Comparative Analysis: Fintech Oversight vs. Traditional Banking Regulation in Nigeria

Comparative Analysis: Fintech Oversight vs. Traditional Banking Regulation in Nigeria

Nigeria’s fintech sector operates under lighter, fragmented regulation compared to the stringent oversight of traditional banks, creating gaps that lawmakers like Oshiomhole warn could destabilize the financial system.

Traditional banks in Nigeria are governed by the Banks and Other Financial Institutions Act (BOFIA), which provides a comprehensive framework for licensing, capital requirements, corporate governance, and consumer protection.

The Central Bank of Nigeria (CBN) enforces these rules with binding authority, ensuring that banks maintain reserve funds, comply with minimum capital ratios, and operate under strict supervision. This system was strengthened after the 2007 global financial crisis to restore trust and stabilityMondaq.

By contrast, fintech companies, including OPAY, Moneypoint, PalmPay, and PiggyVest, operate under general CBN guidelines rather than a dedicated law. While the CBN has introduced frameworks such as the regulatory sandbox to test new innovations, fintechs are not subject to the same rigorous licensing and capital requirements as banks. They often lack physical branches, visible governance structures, and enforceable obligations to social responsibility, which Oshiomhole highlighted in his remarks.

The Senate has acknowledged this gap, noting that fintechs now process billions of naira daily and hold vast pools of sensitive financial data, yet operate without the comprehensive oversight applied to banks. This exposes consumers to risks such as fraud, data breaches, and systemic instability if a major fintech collapses.

Key Differences

Aspect	Traditional Banks (BOFIA)	Fintech Platforms (Current Regulation)
Legal Framework	Governed by BOFIA 2020 with enforceable laws	Operate under CBN guidelines, no dedicated law
Licensing & Capital Requirements	Strict licensing, minimum paid-up capital, reserve ratios	Flexible entry, lighter requirements, sandbox testing
Governance Transparency	Directors and shareholders publicly known	Often opaque ownership and governance structures
Consumer Protection	Binding obligations, enforceable by law	Guidelines only; enforcement weaker
Systemic Risk Management	Resolution tools and penalties under BOFIA	No equivalent framework; risks largely unmitigated

Implications

The regulatory imbalance means fintechs enjoy rapid growth and innovation but pose unmonitored systemic risks. Oshiomhole’s fraud experience illustrates how hackers exploit these platforms, bypassing traditional banks with stronger safeguards. 

The Senate’s proposed BOFIA amendment seeks to close this gap by designating fintechs as systemically important institutions, subjecting them to registration, enhanced supervision, and stricter accountability.

In essence, while banks remain tightly regulated pillars of Nigeria’s financial system, fintechs are still treated as peripheral players despite their central role in everyday transactions.

This mismatch is what Oshiomhole and other lawmakers argue must be urgently addressed to protect consumers and preserve financial stability.