Olayemi Cardoso, governor, Central Bank of Nigeria (CBN), has warned that the rising transaction volumes by non-banks threatens financial stability in West Africa.

Olayemi Cardoso, governor, Central Bank of Nigeria

He stated this on Monday at the 10th meeting of the College of Supervisors for Non-Bank Financial Institutions of the West African Monetary Zone.

Cardoso, was represented by Abayomi Arogundade, acting director of the Other Financial Institutions Department.

He said, “We reiterate the importance of monitoring trends, risks and innovations of NBFIs/OFIs (Non-Bank Financial Institutions or Other Financial Institutions) as their increasing transaction volumes pose major financial system stability risk.

“Fintech loans is one of the most commonly reported innovation. 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.

“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.”

Non-bank financial firms offer financial services but don’t hold banking licences and therefore can’t accept deposits.

The Securities and Exchange Commission (SEC) has reaffirmed its strong support for Pension Fund Administrators (PFAs) and their professionals in driving economic growth, particularly through capital market investments, to bridge the nation’s infrastructural gap.

Emomotimi Agama, SEC Director-General made this commitment during the 2024 Investment Advisers and Portfolio Managers (IAPM) Conference held in Lagos recently.

Agama, represented by the Executive Director of the SEC, Bola Ajomale, stressed the essential role of the SEC in facilitating growth across the capital market.

He assured stakeholders of enhanced infrastructure investment portfolios that will allow better penetration of the pension industry.

He emphasized the SEC’s readiness to embrace innovative ideas and initiatives that can propel the nation’s growth in line with President Bola Tinubu’s $1 trillion economy.

Agama stated, “Our focus at the SEC is to enable all aspects of the capital market to achieve growth. Certainly, the pension industry, and the professionals, is one of our priorities. I assure you that we are listening.

“As we deliberate today on your role in moving the pension industry into infrastructure and development, the SEC is available for your ideas and innovation and how we can help you in driving the economy forward,” Agama affirmed.

Abimbola Olashore, President/Chairman of Council, IAPM, highlighted the relevance of the conference themed “Driving Economic Growth and Developmental Agenda with Pension Fund – The Roles of Investment Professionals.”

Olashore emphasized the urgent need to draw the attention of institutional investors, especially pension funds, to the huge funding gap in the infrastructure sector and the potential for high returns on investment for pension funds if well harnessed and managed.

“The pension industry holds an excess of N19.787 trillion with over 10.3 million Retirement Savings Accounts (RSAs) as at April 2024, according to the National Pension Commission (PenCom). Such a large pool of funds should be channelled into more productive development leveraging the capital market,” Olashore advised.

While noting that the pension industry has its fair share of challenges, including restricted investment options in the capital market, stagnated growth in the economy, a significant informal sector estimated at 65 per cent of GDP, low participation, and an elevated inflation rate of 33.95 per cent, among others, he urged the creation of more expertise in the infrastructure sector who understand the investment market dynamics.

“Institutional investors, in particular, pension funds, will play a major role in the financing of long-term productive activities that support sustainable growth in the infrastructure sector,” he added.

Oguche Agudah, CEO of the Pension Fund Operators Association of Nigeria (PenOp), urged more efforts in the aspect of regulations guiding PFA’s investments in infrastructure.

He emphasized the need for a well-structured and defined market that will allow smooth operations while delivering maximum value to all stakeholders. “Before pension funds could commit large capital to a project such as infrastructure, there must be transparency, long-term and efficient regulations governing the sector.

“Also, such investment will be possible only if investors can earn adequate risk-adjusted returns and if appropriate market structures and risk-free financial securities are in place to attract pension funds.”

Financial industry leaders have urged financial technology (fintech) firms to maintain trust, balance performance, and compliance in a digital age to harness opportunities in the sector.

The stakeholders, who gathered at the Financial Institutions Training Centre (FITC) conference, highlighted the transformative impact of fintech on the global financial services industry.

Philip Ikeazor, deputy governor, financial systems stability at the Central Bank of Nigeria (CBN) and board chairman, FITC, emphasised the growth of the fintech sector in Nigeria and the importance of trust in digital finance.

Represented by Taiwo Oladimeji, deputy director, payments system management department, he said over the past decade, Nigeria has seen a significant surge in the fintech sector, transforming financial transactions through innovations like mobile payments and blockchain technology.

With over 200 fintech startups, Nigeria has become a hub for financial inclusion and substantial investments, he said, adding that the CBN has played a pivotal role by implementing policies that promote innovation while maintaining financial system stability and integrity.

“Continuous dialogue, knowledge sharing, and capacity building are necessary for balancing performance with compliance. The CBN’s e-learning platform, SabiMONI, promotes financial literacy and deepens financial inclusion by equipping citizens with the knowledge and tools they need. This initiative aims to build a financially inclusive society and foster greater trust in the financial system.

According to him, the CBN is dedicated to developing regulatory frameworks that address challenges posed by emerging technologies such as AI (Artificial Intelligence), blockchain, and digital currencies. The Payments System Vision (PSV) 2025 focuses on driving digital innovations and payments, with an emphasis on contactless payments, big data, and open banking.

Chizor Malize, managing director/CEO of FITC and convener of the conference, emphasised the transformative impact of fintech on the global financial services industry. She highlighted the success stories of companies like Interswitch, Flutterwave, and M-Pesa, highlighting Africa’s potential to drive financial inclusion and economic growth through digital innovation.

Malize underscored the importance of maintaining trust and compliance in the digital age, emphasizing FITC’s role in providing innovative knowledge solutions and capacity-building programs to strengthen the financial services sector.

Adedoyin Odunfa, managing director/CEO Digital Jewels Limited and chair of the conference advisory board, highlighted the crucial role of fintech in Nigeria’s economic development and financial inclusion at the FITC FinTech Technovation conference.