Fintech Mergers and Acquisitions in Nigeria: Key Considerations for Investors

In this legal update, we draw on our recent mandates advising on fintech mergers and acquisitions in Nigeria to highlight the issues that are increasingly determining deal outcomes. Across these transactions, the consistent pattern emerges is that, the most significant risks are rarely visible in headline financials. As a practical matter, they sit beneath the surface, in licensing structures, data practices, revenue models, and tax exposure, and often only crystallise under regulatory scrutiny.

Context

Nigeria’s fintech sector continues to attract strong investor interest, but the nature of that interest is changing. One clear signal is that, the market of fintech services in Nigeria, is no longer defined by early-stage experimentation and appears to now be characterised by a preference for consolidation, scale, expanded service offerings and increasingly sophisticated regulatory oversight. As a result, mergers and acquisitions in Nigeria, particularly in the fintech sector, have become a primary entry strategy for investors seeking exposure to one of Africa’s most dynamic financial services markets. Yet, for us, it helps to think about fintech mergers and acquisition in Nigeria, not as a straightforward exercise in valuation and growth projection but fundamentally, an exercise in identifying and pricing hidden regulatory, operational, and fiscal risks. In our experience, many of the most consequential risks may not be immediately visible in financial statements, but are embedded in licences, data practices, revenue models, and compliance architecture. Against that backdrop, investors approaching fintech mergers and acquisitions in transactions in Nigeria must focus on a set of core considerations that go beyond conventional due diligence. We share our insights below.

 1. Licensing Risk and Regulatory Alignment

The first and most immediate consideration is licensing. The regulatory framework for financial services in Nigeria is both fragmented and evolving, and it is not uncommon to encounter companies that have operated for extended periods without full regulatory alignment or that have developed workaround structures to navigate licensing constraints. In some cases, a fintech may have scaled through partnerships or indirect arrangements that have never been formally tested by the Central Bank of Nigeria. The risk, however, is that such structures may not survive regulatory scrutiny, particularly as enforcement becomes more coordinated. Investors must therefore assess not only whether a target holds the appropriate licences, but also whether its historical operations have been fully compliant with banking regulation. Any gaps between operational reality and regulatory approval represent quantifiable risk, which must be priced into the transaction.

2. Data Integrity and Regulatory Exposure

Closely related to licensing is the question of data integrity and regulatory exposure. Fintech companies are, at their core, data businesses. Their value is often tied to the volume and quality of customer data they hold, as well as their ability to deploy that data for credit scoring, payments, and other financial services. However, the enactment of the Nigeria Data Protection Act 2023 has introduced a more stringent framework for how such data may be collected, processed, and transferred. It is not uncommon ( understandably, so) to find that high-growth fintechs have prioritised scale over strict compliance, particularly in areas such as user consent, data minimisation, and cross-border data flows. For investors, the critical issue is whether the data being acquired is legally usable. Data obtained or processed in breach of regulatory requirements may not only attract sanctions from the Nigeria Data Protection Commission, but may also undermine the very business model that justified the acquisition. In this sense, data risk can both be regulatory and existential.

3. Revenue Quality and Regulatory Sustainability

A third consideration lies in the quality and sustainability of revenue. Fintech revenues in Nigeria can sometimes be deceptively robust, particularly in segments such as digital lending, foreign exchange services, and transaction fee aggregation. However, not all revenue is created equal. Certain income streams may depend on pricing structures, fee arrangements, or operational practices that exist in regulatory grey areas. As oversight intensifies, driven by both the Central Bank of Nigeria and the Federal Competition and Consumer Protection Commission, these revenue streams may be curtailed or restructured. Investors must therefore interrogate whether a target’s earnings are regulatorily durable or merely opportunistic. The distinction is critical, as it directly affects valuation and post-acquisition performance.

4. Tax Exposure and Digital Economy Compliance

As a result of the Nigeria Tax Act 2025, tax exposure has now emerged as a fourth, and increasingly decisive, consideration in fintech mergers and acquisitions in Nigeria. The introduction of the Nigeria Tax Act 2025 marks a significant shift in the fiscal landscape for fintech companies. Digital services, which were previously subject to inconsistent enforcement, are now firmly within the tax net, with expanded obligations around value-added tax and transaction reporting. In addition, the growing recognition of digital assets as taxable instruments introduces new layers of complexity for fintechs operating in or adjacent to the crypto ecosystem. Many companies may have historical exposures arising from under-remitted taxes or incomplete compliance frameworks. In our experience, these exposures do not disappear upon acquisition and may ultimately crystallise. As such, tax must be treated not as a back-end compliance issue, but as a front-end valuation driver. Investors who fail to do so risk inheriting liabilities that materially alter the economics of the deal.

5. Dependence on Regulatory Arbitrage

Another critical consideration is the extent to which a fintech’s business model depends on regulatory arbitrage. We find that a number of active start-ups have grown by identifying and exploiting gaps between regulation and enforcement, whether through indirect licensing arrangements, reliance on partner institutions, or structuring techniques that avoid classification under existing rules. While such strategies may be effective in the short term, they are, in our view, inherently unstable. As regulatory frameworks mature and coordination between agencies improves, these gaps tend to close. What once appeared to be innovation may, in hindsight, be recharacterised as non-compliance. Investors must therefore test the resilience of the target’s business model under a scenario of full regulatory enforcement. The key question is whether the company can sustain its operations and margins once the arbitrage disappears.

6. Integration Risk and Post-Acquisition Execution

Finally, investors must confront the often underestimated challenge of integration. Mergers and acquisitions in Nigeria’s fintech sector are often about multi-sector compliance frameworks that are themselves subject to distinct regulatory oversight. Combining two entities may require fresh approvals, particularly where control of a licensed institution is involved. Aligning data systems may trigger obligations under the Nigeria Data Protection Commission, while consolidating operations may raise new questions for competition regulators. The anticipated synergies that underpin many transactions can be delayed or even eroded by these integration complexities. As such, integration risk should be assessed as a core component of deal execution, rather than an afterthought.

Key Takeaway Pricing Risk in Fintech M&A in Nigeria

Taken together, these considerations point to a broader conclusion about fintech mergers and acqusition in Nigeria. The primary challenge is no longer identifying opportunities, but accurately pricing risk. Licensing gaps, data liabilities, fragile revenue models, tax exposure, regulatory arbitrage, and integration complexity all operate beneath the surface of seemingly attractive businesses. From a due diligence standpoint, the task is to surface these risks early, quantify them rigorously, and incorporate them into deal structure and valuation.