Nigeria’s fintech paradox: 11bn transactions, system failures, lingering trust issues – CBN report

Every second of every day, somewhere in Nigeria, money moves.

A market trader in Lagos taps her phone. A student in Abuja splits the bill with friends. A grandmother in Kano receives money from her son working in Port Harcourt. By the time you finish reading this sentence, hundreds more transactions have happened.

Last year, Nigerians moved money 11 billion times through the country’s instant payment system. That’s not 11 billion naira. That’s 11 billion separate transactions, each one happening in real-time, each one settled immediately, each one part of a digital financial revolution most of the world doesn’t even know is happening.

To put that in perspective: Nigeria processed more than double the transactions it handled just two years ago. The system that makes this possible went live in 2011, years before America’s real-time payment network, years before India’s famous UPI system scaled to billions.

Yet ask most people outside Africa what they know about Nigerian fintech, and the answer won’t be about innovation. It’ll be about fraud.

This is the paradox that the Central Bank of Nigeria is now confronting head-on in a new report: How do you lead in innovation when the world still thinks of you as the home of scammers?

The cruel irony? Much of the digital fraud attributed to Nigeria is actually orchestrated by foreign actors using Nigeria as a base or proxy. Recent law enforcement operations have shown that cross-border criminal networks often blame Nigeria for crimes planned and executed elsewhere.

Still, the reputation stuck. Until recently, Nigeria remained on the Financial Action Task Force’s ‘grey list‘ for money laundering concerns, even as the country was quietly building one of the world’s most sophisticated digital payment infrastructures.

The people building the system are frustrated

Meet Chidinma. She’s a composite of the dozens of fintech founders who responded to the Central Bank’s survey, the first of its kind.

Chidinma runs a small digital lending startup in Lagos. Her company helps market traders access credit without visiting a bank. Her biggest innovation this year? An AI system that can detect fraudulent loan applications with 90% accuracy. It’s saved her company millions of naira.

But ask her about regulation, and she’ll give you a contradictory answer, just like half the industry did in the survey.

When the Central Bank asked fintech leaders whether regulation helps or hurts innovation, the results came back perfectly split: 50% said it enables growth. 50% said it restricts it.

“Some days I think we have the most forward-thinking regulators in Africa,” one founder told researchers. “Other days I’m waiting nine months for a simple approval and wondering if we should just move to Kenya.”

The frustration is real. Over a third of fintech companies say it takes more than a year to bring a new product to market because of regulatory delays. Nearly two-thirds say the approval process materially impacts their ability to launch innovations.

Here’s what the public doesn’t see: Nigerian fintech entities are spending more money fighting fraud than almost anything else.

Nearly 9 out of 10 companies use artificial intelligence primarily to detect fraudulent transactions. Not for fancy customer service chatbots. Not for predicting what products people want. For catching criminals.

And it’s working. Digital payment fraud losses dropped 51% in recent years, according to industry data. But the cost of this vigilance is high.

87.5% of fintech executives say compliance costs significantly impact their capacity to innovate. They’re not complaining about having rules, they’re struggling with how much it costs to follow them.

The grandmother who can’t get a bank account

Meet Hauwa. She sells vegetables in a market in Katsina, in northern Nigeria. She’s 62 years old. She’s never had a bank account.

Hauwa is one of millions. Despite all the digital innovation happening in Lagos and Abuja, 26% of Nigerian adults still have no access to formal financial services. In rural areas, that number jumps to 37%. In the North, where Hauwa lives, nearly half of all adults, 47%, remain completely outside the banking system.

Why? Ask the fintech entities trying to reach her, and they’ll point to a simple problem of identity verification costing too much and not working reliably enough.

Nigeria has a national ID system. It has a Bank Verification Number system. But connecting to these systems to verify someone like Hauwa is expensive for small fintech companies, and the systems sometimes go down at critical moments.

More than a third of fintech companies say this is their biggest obstacle to reaching excluded populations. The infrastructure exists. Making it accessible and affordable? That’s the challenge.

Back to Chidinma, our composite founder. She’s not just thinking about Nigeria anymore.

Like nearly two-thirds of Nigerian fintech companies, she’s planning to expand into other African countries. Ghana first, probably. Maybe Kenya after that. South Africa if things go well.

But here’s the problem: every country requires a new licence. New compliance. New approvals. New waiting.

“It’s like starting over from scratch every time,” she explains. “We proved ourselves in Nigeria. We have all the compliance infrastructure. We know how to fight fraud. But in Ghana’s eyes, we’re just another startup that needs to spend two years proving we’re legitimate.”

That’s why 62.5% of Nigerian fintech entities support something called ‘regulatory passporting’, essentially, a system where if you’re licenced and compliant in Nigeria, other African countries would recognise that and fast-track your entry into their markets.

Here’s something you might not know, most of the money funding Nigerian fintech innovation comes from outside Nigeria.

In 2024, Nigerian startups raised $520 million. That sounds impressive until you realise it’s mostly foreign venture capital, which makes the ecosystem vulnerable to global economic shocks.

When interest rates rose in America and Europe, investment in Nigerian fintech dropped dramatically. Companies that were planning to expand had to cut staff instead. Products that were almost ready got shelved.

Why don’t they raise money locally? More than a third of founders say it’s ‘difficult’ or ‘very difficult’ to raise capital within Nigeria’s financial system. Currency volatility, lack of long-term investment instruments, regulatory uncertainty, all contribute.

The solution? Nearly 9 out of 10 companies support creating a dedicated fintech growth fund or credit guarantee scheme to help Nigerian fintechs access local capital and reduce dependence on foreign investors.

Despite all the frustrations, the delays, the costs, the split opinions on regulation, one finding from the Central Bank’s survey stands out:

Every single fintech company surveyed, 100%, said they’re willing to collaborate with regulators.

Not just willing. Eager. Three-quarters want regular forums to discuss policy with the Central Bank. They want sandboxes to test new ideas safely. They want to be part of designing the rules they’ll have to follow.

“We’re not asking for no regulation,” one executive told the Central Bank’s researchers. “We’re asking to help write better regulations. We’re the ones dealing with fraud every day. We’re the ones trying to reach excluded populations. Use our experience.”

What happens next

The Central Bank of Nigeria’s report doesn’t just document problems, it proposes solutions. Ten specific policy options, from creating a permanent fintech engagement forum to piloting regulatory passporting with Ghana and Kenya.

Some are already moving. Nigeria recently exited the FATF grey list after years of strengthening its anti-money laundering systems. The fraud rate is dropping. International recognition is starting to arrive…Nigeria’s instant payment system was just named the first in Africa to achieve ‘maturity ranking’ status.

But the hardest work is still ahead. Building enough credibility that when people think of Nigerian fintech, they think of 11 billion successful transactions, not the scams perpetrated by a criminal minority.

Back to our opening scene. Money is still moving. The grandmother is still selling vegetables. The student is still splitting the bill. The trader is still tapping her phone.

Every second of every day, somewhere in Nigeria, the future of African finance is being written.

The question is whether the world will notice before the next billion transactions go through.

BY THE NUMBERS

• 11 billion – Transactions processed in 2024
• 120% – Growth from 2022
• 2011 – Year Nigeria launched real-time payments (before US and India)
• 50-50 – Split between those who see regulation as enabling vs. restrictive
• 87.5% – Companies using AI primarily for fraud detection
• 26% – Nigerian adults still financially excluded (47% in Northern Nigeria)
• 62.5% – Companies planning regional expansion
• 100% – Willing to collaborate with regulators

The post Nigeria’s fintech paradox: 11bn transactions, system failures, lingering trust issues – CBN report first appeared on Technext.