Increasing Non-bank Transactions Worries CBN
Ikpeme Patience
The Central Bank of Nigeria (CBN) has expressed concerns on the increasing volumes of transactions by Non-Bank Financial Institutions (NBFIs) and Other Financial Institutions (OFIs).
This high volume transactions the CBN noted pose a risk to the financial stability of the system
These concerns were expressed by the CBN governor Olayemi Cardoso who was represented by Mr. Abayomi Arogundade, Acting Director of the Other Financial Institutions Department of the CBN during the 10th Meeting of the College of Supervisors for Non-Bank Financial Institutions (CSNBFI) on Monday in Abuja.
“We reiterate the importance of monitoring trends, risks and innovations of NBFIs/OFIs as their increasing transaction volumes pose major financial system stability risk” noted Cardoso.
Mr. Cardoso further pointed out the increase in fintechs loans, describing it as innovations linked to crypto or stablecoin assets.
“Fintech loans are one of the most commonly reported innovations. While overall this may appear small in relation to the size of credit by Deposit Money Banks (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” he stated
Cardoso further explained that “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 jurisdiction.” said Cardoso.
He pointed out that these innovations pose a significant risk to financial stability if there’s no proper regulation , but it also offers significant opportunities for financial inclusion and efficiency .
Cardoso gave the assurance that the CBN is not relenting in its efforts to develop frameworks that can effectively monitor and manage these risks.
Also, Dr. Olorunsola Olowofeso, Director General of the West African Monetary Institute (WAMI), also identified funding squeeze as a major financial issue in West Africa.
He explained the need to guard the financial sector’s resilience against emerging risks like climate-related issues, internet disruptions, cyber threats, and social media-driven instability.
“In the WAMZ, after turbulent years, the outlook is gradually improving. However, the funding squeeze persists as governments continue to grapple with financing shortages, high borrowing costs, and impending debt repayments, emerging risks to the financial system include climate-related risks, internet disruption, cyber and social media threats arising from the digitization of financial services.” Olowofeso noted
He encouraged the need to develop adequate national cybersecurity strategies and regulatory frameworks to address these emerging risks and strengthen the financial sector’s resilience.
