A parliamentary investigation has uncovered critical vulnerabilities in Nigeria's rapidly expanding digital payment ecosystem, raising alarms about widespread cyber fraud risks that threaten both individual citizens and national security.
Major Security Loopholes Uncovered
The House of Representatives Ad-hoc Committee, chaired by Olufemi Bamisile, discovered multiple security gaps during its comprehensive investigation into cryptocurrency adoption and Point of Sale (POS) operations. The committee identified unregistered agents, cloned payment terminals, anonymous transactions, and poor Know-Your-Customer (KYC) compliance as primary threats to the financial sector's stability.
Committee Chairperson Bamisile emphasized that Nigeria's financial system remains fragile and vulnerable to infiltration by unlicensed crypto-related activities. He expressed particular concern about POS operators offering unauthorized cryptocurrency and digital-asset services, noting that such transactions could potentially facilitate terrorism financing and other criminal enterprises.
Data Security and Identity Theft Concerns
The investigation revealed even more disturbing findings, including the registration of fictitious companies at the Corporate Affairs Commission (CAC) using stolen National Identification Numbers (NIN) and Bank Verification Numbers (BVN) belonging to unsuspecting citizens. This practice highlights weak verification mechanisms within the system.
Equally alarming is the discovery that some fintech companies store sensitive customer data on foreign servers, a practice that Bamisile warned undermines Nigeria's national security efforts and exposes citizen information to potential international breaches.
Financial Impact and Regulatory Response
The scale of financial losses due to these vulnerabilities is staggering. According to data from the Nigeria Inter-Bank Settlement System (NIBSS), financial-channel fraud resulted in losses of N17.67 billion in 2023, affecting 80,000 customers. These losses dramatically increased to N52.26 billion in 2024, indicating an urgent need for intervention.
Paul Okafor, National President of the Association of Digital Payment and POS Operators of Nigeria (ADPPON), acknowledged that the POS ecosystem has outpaced regulatory capacity. He attributed the current crisis to the sector's explosive growth combined with limited regulatory frameworks.
In response to these threats, the Central Bank of Nigeria has implemented stricter measures, including a recent directive limiting POS transactions to N100,000 per customer and imposing daily cash-out limits of N1.2 million. The committee has pledged to develop a comprehensive legislative framework that strengthens the fintech sector while protecting customer information and enabling continued innovation.
