Senate Seeks Tighter Regulation For Fintechs As Daily Transactions Hit Billions

Apparently worried by frequent cases of operational lapses in transactions on Fintech platforms, the Senate has initiated moves to tighten the rules and regulations governing the operations of the platforms.

The upper legislative chamber, in a motion on Thursday, observed that there is no specific legislation guiding the operations of the platforms outside the Central Bank of Nigeria (CBN) guidelines.

The lawmakers further noted that transactions worth billions of Naira pass through the various Fintech platforms daily, despite the absence of comprehensive laws regulating their operations.

During debate on a motion, moved by Senator Tokunbo Abiru, a number of the lawmakers said it’s extremely difficult to hold the Fintechs to account in the event of breaches or meltdowns that adversely affect their customers funds.

Some of the senators also noted how investment scammers and ponzi operators have used some of the Fintech platforms to defraud unsuspecting members of the public.

Senator Abiru, who led the debate, captured the entire essence of the planned amendment to the current flexible CBN regulations guarding the operations of the platforms:

“The Bill seeks to amend the Banks and Other Financial Institutions Act to establish a comprehensive legal and regulatory framework for the supervision and oversight of institutions operating within the financial system and providing technology-enabled financial services.

“This amendment has become not only necessary but urgent, given the evolving realities of our financial ecosystem and the emerging risks associated with large scale, data-intensive, technologically-driven financial service providers whose operations now constitute critical national infrastructure.

“Over the past decade, Nigeria has experienced a deep transformation in the character and structure of financial services. Technology enabled financial institutions: mobile money operators, payment service banks, wallet providers, digital lenders, switching and settlement companies have become not just part of the system but central to its functioning.

“They now serve tens of millions of Nigerians, process enormous daily transaction volumes, and hold vast pools of sensitive consumer and financial data. Their platforms have become indispensable to everyday commerce and financial inclusion efforts. Yet, while their growth has been rapid and commendable, the legal framework that governs them has not kept pace with their increasing scale, influence, and interconnectedness.

“The BOFIA 2020 grants the Central Bank of Nigeria the authority to designate Systemically Important Financial Institutions, but the scope of that designation is currently oriented primarily toward deposit money banks.

“It does not adequately anticipate the reality we face today: that a non-bank institution, because of its market dominance, data concentration, customer reach, or technological capacity, may pose risks equal to or even greater than those posed by a traditional bank.

“Consequently, we are confronted with a regulatory gap that leaves critical parts of the financial system operating outside the highest tier of statutory oversight. This bill seeks to correct that mischief and responsibly address the vulnerabilities that arise from it.”

Abiru, who chairs the Senate Committee on Banking, Insurance and Other Financial Institutions, listed a number of what he described as pressing concerns underscoring the need for the amendment.

He said, “Some Fintechs now operate at a scale that has clear implications for financial stability. Their customer bases number in the tens of millions, and their transaction flows rival those of mid-sized banks.

“In addition, many of these institutions hold extensive behavioural and financial data with far reaching implications for privacy, commercial competition, and national security.

“In some cases, these entities are part of foreign-owned networks with offshore data storage, foreign-linked computer infrastructure, and opaque beneficial ownership structures that complicate regulatory visibility.

“Of equal concern is the emerging issue of data sovereignty. In a digital economy, financial data is no longer a mere administrative asset; it is a strategic national resource. Yet today, we cannot say with certainty where all the financial and behavioural data processed by some of these institutions is stored, who has access to it, or which foreign jurisdictions may lay claim to it.

“Another concern is regulatory visibility. While the Central Bank currently supervises Fintechs through guidelines, licence conditions, and subsidiary regulations, there is no unified statutory architecture built specifically to address the realities of AI-driven financial services, real time cross-border data processing, remote cloud operations, and foreign-controlled digital infrastructure.

“Recent developments have made these gaps even more evident. In April 2024, the Central Bank ordered a temporary halt to onboarding for several Fintechs over issues related to KYC (Know Your Customer), AML (Anti-Money Laundering), and suspicious transactions.

“Although onboarding was restored after remediation, the episode highlighted a deeper truth: that the scale and influence of these institutions have outgrown the regulatory tools available under existing law.”

The Lagos East district senator said the problem isn’t peculiar to Nigeria, listing other countries across the globe to be going through similar challenges and how they addressed them.

” Nigeria is not alone in confronting this challenge. Many countries—Kenya, South Africa, Egypt, India, Singapore, the United States, and members of the European Union—have adopted assertive frameworks that treat large Fintechs and technology-enabled service providers as critical infrastructure.

“This bill therefore seeks to achieve five principal objectives. Firstly, it creates a statutory basis for the Central Bank to designate Fintechs, payment intermediaries, digital lenders, and other technology-enabled financial service providers as Systemically Important Institutions where their operations pose systemic, data, or national-security implications.

“Secondly, it establishes a national registry of fintechs and Systematically Important Institutions, enabling traceability, continuous disclosure of beneficial ownership, and improved transparency within the financial ecosystem.

“Thirdly, it empowers the CBN to impose enhanced prudential and risk-based supervisory requirements tailored to the unique risks posed by large technology-enabled firms.

“Fourthly, it strengthens Nigeria’s data sovereignty. Fifthly, the bill enhances consumer protection, market competition, and systemic stability.

“The consequences of inaction are too significant to ignore. If we fail to modernise our legal framework, Nigeria may find itself dependent on foreign-owned, AI-enabled financial ecosystems in ways that undermine domestic innovation, drain foreign exchange, expose consumer data, and weaken the competitiveness of local firms. This bill is therefore not designed to stifle innovation. On the contrary, it is designed to protect the innovation that fintechs have brought by ensuring stability, predictability, and responsible growth,” he submitted.

Senator Abiru however, clarified that the amendment isn’t seeking for the establishment of a separate regulatory agency, saying doing so might engender role overlap, duplication, administrative costs and avoidable bureaucratic entanglements.

“A parallel agency would not only complicate this ecosystem but risk undermining the consistency of national financial regulation.

“International best practice overwhelmingly favours integrating Fintech oversight within existing financial-sector regulators, particularly the central bank, while creating structured channels of inter-agency collaboration. This model ensures that financial stability, monetary policy transmission, consumer protection, cybersecurity, competition policy, and data governance are aligned rather than dispersed across disconnected institutions.

“Instead of building a new bureaucracy, it is far more effective to strengthen the BOFIA framework, modernise CBN supervisory powers, and mandate robust coordination with agencies such as the Securities and Exchange Commission, Nigerian Communications Commission, National Information Technology Development Agency, Corporate Affairs Commission, Federal Competition and Consumer Protection Commission, Office of the National Security Adviser and Federal Ministry of Finance.

“Beyond efficiency, incorporating fintech regulation into BOFIA ensures that Nigeria does not create a regulatory silo that fails to appreciate the deep integration between fintechs and the broader financial system. Payment systems, digital credit, settlement engines, mobile money, and data-driven financial platforms all interact with banking-sector infrastructure. Regulating them separately would create artificial barriers, slow down oversight, and weaken systemic-risk management. A harmonised framework under the CBN, supported by inter-agency cooperation, better ensures national security, consumer protection, and financial stability.”

END