Nigeria’s Fintech, Disruptions and Appropriate Regulation

Since the global financial crisis of 2007, several banking regulatory reforms have been instituted in a bid to increase trust in the Nigerian Banking Sector and maintain stability in the financial industry. These regulatory reforms, however, did not anticipate the intrusion of technology in the delivery of financial services.

Indeed, the advent of technology in our daily activities has provided varying models and peculiarities in its engagement by various users, yet evolving. Technological innovation has, however, taken the front seat, as it revolutionises the financial sector service offerings with a commonly known cliché “Financial Technology” (Fintech).

Fintech is a contraction of the words ‘financial’ and ‘technology’, which is broadly used to describe any technological innovation in the delivery of financial services. It covers a wide range of areas including financial literacy, wealth/asset management, lending and borrowing, retail banking, fundraising, money transfers, payments, investment management, digital insurance, and cryptocurrency.

The Fintech innovation has been ongoing, and various jurisdictions have adopted or are adopting and testing multiple regulatory and adaptive business models in ensuring a sustainable environment for their Fintech boom and the ultimate growth of the FS industry. Nigeria has seen remarkable growth in the technological sector, including exponential growth in FinTech companies, encompassing start-ups and more established businesses.

Consequently, the Nigerian government has been inquiring into the financial services sector and focusing on FinTech as one of the key impetus for growth in the Nigerian Financial Services Industry. For this reason, and as part of a national strategy for the development of the FinTech industry in Nigeria, there has been significant interest from policymakers in implementing new regulations for the FinTech industry.

In the tech space, testing applications and software can sometimes be a daunting task- especially in Nigeria where tech start-ups are cropping up by the minute. Usually, it takes a great deal of time for FinTechs to test their solutions and ensure that they are ready for the market, after which several of those FinTechs then realise that they are in breach of the regulation that they were not aware of.

New innovative technologies are driving fundamental changes in the financial ecosystem. As with any new idea, there is the potential for things to go wrong – inadvertently, as well as intentionally – and this is what drives the need for regulatory oversight. Regulators in the financial ecosystem play an important role in establishing safety and trust in the financial system, and the products and players that are active in that system, in an effort to maximise opportunities and ensure Fintech compliance.


Nigeria, despite the much-propagated writings of various thought leaders in their outburst for a collaborative and proper regulatory structure in the Fintech space, a proper approach by stakeholders in allaying their concerns is yet to be seen. The CBN and the financial services industry have also been responsive to the emergence of Fintech due to the predominantly cash-driven market, as the cash-less policy and exponential growth in mobile money operations rose from an average monthly transaction value of $5Million in 2011 to $142.8 Million in 2016.

Additionally, the Securities and Exchange Commission (SEC) has just launched a regulatory sandbox. A ‘Regulatory Sandbox’ is a controlled environment that offers a ‘safe space’ in which start-ups and other businesses can test innovative products, services, business models and delivery mechanisms relating to the financial and capital markets in a live environment without immediately satisfying all the necessary regulatory requirements

“Regulators are finding it difficult and challenging all over the world. Fintech is indeed disrupting many financial markets. Regulators have to educate themselves, they cannot afford to sit on the sideline because the market is moving faster,” he said. The Deputy Director, Financial System Stability, CBN, Hassan Ibrahim Umar, said the strong partnership between regulators and operators would help to stay ahead of the rapid pace of technological disruption.


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