Cash-In-Transit and Cash Processing Companies in Nigeria: Some Market Entry Considerations

The world is rapidly shifting into a cashless system. Even with this change, cash is still widely used in most countries, just like in Nigeria where it is the mainstay for a majority of its population of over 200 million people. This means that currency management services, especially with respect to physical cash, are still very much needed and will be needed for a long time.

Cash-in-Transit companies (CITs) are companies that provide the services of providing transport, storage and handling services of banknotes, coins and items of value for financial institutions. Their services include cash replenishment, cash reconciliation, deposit pickup and verification, and the transportation of cash and valuables in an armored vehicle. Cash Processing Companies (CPCs), on the other hand, provide the services of the management of cash for other companies which includes sorting, counting, checking, processing and distribution of physical cash.

Currency management operations typically constitutes 25-40 percent of cost of operations for most Nigerian financial services providers dealing with physical cash. Due to need to attract investment, achieve sustainable cost optimisation, and as part of its to strategic effort to modernise the Nigerian financial industry in accordance with global best practices, the Central Bank of Nigeria (“CBN”) on the 29 October 2019 issued revised guidelines for the setting up of Cash-in-Transit Companies (CIT) or Cash Processing Companies (CPC). The Guidelines seeks to strengthen and enlarge activities in the currency management sub-sector of the financial services value chain.  This presents opportunity for corporate entities and individuals looking at getting into or expanding their play in the country’s financial services space.

The following are key market entry considerations and requirements for the setting up of a CIT or CPC in Nigeria.

• Registration: In Nigeria, both CITs and CPCs are separate business lines. Before commencing operations, all registration requirements must be complied with, the first being the formation and incorporation as a company in Nigeria with the companies’ registry which is the Corporate Affairs Commission.  After this is done, it is also expected that the company obtains a private security license from the relevant agency.

• Licenses: Though a single company can obtain both a CIT and CPC license, the licensing regime provides differently for the registration of both CITs and CPCs, and companies are expected to comply with the requirements. These are different licenses subject to different regulatory requirements. A company can apply to the CBN to obtain a CIT or CPC license under the national or regional license categories. Being a National CIT or CPC means that CITs or CPCs are entitled to establish their offices in any state in Nigeria, subject to regulatory approval, and that they can carry out their operations throughout Nigeria, across all the thirty-six states and the federal capital territory. On the other hand, the registration of a Regional CIT or CPC means that the company can only establish their offices in any State within one geo-political zone and they can only operate in States within that geo-political zone alone.  Regional CITs and CPCs are expressly prohibited from establishing offices and carrying out operations in other geo-political zones where they are not licensed to operate in. Politically, Nigeria operates a federal system of government with 36 states and a Federal Capital Territory. These 36 states are further divided into 6 different geo-political zones for administrative convenience.  

• Capital Requirements: The share capital requirements for both CITs and CPCs are manifestly different. To register a National CIT the law provides for a minimum capital requirement of   N1 billion naira whereas a Regional CIT must have a minimum share capital of N 500 million naira. With respect to CPCs, the share capital requirement for a National CPC is N3 billion naira while the minimum share capital of a Regional CPC must be N2 billion naira. Though the operational regulatory requirements for operating CITs and CPCs are different, the Guidelines provides for instances in which a single company can carry out the combined operations of both a CIT and CPC. The share capital requirement to provide services both as a National CIT and CPC is N 4 billion, and to carry out operations both as a Regional CIT and CPC requires a minimum capital base of N 2.5 billion.

• Security: By reason of the security cost and risks associated with the operations of CITs and CPCs the Guidelines specifies minimum security requirements that must be satisfied before commencement of operations. CITs are required to provide specific types of armored vehicles and such vehicles are to be registered and approved before they can be used for operations. There is also the requirement for CITs to liaise and have a working agreement with relevant security agencies. The directors or promoters of a CIT are also required to provide evidence of clearance from relevant security agencies. CPCs are required to have adequately secure vaults, either owned or leased, that meet the requirement of the CBN. The directors and promoters are also to present evidence of clearance from relevant security agencies.

• Insurance and Risks: Both CITs and CPCs are to provide evidence of insurance with a reputable Nigerian insurance company to cover cash and personnel. They are also to provide proposals measures to mitigate operational, reputational and technological risks inherent in their respective operations.

• Promoters: Promoters of CITs must provide evidence of clearance from relevant security agencies, they must also be private companies and/or individuals with proven integrity and they must also provide evidence of experience in the financial services sector. For CPCs, after clearance has been obtained from relevant security agencies, the promoters must be private companies and/or individuals with proven integrity and must provide evidence of proficiency and demonstrate experience in currency sorting operations, financial services, currency processing systems, sales and maintenance.