The Fintech Act is a bad idea with good intention

If Nigeria has gotten something right and we are all proud of, beyond the jollof rice, it would be fintech.

Nigerian champions like Paystack, Flutterwave, Lemfi, and Moniepoint rule sub-Saharan Africa like imperial colossi.

Internally, though, we all agree that these impressive casts of fintechs won despite Nigeria rather than because of Nigeria.

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If their journeys to greatness are well known, why not codify this into a regulation?

Every couple of years, Nigeria tries to tidy up its financial system with a new idea that sounds orderly at first glance, and truthfully, there is something genuinely worth acknowledging in the motivation behind the newly proposed Fintech Act.

The legislators who have championed it are responding to a real and visible problem: Nigeria’s financial technology sector has grown faster than the regulatory thinking applied to it, and the resulting patchwork of guidance, enforcement, and oversight has created genuine uncertainty for investors, operators, and consumers alike. The intention to bring coherence to this scene deserves credit.

However, the method chosen to achieve it deserves serious scrutiny.

And yet, good intentions are not a sufficient foundation for sound policy. The proposed Fintech Act, which seeks to create an entirely new regulatory body to oversee fintech companies in Nigeria, reflects a fundamental misunderstanding of what the problem actually is and, consequently, proposes a solution that would make things considerably worse.

The bill, which passed through the House of Representatives and subsequently stalled in the Senate, where lawmakers signaled the need for substantial revision, should not simply be reworked. The core premise that another regulator is the answer deserves to be challenged outright.

The very framing of “financial technology” as a unified category requiring its own standalone regulator reveals a conceptual confusion at the heart of the proposal.

Finance and technology are not a single industry. They are two distinct domains whose intersection produces services that already fall within the mandates of Nigeria’s existing regulatory architecture. The Central Bank of Nigeria oversees banking and payments.

The National Pension Commission governs pension fund administration. The National Insurance Commission regulates insurance. The Securities and Exchange Commission covers capital markets. The Federal Competition and Consumer Protection Commission handles consumer protection and market competition. Each of these bodies already has jurisdiction over the fintech activities that touch their domain.

No country with a mature, well-functioning financial system has resolved the complexity of fintech by collapsing all financial regulation into a single omnibus authority. The United Kingdom distributes regulatory responsibility between the Financial Conduct Authority, the Prudential Regulation Authority, and the Payment Systems Regulator, among others.

The Competition and Market Authority continues to drive Open Banking. In the United States, fintechs operate within a layered framework involving the Federal Reserve, the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, and state-level regulators, depending on the nature of their activities. These are not accidents of history or bureaucratic inertia, but they reflect a deliberate understanding that different financial activities carry different risks and require different regulatory philosophies.

To suggest that Nigeria should do what no serious financial jurisdiction has done, i.e. create a single, all-encompassing fintech regulator, is to propose a solution with no precedent in the markets Nigeria aspires to emulate.

The argument that technology ties all of these activities together and therefore justifies a unified regulator misunderstands what regulation is for. Regulation is not organized around the medium of delivery but usually around the nature of risk.

Lending, insurance, capital raising, and payments each carry distinct risk profiles, require distinct supervisory competencies, and serve distinct segments of the public. Technology is simply the channel through which these activities are now delivered, and changing the channel does not change the underlying economic function or the regulatory logic that should govern it.

Beyond the conceptual problem lies a practical one that would have real and measurable consequences for Nigeria’s economy: the cost of regulatory friction. Every time a fintech company operating in Nigeria must navigate an additional regulatory relationship, seek an additional approval, comply with an additional set of reporting requirements, or resolve an ambiguity between overlapping regulatory mandates, it incurs a cost.

That cost is passed on to investors in the form of higher risk premiums, to employees in the form of slower growth, and ultimately to consumers in the form of higher prices and reduced access to services.

This is in no way a theoretical concern. The World Bank’s Doing Business indicators, before the index was retired, consistently documented how regulatory complexity translated into direct economic disadvantage for Nigeria. The country ranked 131st out of 190 economies in the 2020 Doing Business index, with burdensome start-up procedures and licensing requirements cited as significant contributors to that ranking.

During the Buhari administration, the Presidential Enabling Business Environment Council under Vice President Yemi Osinbajo made the reduction of this kind of friction a central policy priority precisely because the evidence was overwhelming: friction does not just slow businesses down, it drives them toward informal or offshore alternatives, reducing tax revenues, employment, and financial inclusion in the process.

The lesson from successful reforms elsewhere in Nigeria is instructive. When the Minister of Interior, Olubunmi Tunji-Ojo, undertook the reform of Nigeria’s passport issuance system, he made the process faster and more predictable, and in doing so, he was able to raise prices substantially while still generating public approval.

Nigerians did not complain about paying more for passports because they were no longer paying the invisible tax of time wasted, trips repeated, bribes solicited, and uncertainty absorbed. The sticker price went up; the real cost went down. Friction, in other words, is itself a form of taxation, one that falls disproportionately on those who can least afford it.

