CBN Raises Alarm Over Foreign Capital Dependence in Nigeria's Fintech Sector
The Central Bank of Nigeria has issued a significant warning to leading financial technology companies including OPay and Moniepoint, highlighting serious concerns about their heavy reliance on foreign capital despite strong sector growth. According to the bank's latest policy insights, this dependence exposes Nigeria's vibrant fintech ecosystem to potentially damaging volatility in global financial markets.
Foreign Funding Decline and Market Vulnerability
In its comprehensive 2025 Fintech Policy Insight Report, the CBN revealed that Nigerian fintech startups secured approximately $520 million in equity funding during 2024. This represents a notable decline from the $747 million recorded in 2019, when Nigeria accounted for an impressive 37% of total startup investment across the African continent. While acknowledging the sector's resilience amid challenging global economic conditions, the central bank emphasized that excessive dependence on external funding sources creates substantial vulnerability to shifts in international financial dynamics.
The report specifically attributed the slowdown in venture capital inflows to the sharp interest rate increases across advanced economies in 2022, which significantly constrained global investment appetite. This development has prompted serious concerns about the sustainability of current funding models within Nigeria's fintech landscape.
Nigeria Maintains Fintech Leadership Position
Despite these funding challenges, Nigeria continues to solidify its position as Africa's premier financial innovation hub. The country's digital payment infrastructure has demonstrated remarkable strength, with more than 25% of electronic transactions now processed through real-time payment channels. The Nigeria Inter-Bank Settlement System Instant Payment platform has emerged as one of the world's most mature and widely adopted instant payment systems, processing nearly 11 billion transactions in 2024 compared to approximately five billion just two years earlier.
CBN Governor Olayemi Cardoso commented on these developments, noting that Nigeria's financial system has undergone transformative changes over the past decade, with fintech startups evolving into one of the continent's most vibrant innovation ecosystems. He emphasized that improving currency stability and domestic economic conditions have reinforced financial innovation's crucial role in expanding access to financial services at scale.
Regulatory Challenges and Compliance Costs
The CBN report identified significant regulatory hurdles that continue to challenge fintech innovation. According to stakeholder surveys conducted by the central bank, approximately 87.5% of respondents indicated that compliance and risk management expenses substantially affect their ability to innovate. Delays in regulatory approvals were also highlighted as major constraints to sector development.
The apex bank stressed the critical importance of strengthening system integrity and market confidence through enhanced compliance reforms, improved anti-money laundering supervision, and robust consumer protection measures. These elements were identified as essential priorities for sustaining investor trust and ensuring long-term sector stability.
Expansion Plans and Domestic Funding Solutions
Looking toward the future, the report revealed that 62.5% of fintech firms plan to expand regionally, with strong support for regulatory passporting frameworks that would enable compliant cross-border operations. However, the CBN cautioned that successful regional expansion would require a stable funding base and coordinated regulatory oversight across multiple markets.
The central bank emphasized the urgent need to deepen domestic funding sources to support sustainable growth within the sector. Expanding access to local capital markets would help reduce currency risk exposure and strengthen the long-term stability of fintech companies operating in Nigeria. This strategic shift toward domestic funding represents a crucial component of the CBN's vision for a more resilient financial technology ecosystem.
Licensing Developments and Regulatory Oversight
In related developments, the CBN has granted national operating licences to several fintech companies and microfinance banks, including industry leaders OPay and Moniepoint. These approvals will enable the firms to expand their agent networks, open outlets nationwide, and scale digital banking services more effectively.
While these licensing moves are expected to significantly improve financial access and service delivery across Nigeria, the CBN has made clear that all beneficiaries remain under strict regulatory oversight. This balanced approach aims to foster innovation while maintaining financial system stability and protecting consumer interests in Nigeria's rapidly evolving digital finance landscape.
