asset management activities” through its Zenith Bank accounts which “recorded N1.97 billion” between January 1, 2019, and April 27, 2021.

Inflows into the amount were mainly from retail investors through two Payment Service Solution Providers (PSSPs), which are firms licensed by the CBN to provide a bridging infrastructure, end-to-end electronic payment solutions, systems and services to stakeholders within the financial services space.

The two PSSPs through which the firm received inflows are Flutterwave, accounting for about N500 million, and Monnify, responsible for N967.58 million.

Outflows from the account were said to include payment of N500 million to Paystack, N110million to cryptocurrency traders like BuyCoins, and N350million to Beltium Venture.

The firm’s offence, according to the CBN, is that it traded in cryptocurrency in contravention of its February 5, 2021 circular.

Bamboo Systems Technology Limited

The CBN said the firm, incorporated in December 2019, is owned by U.S.-based Bamboo Global LLC (99.99 per cent) and Oluwole Ralph Olugbenga (0.01 per cent).

It was incorporated to carry on the business of software design, implementation development, maintenance and consultancy amongst others. It is said to be related to One Global Med. Technology, BSTL Lambeth and Grag Concepts Limited.

It operates an online app, Bamboo, that provides a medium for investors to buy and sell stock exchange traded funds (ETFs), the CBN said.

The company’s index funds and derivatives are listed in major exchanges in the U.S. such as NASDAQ and the New York Stock Exchange.

Its Bamboo app works through collaboration with DriveWealth LLC, a U.S.-based digital securities trading entity, Lambeth capital, a Nigerian stockbroking firm duly registered with the Security Exchange Commission (SEC), and Flutterwave which provides a secure payment pathway.

CBN’s review of its domiciliary account with Zenith Bank Plc showed a turnover of $0.40 million between September 24, 2019 and April 27, 2021.

Cash inflows into the account were from Bamboo Global LLC, cash deposited by sundry individuals, ZBS Oil and Gas Limited and Menakay Uche.

Outflows, according to the CBN, were to forex operators like Morifife Ventures, Belfour Energy & Allied Services, POS transactions, cash sale of foreign exchange to sundry entities, and cash payments to Rishmond Bassey and Akinyemi Damilola. There were also transfers to Loftyhills Support Networks Limited and Drivewealth LLC, a U.S.-based digital securities trading entity.

A naira account of the firm with Zenith Bank was also reviewed by the CBN. The apex bank said the firm had a turnover of N479.10 million between April 24, 2019 and April 27, 2021.

Major inflows to the account were said to be from Flutterwave and Morifife Ventures, which was suspected to have received N75 million equivalent of forex indicated in the dollar account, among others.

Major outflows were said to include “investible amounts from sundry investments” transferred to Paystack.

CBN said its review showed that Bamboo Systems Technology Limited engaged in “investment management activities and was actively engaged in trading in foreign securities using FX sourced from Illegal FX operators and Nigerian FX market” in violation of its circular dated July 1, 2015.

Chaka Technologies Limited

The firm, said to be owned by Oluwatobi Osibodu and Oluwatosin Osibodu, was incorporated in March 2009 to engage in information technology business, according to the CBN.

It is related to Citi Investment Capital. The company’s website hosts a digital app ‘Chaka.com’ which allows subscribers to invest and trade in naira and dollars.

The CBN says its review showed that transactions on Chaka.com are settled through Guaranty Trust Bank Plc accounts of Citi Investment Capital Limited.

Citi Assets Management Limited, owned by Victor Gbolade Osibodu, Olufunke Iyabo Osibodu, Foluso Olajide Phillips, and Vigeo Capital Limited, was said to have been incorporated in 2006 to carry on the business of financial and investment advisory services for Unit Trusts and Funds.

The company, according to CBN, also owns a mobile/digital investment app (Chaka.com), which provides a gateway for investors willing to invest in local and foreign securities from as low as N1,000 or $10. It maintains naira and domiciliary accounts with Guaranty Trust Bank Plc.

The company’s three domiciliary accounts were said to have recorded an aggregate turnover of $0.91 million between January 1, 2019, and April 27, 2021.

Inflows into the account came from Drivewealth LLC, Golden Palm Investments Corporation, Angellist Holdings, Microtraction Investments, Blue Rinc Capital, as well as Nigerian investment firms like VGO Company and Tag Limited. There were also cash deposits from sundry investors and forex operators.

Outflows went to companies like Drivewealth LLC, Orb Development Company, ABTA Investment Limited, Dedrobium Limited, Tradingview Incorporated, Rolald Company Limited, VGO Investment Company Limited, an offshore cloud service provider – Rackspace International Gmbh, among others.

A review of the naira accounts showed an aggregate turnover of N9.26 billion in the same period, the CBN said.