Nigeria’s fintech sector has grown precisely because the digital infrastructure that underpins it has reduced certain kinds of friction dramatically. The country now has one of the most vibrant fintech ecosystems on the African continent, with over 200 active fintech companies as of recent estimates and a digital payments market that processes transactions worth trillions of naira annually.

This growth has happened in an environment of regulatory imperfection, which is itself a testament to the sector’s dynamism. A new regulatory body sitting atop the existing framework would not eliminate the imperfections. It would add to them.

The argument for the Fintech Act rests on a legitimate diagnosis: Nigeria’s existing regulators have, in several documented instances, been slow to respond to fintech innovation, inconsistent in their guidance, and inadequately equipped to handle the cross-cutting questions around data privacy, cybersecurity, fraud, and consumer protection in digital environments.

The Nigeria Data Protection Act of 2023 has gone some way toward addressing the data dimension, but enforcement capacity remains thin. Regulatory sandboxes have been established, but have not always been translated into clear licensing pathways.

The error lies in concluding that, because the existing regulators have gaps, the solution is a new regulator. Creating a new institution does not fill gaps in existing ones. It creates new ones, along with new coordination problems, new jurisdictional ambiguities, and new opportunities for regulatory arbitrage.

The question that deserves to be asked is not how to add to the regulatory architecture, but how to make the existing architecture function at the speed and sophistication that the industry now demands.

The presidency already has the constitutional and institutional authority to do what needs to be done. Rather than creating a new regulator, the Federal Government should establish a high-level, cross-agency Fintech Regulatory Coordination Committee, convened under the authority of the Office of the President and tasked with producing binding minimum standards that all relevant regulators must meet in their dealings with the fintech sector.

Those standards should address several specific and measurable failures. Every regulator with jurisdiction over fintech activities should be required to operate a single, publicly accessible portal through which all licensing applications, compliance filings, and correspondence can be submitted and tracked.

Where regulators maintain separate portals, those portals should conform to common standards of interface design, document requirements, and processing transparency so that companies operating across multiple regulatory relationships do not face entirely different experiences with each.

Application timelines should be published, automated, and monitored. When a regulator fails to respond to an application within the stipulated period, the outcome should default in favor of the applicant, or at a minimum trigger an automatic public notification that creates accountability.

The Auditor General of the Federation, whose office is constitutionally empowered to audit government agencies, should be given both the mandate and the technical capacity to audit regulatory compliance with these standards.

This would require investment in the Auditor General’s office specifically in digital literacy, technology auditing competencies, and independent analytical capacity, but this is an investment of a categorically different order from capital expenditure, staffing costs, and institutional inertia that a new regulatory body would generate.

Beyond coordination, there is a case for targeted capacity building within each existing regulator.

The Central Bank, SEC, and NAICOM each need fintech desks staffed by people who genuinely understand distributed ledger technology, algorithmic credit scoring, embedded finance, and the other technical realities of modern financial services.

This is a training and recruitment challenge, and it is one that is far more tractable than the challenge of building an entirely new institution from the ground up.

Nigeria’s fintech sector is no longer a marginal sideshow. It has now become increasingly central to the country’s financial inclusion agenda, its foreign direct investment story, and its capacity to deliver financial services to the more than 38 million Nigerian adults who, according to the EFInA Access to Finance Survey, remained outside the formal financial system as recently as 2023. Every policy decision that affects the cost and ease of operating in this sector carries a direct human consequence.

The legislators who have championed the Fintech Act deserve credit for recognizing that the regulatory status quo is not adequate to the moment. Their diagnosis is not wrong; the prescription, however, risks compounding the problem they are trying to solve. Adding a new regulator to a system already characterized by overlapping mandates and uneven enforcement capacity does not produce clarity. It produces more of the same, with additional overhead.

As the Yoruba will say, you should not behead someone to cure their headache.

Nigeria has an opportunity to take a different approach; one that draws on the existing authority of the presidency, the existing mandate of established regulators, and the existing dynamism of a sector that has already demonstrated what it can achieve under conditions that are far from optimal.

That approach requires coordination, standardization, and accountability rather than institutional proliferation. It requires the political will to hold existing regulators to a higher standard rather than the administrative convenience of delegating that problem to a new body.

The Senate was right to pause on this bill. The pause should be used not to refine the mechanics of a new regulator, but to reconsider whether a new regulator is the right answer at all. Nigeria’s fintech sector does not need more regulation; it only needs smarter governance of the regulation it already has.

Adedeji Olowe is the Founder of Lendsqr, a global loan management and credit infrastructure company serving lenders across multiple markets. He also chairs Paystack and initiated Open Banking Nigeria, the industry movement that led to the country’s open banking regulatory framework. Olowe writes and speaks extensively on credit systems, financial infrastructure, and digital finance, with a focus on expanding responsible access to credit for households and small businesses in emerging markets.