When policymakers face a new challenge, the instinct sometimes is to create a new institution. Nigeria may be about to do exactly that with our financial sector regulation.
The Fintech Regulatory Commission Bill 2025 is designed to regulate a rapidly evolving industry. But before we set up yet another regulator, shouldn’t we consider a bigger question: is the problem the absence of regulators, or are we trying to regulate a system that no longer mirrors the reality of how financial services operate?
The structure of the financial sector in Nigeria has undergone a complete transformation in the last twenty years. For instance, banks presently do so much more than banking. Fintech firms also lend money, process payments and operate investment services, providing tools that until some years ago were separate slices of the financial services industry. Financial holding companies can be owners of banks, pension fund administrators and custodians, insurance companies, and payment firms.
Interestingly, even with the emerging dynamics in our regulatory sector, the regulatory structure still behaves as though these activities exist in separate worlds, in line with the institutional approach to regulation which we currently use in Nigeria. The framework was designed for a time when financial institutions fell neatly into categories. Banks had one regulator. Insurance companies had another. The lines were relatively clear.
Today, those lines are increasingly blurred.
A customer can receive a loan through a mobile app, fund it through a bank account, repay it through a payment platform and invest savings through a digital investment service, all within the same financial ecosystem. Yet different parts of that activity may be overseen by different regulators.
This is exactly what the proposed Fintech Regulatory Commission Bill for the finance industry points out. It is an acknowledgement of the agencies that are currently present and regulating the industry: Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC), Federal Competition and Consumer Protection Commission (FCCPC), Nigeria Data Protection Commission (NDPC), Nigerian Communications Commission (NCC), National Information Technology Development Agency (NITDA), Nigeria Deposit Insurance Commission (NDIC), etc.
One might expect such a long list to trigger a discussion about whether supervision has become too fragmented. Instead, the Bill proposes another regulator. It also advocates for the creation of a National Fintech Management Council to coordinate the new regulator with the existing ones.
That should make us stop and have a rethink.
If managing a single industry properly requires a council to control regulators, then maybe the problem isn’t just coordination. It is time to deeply re-examine the entire financial sector regulatory structure. The usual answer is that regulators simply need to coordinate better. However, coordination is a reaction to fragmentation. This cannot be used as a substitute for a more thorough discourse on whether the existing fragmentation we have is still useful, counterproductive or outdated.
Every new coordinating body is confronted with a relatively simple question: “Is it a coordination problem or a fragmentation problem? This is not to criticise the regulators. Specialisation has its advantages, and sometimes regulators who focus on one thing notice things that bigger, general organisations might miss.
However, the issue is not competence. It is designed.
The question is whether financial regulation should continue to be organised around boundaries that no longer reflect how financial services are delivered or where risks emerge. More regulators do not automatically mean better supervision. A fragmented system can create overlapping mandates, duplicated compliance requirements, conflicting instructions, higher costs and uncertainty about who is ultimately responsible when something goes wrong.
A system can have many regulators and still have blind spots. Some areas may attract intense supervision, while others receive very little because responsibility is spread across multiple agencies. In those circumstances, more regulation does not necessarily produce better oversight.
Experience elsewhere offers a useful warning. Before the 2008 global financial crisis, financial regulation in the United States was spread across multiple agencies. As financial institutions expanded beyond traditional categories, important risks fell between the cracks. By the time those weaknesses became obvious, fixing the system was far more difficult and far more expensive.
The lesson for Nigeria is not that we should copy another country’s model. It is that reviewing a regulatory system before a crisis is usually much cheaper than rebuilding it after one.
Nigeria is already facing these challenges. The Investments and Securities Act 2025 recognises digital assets, an acknowledgement that modern finance no longer fits neatly into traditional regulatory boxes. Yet it also makes cooperation between regulators increasingly necessary because their responsibilities often overlap.
That should give us a pause!
If the financial system is becoming more interconnected, why is the default response still to create more institutions? The answer is not necessarily fewer regulators. It is a thorough review of the system we already have.
Before creating another regulator, it is immensely critical and important for CBN and other relevant stakeholders to comprehensively examine the current framework carefully. They should identify which financial services are regulated, who regulates them and where responsibilities overlap. They should identify areas where requirements conflict, where accountability is unclear and where gaps exist.
Most importantly, they should ask which functions genuinely require separate regulators, which could be combined and which institution should take the lead when activities cut across traditional lines. Such a review should not be driven principally by a desire to abolish agencies but should be pursued where inevitable. The goal should be to determine whether the current structure still reflects the realities of Nigeria’s financial system and whether it improves supervision or simply adds more layers to it. Based on the current and emerging developments in our financial sector, it is pertinent to adopt an objectives approach to regulation, not an institutional approach.
The cost of avoiding this exercise is huge and systemic.
Every unnecessary layer of regulation consumes scarce public resources. Every hour spent managing overlap is an hour not spent identifying new risks. Over time, complexity grows, compliance costs increase, accountability weakens, and decision-making slows.
Before building another institution, we should first ask a simpler question: does the system we already have still fit the financial system we are trying to regulate? That question is worth answering now, before a crisis answers it for us.
Professor Franklin Nnaemeka Ngwu & Chinasa: We are with the Department of Strategy & Entrepreneurship, Lagos Business School (LBS)
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