The Central Bank of Nigeria has warned about the rising transaction volumes of Non-Bank Financial Institutions and Other Financial Institutions, which pose significant risks to the stability of the financial system.

CBN Governor, Mr. Olayemi Cardoso, represented by Mr. Abayomi Arogundade, Acting Director of the Other Financial Institutions Department at the CBN, issued the warning at the 10th Meeting of the College of Supervisors for Non-Bank Financial Institutions 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 urged the gathering of West African central bankers.

He highlighted the rapid growth in fintech lending as a particular concern, noting that while the size of these loans is small compared to traditional banking, some areas have seen worrying trends 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, making them akin to new types of financial intermediaries.”

These fintech firms, which offer applications, software, and other technologies for mobile and online banking, are often regulated either as banking entities or fintech payment service providers, depending on the jurisdiction.

Cardoso also highlighted the need to monitor innovations linked to crypto or stablecoin assets closely.

The concerns raised by the CBN governor come at a time when the non-bank financial sector is playing a vital role in enhancing access to credit, offering cost-effective payment services, and supporting economic growth across the West African Monetary Zone (WAMZ) region.

Director General of the West African Monetary Institute, Dr. Olorunsola Olowofeso, echoed the need to strengthen the resilience of the financial sector in the face of emerging risks such as climate-related issues, internet disruption, cyber threats, and social media-driven instability.

“To strengthen the resilience of the financial sector, Member States should develop an adequate national cybersecurity strategy and appropriate regulatory and supervisory frameworks,” Olowofeso said.

The technical sessions of the CSNBFI meeting this week are expected to focus on climate risk regulation, highlighting the importance of addressing these emerging threats to the stability of the financial system.

As the NBFI sector continues to grow in influence and importance, the central bank governors of the WAMZ region have a critical responsibility to ensure that regulatory requirements foster compliance with international standards and mitigate the risks posed by the rapid digitalization of financial services.