The inflows were said to include transfers from a power distribution company – Global Utilities Management Company, an Australia-based consulting and training company, Oversight Consulting, Vigeo Shipping Limited, Oygron Oil and Gas, Hoborn Associates Limited, VGO Investment Company Limited, Munak Group Limited, among others.

The outflows included transfers to entities like Vigeo Holdings Limited, Global Utilities Management Company, Africa Finance Corp, Sytex Moving Company, among others.

The apex bank said the inflows and outflows on the bank accounts are “indicative that Chaka Technology Limited and Citi Investment Capital Limited was actively engaged in trading in foreign securities and cryptocurrencies using FX sourced from Nigerian FX” in contravention of its circular dated July 1, 2016.

Trove Technologies Limited

The firm incorporated on December 13, 2018, is said to be owned by Solanke Oluwatomi David, Akagu Austin, Olanipekun Olaoluwakitan Opeyemi and Ajisegiri Desayo Oyindamola.

It was said to have been incorporated on December 13, 2018, to undertake, maintain, develop, operate and provide internet-related services, system technology, information and software development services and products.

The company also owns a mobile digital investment app, Trove, which provides a gateway for investors willing to invest in local and foreign securities as well as cryptocurrencies from as low as N1,000 or $10. The investments are managed by Drivewealth LLC (foreign investments) and A.R.M Securities Limited (local investments).

A review of the company’s domiciliary account with Zenith Bank Plc, the CBN said, showed a turnover of $1.42 million between May 1, 2019, and April 27, 2021.

Firms like Drivewealth LLC, A.R.M Securities Limited, Verto Financial Technologies Limited, West Continental Prospecting Limited, West Atlantic Drilling, and other individuals, were said to have provided the inflows into the account.

Outflows from the account included offshore transfers to Drivewealth LLC for investments on behalf of its clients, and others.

For its naira account with the same bank, CBN said it showed an aggregate turnover of N3.27 billion.

Inflows into the accounts were from PSSPs like Teamapt Limited, Paystack and Flutterwave, the apex bank added.

Outflows, it said, were to companies involved in B2B Payment Solutions, as well as cryptocurrencies like Verto Financial Technologies Limited. There were also said to be outflows to Paystack, Quidax Technologies Limited, BT Pesa, as well as for purchase of forex from HFT BDC, Kiakiafx Services International Limited, and BLK Prestige.

Based on the inflows and outflows on the accounts, CBN said, the firm “was actively engaged in trading in foreign exchange and cryptocurrencies using FX sourced from illegal FX operators and Nigerian FX market.”

Growth of Fintech, concerns

PREMIUM TIMES had reported that the financial technology space in Nigeria, delivering financial services to consumers using the internet, apps, mobile phones and other technological devices, has about 250 companies.

Mr Fasua described the growth of fintech as “a new thing” in Nigeria, adding that it is changing the face of banking everywhere in the world.

He, however, warned that it comes with the risk of “financialisation as against industrialisation of the economy.”

This, he explained, is a situation where everybody wants to play in the financial sector “where all they do is look smart and make a whole lot of money, especially trading forex.”

Mr Nwoga also warned that not all the companies are truly fintech firms.

He said the real fintech organisations “are set up and registered with the appropriate authorities which help safeguard the assets of the investors,” while the others are mere “cooperatives,” unregistered with the appropriate authorities but use deposits to trade in foreign exchange, and others.

He called for “measures against such unregistered companies who are taking advantage of our people.”

“Illegal financial deals are crippling our people who sometimes even take loans to participate in these supposedly FX deals,” he said.

Mr Fasua too expressed concerns about the activities of some of the supposed fintech firms dabbling into things they were not registered for and whose funds were not insured by appropriate authorities like the Nigeria Deposit Insurance Corporation (NDIC).

Nigeria Deposit Insurance Corporation (NDIC)

“One begins to wonder, what happens if they go down? Are they insured? Most of them are not insured by NDIC. If they go down, everybody is on their own,” he said.

He also lamented the activities of some of the companies trading in cryptocurrencies against the CBN directives.

“The regulators must act fast,” Mr Fasua warned, while giving conditional support for the CBN’s action against the six firms whose accounts were restricted.

“Seriously speaking,” he said, “if CBN can prove the basis for the action it has taken, I think regulators should be allowed to regulate. I am in support of this based on more evidence that shows that the Central Bank understands what it’s doing.”

Shina Memud, a tech and marketing enthusiast, said fintech space being an innovation-driven system has a lot of opportunities and must be supported by the government.

Shina Memud

He urged the Nigerian government to “see it as a new form of business opportunity to tap into” by supporting the players which he assured would help in creating job opportunities.

“If any startup or business is committing criminal activities then they should be prosecuted accordingly,” Mr Memud added.

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