• Data protection, consumer redress, risk management top regulatory concerns
•Survey supports cross-border licence recognition
•Operators seek capital access, clearer rules

The fast-growing but weakly regulated fintech sector is upsetting the financial system, including the Central Bank of Nigeria (CBN), which warned that the weak oversight poses a direct threat to financial stability.

The apex bank flagged rising consumer risks and systemic vulnerabilities as urgent areas requiring regulatory intervention.

The CBN, in its ‘Shaping the Future of Fintech in Nigeria: Innovation, Inclusion and Integrity’ report released yesterday, admitted that Nigeria has emerged as one of Africa’s most vibrant fintech markets.

It said the growth is driven by mobile payments, digital lending, agency banking, and innovation in financial services.

However, it emphasised that the speed of growth has outpaced regulatory safeguards.

The CBN noted that fintech firms now play a central role in Nigeria’s payment ecosystem, facilitating billions of naira in daily transactions and expanding access to financial services for previously unbanked and underbanked populations.

It cautioned that gaps in governance, data protection, consumer redress, and risk management pose growing concerns.

The report highlighted that digital lending platforms, payment service providers, and wallet operators have significantly improved access to credit and financial services. However, they have also been linked to rising complaints over predatory lending practices, opaque pricing, data privacy violations, and aggressive recovery methods.

The apex bank, in the 37-page document, warned that unchecked fintech failures could transmit shocks to the broader financial system.

This is particularly concerning as banks and fintechs become increasingly interconnected through partnerships, shared infrastructure and payment rails.

While reaffirming its commitment to innovation, the CBN stressed the need for effective fintech regulation. It stressed that effective regulation must balance growth with stability, consumer protection, and systemic resilience.

The bank argued that innovation without guardrails creates new risks rather than inclusive prosperity.

The report explored regulatory measures, including stricter licensing requirements, risk-based supervision, higher capital thresholds for fintech operators and more stringent rules on cybersecurity, anti-money laundering and consumer protection.

The bank emphasised the importance of improved coordination among regulators, cautioning that fragmented oversight could lead to regulatory arbitrage and undermine enforcement across the digital financial services sector.

The report maintained that Nigeria’s fintech future hinged not only on innovation but also on credible regulation, robust institutions and accountability mechanisms that safeguard consumers while enabling responsible digital finance to flourish.

Expanding on the regulatory dimension, the CBN framed its role as shifting from a traditional gatekeeper to what it described as an enabler of sustainable innovation under disciplined oversight. It acknowledged that fintech’s growing systemic importance has stretched conventional supervisory tools, requiring more technology-driven regulation and closer engagement with operators.

According to the report, four pressure points demand urgent attention: a disconnect between regulators and innovators, compliance gaps around know-your-customer (KYC) and anti-money laundering controls, limitations in supervisory capacity, and jurisdictional overlaps among agencies. The bank said fragmented mandates across finance, telecoms and data governance create uncertainty for operators and open room for regulatory arbitrage.

The CBN pointed to existing frameworks such as its AML/CFT regulations, cybersecurity standards and ongoing investments in supervisory technology as foundations for closing these gaps. It added that structured inter-agency coordination platforms are being strengthened to prevent duplication and ensure consistent enforcement across the ecosystem.

The regulator also tied fintech oversight to Nigeria’s international financial reputation. It noted that stronger compliance enforcement and tighter supervision are essential to sustaining investor confidence and protecting the integrity of cross-border transactions, especially as Nigerian fintech firms expand regionally.

Industry feedback captured in the report shows tension between innovation speed and regulatory processes. A significant share of surveyed firms complained about long approval timelines, ambiguous guidelines and rising compliance costs, with many saying it can take over a year to bring a new product to market. The CBN acknowledged these concerns and signalled plans to streamline approvals, expand regulatory sandboxes and deploy supervisory technology to reduce friction without weakening safeguards.

The report revealed the desires of players to expand services to other African countries and ensure that Nigeria becomes the hub.

The CBN noted that 62.5 per cent of respondents currently operate or plan to expand into other African markets, with ambitions to position Nigeria as a regional hub for digital financial services.

In support of this, CBN said an equal share (62.5 per cent) endorsed the concept of a regulatory passporting framework, which would allow for mutual recognition of licences across jurisdictions.

The document informed that stakeholders proposed piloting this model with peer regulators in Ghana, Kenya, South Africa, Uganda and Senegal. It noted that immediate bilateral pilots were seen as more realistic in the short term than wholesale frameworks.

The bank also called for the creation of a dedicated growth fund or credit guarantee scheme as capital constraints intensify across the sector.

According to the report, half of the respondents view the regulatory environment as enabling, while the other 50 per cent find it restrictive. This divergence stemmed from perceived delays in licensing, lack of clarity in guidance, and inconsistent application of rules.

The survey highlighted access to capital as one of the most significant barriers to scaling innovation, with macroeconomic volatility, regulatory delays, and currency risks discouraging both local and foreign investment.

The report revealed that participants also expressed interest in extending such collaboration to technical infrastructure, for example, trialling interoperability between Nigeria’s and Ghana’s payments systems, as a way to enhance cross-border payments and support real-time regional settlement.

Stakeholders were broadly positive about the resilience of Nigeria’s core payments infrastructure but identified coordination gaps during peak periods. CBN noted that responses were evenly split between “Very Resilient” and “Generally Resilient” ratings, with half of the respondents citing inter-institutional coordination as the top improvement area.

The bank disclosed that AI is widely adopted in Nigerian fintech, primarily for risk management and operational efficiency.

According to the regulator, “Fraud detection” is the most common use case by a significant margin, employed by 87.5 per cent of companies. This, CBN claimed, underscored the severity of the fraud challenge, which was described in the closed-door stakeholder workshop as a “big issue in the industry”.

According to the report, the ability to scale AI is principally constrained by access to “technical talent” and the lack of “regulatory clarity,” each cited by 37.5 per cent of firms as the biggest obstacle.

Consequently, the most sought-after support, according to the report, is “Access to high-quality data or infrastructure” (50 per cent).

The report observed that the industry is eager to innovate responsibly, with 62.5 per cent being “very interested” in participating in an AI-focused regulatory sandbox.

Looking ahead, the CBN said their priorities are to ensure the “Ethical and transparent use of AI in credit or risk decisions” and “fair and inclusive access to AI tools and data,” each chosen by 75 per cent of respondents.

“There was a strong consensus that Nigeria’s regulatory approach to AI should reflect both its global relevance and its unique domestic context — ensuring that innovation supports inclusion and trust,” it stated.