Olayemi Cardoso, the governor of the Central Bank of Nigeria (CBN), has raised concerns about the increasing transaction volumes of non-bank financial institutions (NBFIs) and their potential threat to the stability of Africa’s financial system. Cardoso addressed these issues on Monday at the 10th meeting of the College of Supervisors for Non-Bank Financial Institutions (CSNBFI) in Abuja.
Represented by Arogundade Abayomi, the CBN’s acting director of the financial institutions department, Cardoso emphasized the need to monitor the trends and innovations within NBFIs. He noted that the transactions of these institutions, which include bureaux de change (BDCs), primary mortgage institutions (PMIs), development finance institutions (DFIs), and insurance companies, could expose the financial system to significant risks.
“We reiterate the importance of monitoring trends, risks, and innovations of NBFIs/OFIs as their increasing transaction volumes pose major financial system stability risks,” Cardoso stated. He highlighted that fintech loans, although currently smaller in volume compared to those by Deposit Money Banks (DMBs), are on the rise globally.
Cardoso explained that fintech credit is typically facilitated through electronic platforms connecting lenders with borrowers, with these platforms acting as financial intermediaries. In some cases, loans are recorded on these platforms’ balance sheets, akin to new financial intermediaries.
He urged NBFIs in the West African Monetary Zone (WAMZ) to enhance their anti-money laundering and cybersecurity measures. “We must continue to push forward the agenda of strengthening anti-money laundering practices, deepening supervisory capacity on cybersecurity and fintech regulation, and implementing a risk-based supervisory approach,” he said.
Cardoso also praised the college for focusing on climate risk regulation during its technical sessions.
Olorunsola Olowofeso, the director-general of the West African Monetary Institute (WAMI), identified funding shortages as a major financial challenge in West Africa. He stressed the need to bolster the financial sector’s resilience against emerging risks such as climate-related issues, internet disruptions, cyber threats, and social media-driven instability.
“As we all continue to anticipate the soft landing of global inflation to pre-pandemic levels, let us continue to monitor policy actions and spillovers to ensure the financial system is resilient,” Olowofeso said. He noted that while the outlook in the WAMZ is gradually improving after turbulent years, funding challenges persist due to high borrowing costs and impending debt repayments.
To strengthen the resilience of the financial sector, Olowofeso urged member states to develop comprehensive national cybersecurity strategies and establish appropriate regulatory and supervisory frameworks.
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