The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has expressed concerns over the rising volume of non-bank transactions, which he warns could threaten financial stability in West Africa.
Cardoso’s remarks came during the 10th meeting of the College of Supervisors for Non-Bank Financial Institutions of the West African Monetary Zone, held on Monday. Represented by the apex bank’s Acting Director of the Other Financial Institutions Department, Abayomi Arogundade, Cardoso emphasized the significant risks posed by the increasing volume of transactions conducted through non-bank financial institutions (NBFIs) and other financial institutions (OFIs).
“We reiterate the importance of monitoring trends, risks, and innovations of NBFIs/OFIs as their increasing transaction volumes pose a major financial system stability risk,” Cardoso stated.
The rapid growth of fintech companies and mobile money services in West Africa has transformed the financial landscape, offering millions of unbanked individuals access to financial services. However, the shift towards digital transactions has raised alarms among financial experts and regulatory bodies about the potential systemic risks.
“The surge in non-bank transactions is a double-edged sword,” said Dr. Amadou Toure, a financial analyst based in Dakar, Senegal. “While it has greatly improved financial inclusion, it also presents significant regulatory challenges. Without proper oversight, there’s a risk that these transactions could destabilize the financial system.”
Central banks and financial regulators across the region are increasingly vigilant about the potential threats posed by the unregulated activities of non-bank financial entities. The lack of stringent regulatory oversight for many fintech firms and mobile money operators increases the risk of fraud, money laundering, and other financial crimes.
“The lack of regulation in the non-bank financial sector is a ticking time bomb,” warned Mariam Doumbia, a senior official at the Central Bank of West African States (BCEAO). “We need to implement robust regulatory measures to safeguard the integrity of our financial systems.”
In response to these concerns, several West African countries are already enhancing their regulatory frameworks. Nigeria has introduced new guidelines for fintech companies and mobile money operators to enhance transparency and accountability. Similarly, Ghana and Senegal are exploring ways to integrate non-bank financial transactions into their existing regulatory frameworks.
Despite these efforts, challenges remain. The rapid pace of technological innovation often outstrips the ability of regulators to keep up, leading to gaps in oversight. Additionally, the cross-border nature of many non-bank transactions complicates regulatory efforts, as different countries may have varying standards and enforcement mechanisms.
“The interconnectedness of our financial systems means that a problem in one country can quickly spread to others,” noted Dr. Toure. “Regional cooperation and harmonization of regulatory standards are crucial to addressing these challenges.”
As non-bank transactions continue to grow, the need for comprehensive and coordinated regulatory responses becomes increasingly urgent. Ensuring financial stability in West Africa will require a delicate balance between fostering innovation and maintaining robust oversight to mitigate potential risks.
