The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso has called on financial regulators in West Africa to tighten regulations of fintech and Non-Bank Financial Institutions (NBFIs) to ensure financial system stability across the region.
The CBN Governor made this call at the meeting of the College of Supervisors for Non-Bank Financial Institutions of the West African Monetary Zone held in Abuja on Monday.
Cardoso said that the volume of transactions carried out by NBFIs and Other Financial Institutions (OFIs) transactions in Nigeria and West Africa over the years has been on a steady rise.
He said, “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 is one of the most commonly reported innovations.”
Further that, “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 also said that fintech credit is provided via electronic platforms that connect lenders to borrowers – in which case the platform takes the role of a financial auxiliary.
According to Cardoso, loans are taken on the balance sheet of the fintech.
He stated, “ 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 NBFIs may be small but that should not be a crutch to excuse them from global best practices. Supervisors must ensure that regulatory requirements are tailor made to foster compliance with international standards,” he added.
The Director-General of the West African Monetary Institute, Dr. Olorunsola Olowofeso said that NBFIs and OFIs play a pivotal role in the financial system by enhancing access to credit, offering inexpensive and reliable ways to make payment.
He said that their importance underscores the need to strengthen the resilience of the NBFI sector to ensure a much more stable provision of financing and reliable payment services.
“Emerging risks to the financial system include climate-related risks, internet disruption, cyber and social media threats arising from the digitization of financial services,” Dr. Olorunsola stated.
“To strengthen the resilience of the financial sector, Member States should develop an adequate national cybersecurity strategy and appropriate regulatory and supervisory frameworks,”he added.
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Chinedum Anayo