The "Success and Trust Dilemma" Facing Nigeria's Fintech Industry

Nigeria’s digital finance sector faces a paradox. Despite processing over 11 billion transactions daily and operating one of the most sophisticated real-time payment systems in the world, it is still widely viewed internationally as a hotbed of fraud. A new report from the Central Bank of Nigeria (CBN) directly analyzes this complex reality.

The Power of Fintech Innovation Demonstrated by 11 Billion Transactions

The scale of fintech transactions in Nigeria is beyond imagination. In 2024, the country processed 11 billion transactions through its instant payment system. This is not just about the large volume of money; each of these 11 billion individual transactions is completed in real time, serving as a testament to Nigeria’s digital financial revolution.

The growth over the past two years has been overwhelming. Since 2022, there has been a 120% increase, far surpassing the expansion rates of many advanced countries’ systems. Notably, Nigeria has been operating this real-time payment system since 2011—well before the development of modern real-time networks in the US or the widespread deployment of India’s UPI (Unified Payments Interface).

Market vendors in Lagos tap their smartphones to make payments, Kan’s grandmother receives remittances from her distant son, and students split bills—all these daily financial activities generate hundreds of fintech transactions every second.

Challenges in Balancing Regulation and Innovation

However, the regulatory environment supporting Nigeria’s fintech growth is sharply divided. When asked whether regulations help or hinder innovation, responses from founders responding to the CBN survey were evenly split: 50% believe regulation promotes growth, while the other 50% see it as restrictive.

This split is reflected in individual companies’ experiences. One founder said, “Some days I think Nigeria has the most advanced regulator in Africa; other days I consider moving to Kenya after waiting nine months for simple approvals.”

More than one-third of fintech companies experience delays of over a year when launching new products. Nearly two-thirds report that approval processes significantly impair their innovation capacity. The length of approval wait times directly influences their growth strategies.

At the same time, communication with regulators remains inadequate. Industry calls include establishing regular forums and creating sandbox environments for testing new services. Companies are not seeking to evade regulation but rather want to influence its design with their insights.

The Reality of Fintech Companies Focusing on Fraud Prevention

When the international community thinks of Nigeria’s fintech, fraud-related headlines often come to mind. However, the industry’s internal reality is quite different.

Nearly 87.5% of Nigerian fintech firms have adopted AI primarily for detecting fraudulent transactions. Instead of flashy customer service chatbots, they deploy specialized AI to identify and catch criminals. For example, one company uses an AI system that detects fraudulent loan applications with 90% accuracy, preventing millions of naira in losses.

The results are tangible: losses from digital payment fraud have decreased by 51% in recent years. Yet, maintaining this vigilance incurs costs—87.5% of fintech leaders say compliance expenses significantly impact their ability to invest in innovation. Balancing security and growth remains a key industry challenge.

How to Include the 26% of Unbanked in Nigeria

While fintech innovation accelerates in urban areas, many rural populations remain excluded from financial services. About 26% of adults still lack access to formal banking, rising to 37% in rural areas, and nearly half (47%) of adults in northern Katsina remain outside the banking system.

For example, a 62-year-old woman selling vegetables in northern Nigeria has never had a bank account. The biggest barriers for fintech firms trying to reach these populations are high costs of identity verification and trust issues.

Nigeria has a national ID system and a Bank Verification Number (BVN), but access to these systems is costly for small fintechs, and system outages at critical moments are common. Over one-third of industry players cite these issues as the main obstacles to financial inclusion.

While infrastructure exists, making it affordable and accessible is the real challenge.

Regulatory Barriers and Solutions to Regional Expansion

Nearly two-thirds of Nigerian fintech firms with established operations plan to expand into other African countries, starting with Ghana and eyeing Kenya and South Africa.

However, cross-border expansion faces significant hurdles. Each new market requires obtaining new licenses, establishing compliance frameworks, and undergoing multiple approval processes—taking months or even years.

One executive explained, “It’s like starting from scratch every time.” Despite proven success, established compliance infrastructure, and fraud prevention technology in Nigeria, each new country treats the firm as a new entrant needing to reprove everything.

To address this, 62.5% of Nigerian fintech firms support a “regulatory passport” system—an agreement where licenses and compliance in Nigeria are mutually recognized across other African countries. If implemented, this could dramatically accelerate their expansion across the continent.

The Urgent Need to Boost Domestic Funding

Most of Nigeria’s fintech funding still comes from abroad. In 2024, the entire startup ecosystem raised $520 million, mostly from foreign venture capital.

This dependence on external capital exposes vulnerabilities. When US and European interest rates rose, investment in Nigerian fintech sharply declined, forcing some companies to cut staff and delay new product launches.

Why is domestic funding so limited? Over 33% of founders say raising capital within Nigeria’s financial system is “difficult” or “very difficult.” Currency volatility, lack of long-term investment options, and regulatory uncertainties all play a role.

Industry stakeholders agree on the need: nearly 90% support establishing dedicated growth funds or credit guarantee schemes for local companies. Increasing reliance on local capital would enhance resilience against global shocks.

Why 100% of Firms Are Willing to Collaborate with Regulators

Despite challenges like regulatory delays, costs, and disagreements, the CBN survey revealed an unexpected unity: all fintech firms surveyed—100%—are willing to cooperate with regulators.

This is not just lip service. Three-quarters want regular forums with the central bank to discuss policies, and they seek to participate in designing rules from the outset, including testing new business models in sandbox environments.

One CEO told CBN researchers, “We’re not asking for no regulation. We want to help craft better regulation. Our experience fighting fraud daily and reaching excluded populations can inform policy.”

This attitude reflects industry maturity and self-awareness. They recognize the importance of a well-designed regulatory environment and genuinely want to contribute to its optimization.

Nigeria’s Fintech: A Turning Point for Global Recognition

The CBN report is not just a record of problems but also a call for solutions. It proposes ten specific policy options, including establishing a permanent fintech engagement forum and piloting the regulatory passport system with Ghana and Kenya.

Some initiatives are already underway. Nigeria, after years of strengthening anti-money laundering measures, exited the FATF grey list in 2024. Fraud rates are declining, and international recognition is beginning to arrive.

A symbol of this progress is Nigeria’s instant payment system recently earning Africa’s first “maturity ranking”—a high accolade. The 11 billion fintech transactions are not just numbers; they are proof of a reality where technology, regulation, and human engagement intersect.

The biggest challenge now is whether the international community’s perception will catch up. It’s not about a few criminals committing fraud but about the 11 billion successful transactions that the world needs to recognize and understand. Nigeria’s fintech industry continues to evolve steadily, but whether that evolution is acknowledged globally remains the next hurdle.

Every day, every second, somewhere in Nigeria, money moves. Students split bills, market vendors tap their smartphones, and rural residents seek access to financial services. The future of African finance is quietly, but surely, being written.