Porous borders, systemic corruption, arms smuggling pose challenges to Fintech – Nextier experts

….Urge FG to Establish Enforceable Regulations to Address Emerging Risks

By Johnbosco Agbakwuru

ABUJA – Despite leveraging advanced digital solutions to enhance financial services, Nigeria’s financial technology (Fintech) sector faces significant challenges, including systemic corruption, inadequate border control, and security vulnerabilities.

To address these risks, experts from Nextier have called on the Federal Government to establish clear, enforceable, and adaptive fintech regulations that mitigate emerging threats while promoting innovation.

These insights were detailed in the latest Nextier SPD Policy Weekly report, which examines the complex relationship between fintech and national security in Nigeria. The report was authored by Dr. Chibuike Njoku, an Associate Consultant at Nextier and lecturer at Chrisland University, Abeokuta, and Dr. Ndu Nwokolo, Managing Partner at Nextier and an Honorary Fellow at the University of Birmingham, UK.

The report highlights the remarkable growth of Nigeria’s fintech industry, driven by a young, tech-savvy population, increased smartphone usage, and evolving regulations.

Fintech startups grew from 144 in 2021 to over 217 in 2024.

The alternative lending market is projected to grow by 34.8% annually, reaching $230.9 million in 2024.

Mobile money and digital payments have boosted financial inclusion, entrepreneurship, and innovation.

However, this rapid expansion has introduced significant national security risks. The report warns that fintech platforms are being exploited by cybercriminals, money launderers, and kidnappers to commit financial crimes.

Cyberattacks and Fraud: In early 2023, cybercriminals targeted three Nigerian financial institutions, resulting in losses exceeding ₦5 billion.

Nigeria ranks among the top African nations facing cyber threats, with over 5,366 detections of malicious software, according to INTERPOL’s African Cyber Threat Assessment Report 2023.

A 2023 survey found that 61% of Nigerian respondents encountered phishing scams while using online banking or mobile wallets.

Financial institutions suffered ₦52.26 billion in fraud-related losses in 2024.

Cryptocurrency and Money Laundering: Despite a Central Bank of Nigeria (CBN) ban on banks transacting with crypto entities, digital currencies remain popular.

33.4 million Nigerians invested in digital assets within six months.

The rise of cryptocurrencies has complicated monitoring and regulatory enforcement, leading to allegations of illicit financial flows.

In February 2025, Nigeria’s Federal Inland Revenue Service (FIRS) sued Binance for $79.5 billion in damages and $2 billion in back taxes, citing tax evasion and economic harm.

Kidnapping and Fintech Exploitation: The National Bureau of Statistics (NBS) reported that ₦2.2 trillion in kidnapping ransoms was paid within 12 months, with many transactions conducted through POS (Point of Sale) machines.

Criminals exploit fintech banks’ POS machines to wipe victims’ accounts within minutes, despite the existence of Bank Verification Number (BVN) and National Identification Number (NIN) linkages.

Regulatory Gaps and Weak Oversight: Nigeria’s fintech sector is regulated by multiple agencies, including: CBN, SEC, NCC, NITDA, FIRS, NDPC, and NO-TAP, among others.

This fragmented regulatory approach creates ambiguities, weak enforcement, and compliance challenges.

Weak anti-money laundering (AML) and counter-terrorism financing (CTF) frameworks allow illicit financial flows to persist.

Nigeria’s foreign investment inflows remain low, recording just $468 million in 2022 compared to Egypt’s $11.4 billion.

Recommendations for Strengthening Fintech Security

To mitigate security risks while ensuring fintech continues to drive economic growth, Nextier experts recommend:Establishing a Unified Regulatory Framework

The CBN, SEC, and Nigerian Financial Intelligence Unit (NFIU) should collaborate on a comprehensive and enforceable fintech policy.

A regulatory sandbox should be introduced to test new financial technologies in a controlled environment before full-scale deployment.

Mandatory adoption of multi-factor authentication, encryption technologies, and real-time fraud detection systems.

Creation of a Financial Cybersecurity Fusion Centre to monitor and respond to fintech-related cyber threats.

Enforce stricter Know Your Customer (KYC) and AML policies to prevent money laundering and terrorism financing.

Leverage artificial intelligence and blockchain technology to enhance transaction monitoring and fraud detection.

Address predatory lending practices by enforcing interest rate caps and consumer protection laws.

Ensure digital lenders comply with data privacy regulations to prevent unauthorized data collection and misuse.

Collaboration between fintech firms, banks, and cybersecurity companies to share threat intelligence and develop security best practices.

Establish joint cybersecurity initiatives to counter online fraud, identity theft, and digital financial crimes.

Strengthen Nigeria’s Data Protection Act to align with global standards like the General Data Protection Regulation (GDPR).

Implement nationwide cybersecurity awareness campaigns to educate users on fraud prevention and safe digital transactions.

Strengthen border controls to combat arms smuggling and illicit financial flows that fund criminal networks.

Improve financial tracking and enforcement mechanisms to prevent anonymous transactions that fund organized crime.

Nigeria’s fintech sector presents immense opportunities for economic growth and financial inclusion but is also vulnerable to cyber threats, illicit financial activities, and weak regulatory enforcement.

Experts warn that ignoring these risks could lead to long-term financial instability, loss of investor confidence, and economic disruptions. To secure the sector’s future, urgent policy actions are needed, including stronger regulations, enhanced cybersecurity frameworks, and cross-sector collaboration.

The government must act decisively to strike a balance between fintech innovation and national security, ensuring a resilient, well-regulated, and sustainable financial ecosystem.

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