Compliance becomes new currency for Nigerian banks as digital finance expands

Compliance is emerging as a key asset for banks in Nigeria as the country’s financial sector becomes more digital and more tightly regulated.

As millions of Nigerians move to mobile banking and online lending platforms, banks say following regulatory rules is no longer just an internal function but a core strategy for building customer trust.

James Edeh, head of compliance at FairMoney Microfinance Bank, said strong compliance systems are now essential for financial institutions operating in Nigeria’s rapidly expanding digital economy.

“In today’s environment, compliance is not just about meeting regulations. It is the foundation of trust between financial institutions, customers and regulators,” Edeh told BusinessDay.

Nigeria’s shift toward digital banking has been rapid. Data from the Nigeria Inter-Bank Settlement System (NIBSS) shows that the country processed about 11.2 billion electronic transactions in 2024, reflecting the scale of mobile payments, online transfers and digital lending activity.

But the growth of digital finance has also increased risks such as fraud, data misuse and unfair lending practices. Regulators have responded with stronger oversight aimed at protecting consumers and stabilising the financial system.

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The Central Bank of Nigeria (CBN) and the Federal Competition and Consumer Protection Commission (FCCPC) have introduced several rules to tighten supervision of digital lenders and fintech companies. One of the most significant is the Digital, Electronic, Online, or Non-traditional Consumer Lending Regulations 2025, which requires lenders to follow stricter transparency and data protection standards.

Nigeria has also strengthened its anti-money laundering framework in recent years. The country exited the Financial Action Task Force (FATF) grey list in October 2025 after improving controls against money laundering and terrorism financing.

Identity verification systems have also been expanded. The mandatory integration of the Bank Verification Number (BVN) and National Identification Number (NIN) has become a key tool in reducing fraud and strengthening digital banking security.

According to NIBSS data, reported identity fraud losses fell sharply from 52.26 billion naira in 2024 to 25.85 billion naira in 2025, highlighting the impact of tighter verification and monitoring systems.

Regulatory reforms have also extended to capital requirements. The CBN’s banking recapitalisation programme for 2024 to 2026 requires higher minimum capital levels, including up to 500 billion naira for banks with international licences, to strengthen the resilience of the sector.

The Securities and Exchange Commission (SEC) has also raised minimum capital requirements for fintech operators and digital asset platforms, with compliance deadlines running through 2027.

For many financial institutions, these measures are turning compliance into a competitive advantage rather than a regulatory burden.

In digital banking, where customers rarely visit physical branches, regulatory approval acts as a signal of safety. Banks that follow lending rules, protect customer data and disclose fees clearly are increasingly gaining user confidence.

Edeh said FairMoney has built its growth strategy around compliance and responsible lending practices. The company follows FCCPC digital lending guidelines and provides clear disclosure of interest rates and charges to borrowers.

“Customers want transparency and fairness. When institutions consistently follow the rules, it creates long-term trust,” he said.

The benefits of this approach are already visible in the sector. In late 2025, global ratings agency GCR upgraded FairMoney’s national long-term issuer rating to BBB+(NG) from BBB(NG), reflecting improved financial strength and governance.

Internal records from the bank show that it disbursed more than 250 billion naira in loans in 2025, while paying over 7 billion naira in interest to depositors.

Customer confidence is also helping digital banks reduce their funding costs. FairMoney now funds more than 56 per cent of its loan book through customer deposits, as users increasingly trust licensed digital platforms to store their savings.

The wider Nigerian banking sector is also benefiting from growing public confidence. Industry data shows total deposits in Nigerian banks rose by 63 per cent to about 136 trillion naira by late 2024, driven partly by increased adoption of digital financial services.

Analysts say the trend shows how strong regulation and compliance can encourage people to move their money into formal financial systems.

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As Nigeria pushes deeper into digital finance, banks are likely to face even tighter regulatory oversight.

But industry executives say institutions that invest early in compliance systems, ethical governance and transparency will be better positioned to compete.

“In the future, the strongest banks will not necessarily be the ones with the biggest marketing budgets. They will be the ones customers trust the most,” Edeh said.

As Nigeria looks toward expanding its digital economy by 2030, analysts say maintaining that trust will depend largely on how well financial institutions follow the rules designed to protect consumers and the financial system.