CBN report shows innovation slowed by licensing delays, high compliance costs, but strong appetite for structured regulatory engagement
Nigeria’s fintech ecosystem remains sharply divided over the country’s regulatory environment, with operators evenly split between those who see it as supportive of innovation and those who view it as restrictive, according to a new survey released by the Central Bank of Nigeria.
The findings are contained in the CBN Fintech Report 2025, published on Monday, based on a nationwide ecosystem survey, a closed-door stakeholder workshop held in June 2025, and discussions from the October 2025 CBN Fintech Roundtable.
According to the apex bank, the 50–50 split reflects persistent friction points in regulation, particularly around licensing timelines, clarity of guidance, and uneven enforcement across regulatory agencies, despite growing engagement between fintech firms and supervisors.
The report stated that exactly half of respondents described the regulatory environment as enabling, while the remaining half characterised it as restrictive, attributing the divergence to delays in approvals, ambiguous regulatory expectations, and inconsistent application of rules.
Beyond perceptions, the report found that regulatory processes are materially slowing innovation. About 62.5 per cent of surveyed fintechs said approval timelines significantly delay product launches, while more than one-third reported that it takes over 12 months to bring a new product to market, largely due to compliance-related bottlenecks.
Compliance costs were identified as an even greater constraint. Roughly 87.5 per cent of respondents said spending on regulatory and risk-management requirements limits their ability to innovate, with costs linked to anti-money laundering controls, cybersecurity, and fraud prevention weighing heavily on firms.
While respondents acknowledged the importance of these safeguards, many pointed to fragmented supervision and duplicative reporting requirements as drivers of rising costs, particularly for smaller and fast-growing fintech companies.
Despite these challenges, the report found little appetite for deregulation. Instead, fintech operators expressed strong support for deeper, more predictable engagement with regulators.
About 75 per cent of respondents called for regular and structured engagement forums, while all surveyed firms indicated a willingness to collaborate through regulatory sandboxes, policy pilots, or joint working groups. The CBN noted that this points to a shift toward higher-trust, institutionalised models of regulatory engagement.
Regional expansion remains a central growth ambition for Nigerian fintechs, with approximately 62.5 per cent already operating in or planning to expand into other African markets.
However, respondents warned that fragmented licensing regimes across the continent increase costs and slow cross-border growth. An equal proportion of firms supported the introduction of regulatory passporting arrangements, under which licences issued in Nigeria could be recognised in peer markets through agreed frameworks.
Countries identified as potential pilot jurisdictions include Ghana, Kenya, South Africa, Uganda, and Senegal.
While fintech operators broadly commended Nigeria’s real-time payments infrastructure as one of the most advanced in Africa, they also highlighted structural gaps that limit scale and inclusion. These include limited access to affordable digital identity verification, incomplete data-sharing systems, and uneven broadband penetration.
The report cited the December “Detty December” period as a key stress test for the payments system, noting spikes in transaction failures and service disruptions during periods of peak demand.
On cryptocurrency, respondents acknowledged its potential to reduce the cost of cross-border payments and expand financial inclusion but cautioned against blanket restrictions. Instead, they called for risk-based regulation, clearer rules on permitted activities, and stronger international cooperation.
Access to capital also remains a concern, with 37.5 per cent of respondents citing macroeconomic volatility, currency risk, and delays in foreign investment approvals as major constraints. In response, 87.5 per cent supported the creation of fintech-specific growth funds or credit-guarantee schemes, preferably through public-private partnerships.
The report further showed that risk management considerations are shaping technology adoption across the sector. About 87.5 per cent of Nigerian fintechs now use artificial intelligence for fraud detection, making it the most common AI application in the industry.
AI-powered chatbots are deployed by 62.5 per cent of firms for customer service, while 37.5 per cent apply AI to credit scoring, risk modelling, customer onboarding, and know-your-customer processes.
According to the CBN, this pattern reflects both the scale of fraud risks within Nigeria’s rapidly expanding digital finance ecosystem and the growing reliance on data-driven tools as fintech services deepen across payments, lending, and remittances.
The apex bank warned that although Nigeria processed close to 11 billion real-time payment transactions in 2024, rapid digitisation has widened the system’s risk surface.
Fraud, weak controls at some fast-scaling firms, and cross-border financial crime remain concerns, even as Nigeria has strengthened anti-money laundering supervision and exited the Financial Action Task Force grey list.
Despite these risks, fintech operators showed strong interest in responsible AI deployment. About 62.5 per cent said they are willing to participate in an AI-focused regulatory sandbox, while 75 per cent prioritised ethical and transparent use of AI in credit and risk decisions.
The CBN said the findings reflect both notable progress and unresolved tensions within Nigeria’s fintech ecosystem.
In the foreword to the report, CBN Governor Olayemi Cardoso said the bank has witnessed first-hand the transformative impact of digital finance in broadening economic participation, creating jobs, and improving the lives of millions of Nigerians.
He stressed that fintech innovation must grow under prudent oversight, noting that while innovation is essential, safeguarding financial system integrity, strong governance, consumer protection, and effective risk management remain non-negotiable.
Cardoso said Nigeria’s objective is to strike the right balance between fostering innovation and preserving stability and public confidence, positioning the country as a leading fintech hub in Africa and beyond.
In a statement issued on Monday following the report’s release, the CBN said the findings underscore Nigeria’s leadership in real-time payments and frame fintech innovation as a complementary force within the financial system, expanding access, efficiency, and reach while maintaining resilience.
The apex bank added that the report offers practical policy directions to improve regulatory coordination, strengthen supervisory capacity, and support responsible innovation, serving as a reference point for stakeholders as Nigeria consolidates its position in the regional and global fintech landscape.
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