The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, emphasised the critical role of Non-Bank Financial Institutions (NBFIs) within the West African Monetary Zone (WAMZ), but also highlighted the need for greater supervision and vigilance.
Speaking at the 10th meeting of the College of Supervisors for Non-Bank Financial Institutions (CSNBFI) in Abuja, Cardoso underscored the importance of vigilance in monitoring trends, risks, and innovations within the NBFI sector.
Cardoso was represented by the CBN acting Director, Other Financial Institutions Department (OFID), Mr. Abayomi Orogundade.
He said, “While we celebrate the milestones that the CSNBFI has achieved, I implore you not to rest on your oars. There is still a lot to be done.
“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.
“We reiterate the importance of monitoring trends, risks and innovations of NBFIs/OFIs, as their increasing transaction volumes pose major financial system stability risk.
“Fintech loans are one of the most commonly reported innovations. While overall this may appear small in relation to the size of credit by DMBs, some jurisdictions, globally, have noted a growing trend in the volume of these loans.”
He stressed the necessity for tailored regulatory frameworks to ensure compliance with international standards, particularly in the face of increasing transaction volumes and the rapid evolution of fintech innovations.
“We must continue to push forward the agenda of strengthening anti-money laundering practices, deepening supervisory capacity on cybersecurity and fintech regulation, and implementing a risk-based supervisory approach,” Cardoso urged, emphasising the pivotal role of supervisors in maintaining financial system stability.
He added, “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.
“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 entities are typically fintech firms that offer applications, software, and other technologies to streamline mobile and online banking.
“In many jurisdictions, these digital firms have a banking license and are subject to prudential requirements or they may just be regulated as fintech payment service firms. Innovations linked to crypto or stablecoin assets were also reported by some jurisdictions.”
The meeting also addressed emerging trends in fintech lending, with Cardoso expressing concern over its exponential growth.
“Fintech credit, facilitated through electronic platforms, poses a unique challenge as these platforms evolve into new types of financial intermediaries,” he explained.
He highlighted the regulatory complexities surrounding fintech firms, some of which operate under banking licenses while others are classified as payment service providers.
Dr. Olorunshola Olowofeso, Director General of the West African Monetary Institute (WAMI), echoed Cardoso’s sentiments, emphasizing the imperative for member states to bolster their cybersecurity strategies and regulatory frameworks.
He identified climate-related risks, internet disruptions, and cyber threats stemming from digital financial services as emerging challenges to financial stability.
The CSNBFI meeting served as a platform to review developments in the NBFI sector from late 2023 through early 2024, assessing regulatory challenges and sharing strategies to mitigate risks.
Participants focused on identifying and monitoring vulnerabilities within the NBFI sector to provide recommendations to the Committee of Governors of WAMZ.
The gathering concluded with commendations from outgoing CSNBFI chairman Yaw Sapong, who acknowledged regulatory reforms undertaken by the CBN and other regional central banks despite economic adversities.
He emphasised the pivotal role of NBFIs in extending essential financial services to underserved segments of the population, contributing significantly to overall economic development within WAMZ member states.
