By Cross Udo, Abuja
Despite applying advanced digital solutions to enhance services, financial technology (Fintech) is contending with systemic corruption and inadequate border control.
Consequently, the Nigerian Government has been told to establish clear, enforceable, and adaptive fintech regulations addressing emerging risks while promoting innovation.
This was in the latest Nextier SPD Policy Weekly report, which examined the complex interplay between Fintech and national security in Nigeria.
The report was authored by Dr Chibuike Njoku, an Associate Consultant at Nextier and lecturer at the International Relations and Diplomacy Department, Chrisland University, Abeokuta, Ogun State, and Dr Ndu Nwokolo, a Managing Partner at Nextier and an Honorary Fellow at the School of Government at the University of Birmingham in the UK.
It highlighted the critical challenges fintech companies face in safeguarding the financial ecosystem and explored strategies to mitigate security risks while fostering a resilient and well-regulated fintech sector.
The University dons noted that Fintech, or financial technology, is applying advanced digital solutions to enhance financial services which encompasses innovations such as mobile banking, digital payment systems, and online lending platforms, all designed to streamline financial transactions and improve accessibility.
They said that by leveraging sophisticated software, artificial intelligence, and data analytics, Fintech disrupts traditional banking models, enabling businesses, individuals, and consumers to manage their financial activities efficiently through computers and mobile devices.
“Nigeria’s fintech industry has experienced remarkable growth, driven by a young, tech-savvy population, increased smartphone usage, and an evolving regulatory environment. Fintech start-ups grew from 144 in 2021 to over 217 in 2024, reflecting rapid expansion.
“The widespread adoption of mobile money and digital payments has boosted financial inclusion, entrepreneurship, and innovation. Fintech solutions have enhanced transaction efficiency, improved credit access, and contributed to economic dynamism. Notably, the alternative lending market is projected to grow by 34.8 percent annually, reaching $230.9m in 2024,” the report said.
However, they pointed out that the rapid growth of Fintech in Nigeria has raised grave national security challenges. While technology-driven financial services offer numerous benefits.
They also said that the growth of Fintech has created vulnerabilities that cybercriminals and illicit actors can exploit for fraud, money laundering, cyberattacks, and kidnapping for ransom (KFR).
“Notably, in early 2023, cybercriminals targeted three Nigerian financial institutions, resulting in losses exceeding ₦5bn. The rise of cryptocurrencies has further complicated Nigeria’s regulatory landscape.
“Despite a Central Bank of Nigeria (CBN) ban on banks transacting with crypto entities, digital currencies remain widely used, with 33.4 million Nigerians investing in digital assets within six months,” they said.
The Nextier weekly edition cited an instance in which the National Bureau of Statistics (NBS) reported that a kidnapping ransom of ₦2.2trn was paid in twelve months, and many of such transactions were made via a POS (Point of Sale) machine. It added that this rapid adoption challenges regulators in curbing illicit financial activities.
“This edition of the Nextier SPD Policy Weekly examines the complex interplay between Fintech and national security in Nigeria. It highlights the critical challenges fintech companies face in safeguarding the financial ecosystem and explores strategies to mitigate security risks while fostering a resilient and well-regulated fintech sector.”
Njoku and Nwokolo contended that the rapid expansion of Nigeria’s fintech sector has transformed the financial landscape, driving financial inclusion, digital innovation, and economic growth.
They also said that the industry faces significant security risks that remain largely unaddressed alongside the advancements.
“Regulatory gaps, cybersecurity threats, illicit financial flows, and data privacy concerns pose serious national security and economic stability challenges. The regulatory approach towards the fintech industry in Nigeria is multifarious. This is evident because no single regulatory authority is assigned to it.
“It is being regulated by several agencies in Nigeria, which could be attributed to the fact that fintech activities often cut across several transactions, which frequently crisscross into several areas controlled by several other government-established institutions.
“The central regulatory bodies in the fintech sector include the Corporate Affairs Commission, Central Bank of Nigeria, Securities and Exchange Commission, Nigerian Communications Commission, National Information Technology Development Agency, National Insurance Commission, Federal Competition and Consumer Protection Commission, Federal Inland Revenue Service, Nigerian Data Protection Commission and National Office for Technology Acquisition and Promotion.”
While noting that Nigeria ranks among the top African nations facing cyber threats, the report quoted the African Cyber Threat Assessment Report 2023 by INTERPOL, which indicated that Nigeria recorded 5,366 detections of malicious software, placing it among the most affected countries on the continent.
On financial losses, the experts said that reports have shown that financial institutions in the country suffered losses amounting to ₦52.26bn due to fraud in 2024.
Similarly, hacking and phishing are prevalent cyber threats in Nigeria.
“A 2023 survey revealed that 61 percent of Nigerian respondents encountered phishing scams while using online banking or mobile wallet services. The lack of robust cybersecurity frameworks exacerbates these threats, leaving many financial institutions vulnerable.
“The rapid adoption of fintech platforms, particularly those facilitating cryptocurrency transactions, has introduced new challenges in combating money laundering and terrorism financing.
“The inherent characteristics of digital transactions—such as speed and a degree of anonymity—pose significant obstacles to effective monitoring and regulation,” it added.
Nextier experts stressed that reports have highlighted how terrorist organisations have attempted to leverage cryptocurrency for fundraising, prompting international efforts to enhance regulatory frameworks.
They also said that the proliferation of unregulated digital lending platforms has led to predatory lending practices and significant data privacy violations.
They said many digital lenders operate without proper regulation, offering short-term loans with excessive interest rates and hidden charges.
Though they said Nigeria’s burgeoning fintech sector has significantly enhanced financial inclusion and economic growth, inadequate regulatory oversight poses substantial national security risks.
The experts’ recommendations called for a comprehensive and proactive approach to mitigating security risks in Nigeria’s fintech sector.
They also called for establishing a Financial Cybersecurity Fusion Centre, a central body responsible for monitoring and responding to cyber threats in the financial sector, noting that it can further enhance resilience against cyber risks.
They also said that Fintech platforms must enforce stricter AML and KYC regulations to combat financial crimes such as money laundering and terrorism financing.
*Urge FG to establish enforceable regulations to address emerging risk
They advised that Nigeria must strengthen its Data Protection Act to align with global standards such as the General Data Protection Regulation (GDPR).
“Fintech firms should be required to conduct regular audits on data security, implement strong encryption measures, and obtain user consent before collecting or processing personal data.
“Government agencies, fintech firms, and civil society organisations should collaborate to provide awareness campaigns that educate users on secure digital transactions, fraud prevention, and personal data protection.
Law enforcement agencies and regulatory personnel must also receive specialised training to effectively detect, investigate, and prosecute fintech-related crimes,” they said
