The Central Bank of Nigeria (CBN) has raised the alarm over the increasing transaction volumes of Non-Bank Financial Institutions (NBFIs) and Other Financial Institutions (OFIs) which he said posed major financial system stability risk.
CBN Governor, Mr Olayemi Cardoso, who was represented by Mr. Abayomi Arogundade, the Acting Director of the Other Financial Institutions Department at the CBN, gave the warning at the 10th Meeting of the College of Supervisors for Non-Bank Financial Institutions (CSNBFI) in Abuja yesterday.
“We must continue to push forward the agenda of strengthening the anti-money laundering practices; deepening supervisory capacity on cybersecurity and fintech regulation; and the implementation of risk-based supervisory approach,” Cardoso warned the gathering of West African central bankers.
The CBN governor noted the rapid growth in fintech lending as a particular area of concern, noting that while the overall size of these loans may still be small compared to traditional banking, some jurisdictions have observed a worrying trend of increasing volumes. “In many cases, fintech credit is provided via electronic platforms that connect lenders to borrowers – in which case the platform takes the role of a financial auxiliary,” Cardoso explained. “In some cases, however, loans are taken on the balance sheet of these platforms (even if it is short-term), in which case the platforms are akin to new types of financial intermediaries.”
These fintech firms, which offer a range of applications, software, and other technologies to streamline mobile and online banking, are often regulated either as banking entities or as fintech payment service providers, depending on the jurisdiction.
Cardoso also highlighted the emergence of innovations linked to crypto or stablecoin assets as another area of concern that supervisors must closely monitor.
