The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso made the observation on Monday at the 10th meeting of the College of Supervisors for Non-Bank Financial Institutions of the West African Monetary Zone.

Represented by the bank’s Acting Director, Other Financial Institutions Department, Abayomi Arogundade, Cardoso said: “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.

“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.”

He added: “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.

Also speaking at the event, the Director-General of the West African Monetary Institute (WAMI), Dr. Olorunsola Olowofeso, noted the resilience of economies of member countries,  despite the challenging global environment.

According to the DG, the meeting was very important as it presented delegates an opportunity to review developments in the non-bank financial institutions sub-sector within the Zone for the second half of 2023 and the first quarter of 2024, assess the regulatory and supervisory challenges of Member States and share experiences to mitigate emerging risks to the financial system of the WAMZ.

He urged the experts to focus on identifying, assessing, and monitoring emerging risks, vulnerabilities, and early warning signals in the NBFI sector of the Member States and provide relevant recommendations to the Committee of Governors of the WAMZ.

Olowofeso noted that WAMI has achieved significant milestones in the implementation of two important projects: the Development of Domestic Debt Markets, Phase 1 and the West African Capital Markets Integration Program, Phase 2, aimed at developing debt and capital markets in The Gambia, Guinea, Liberia, and Sierra Leone.