Nigeria’s Central Bank fines 29 banks $9 million

It seems compliance professionals will remain in high demand in Nigeria’s financial services industry.

At the annual bankers’ dinner on Friday, Nigeria’s Central Bank governor Olayemi Cardoso disclosed that 29 Nigerian banks were fined a combined ₦15 billion ($9 million) for violating anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.

While this sends shock ripples across the entire financial ecosystem, it makes sense for the apex bank which has prioritised strong compliance under Cardoso.

This move will likely push more fintechs—and even crypto fintech companies now close to being regulated—to ramp up compliance hiring. One of the reasons is the illicit money flows in Nigeria that led to tighter Know Your Customer (KYC) processes for fintechs, closer monitoring of remittance startups on enhanced due diligence (EDD) checks, and Binance’s regulatory troubles.

Compliance professionals are having their moment. Four top Nigerian fintechs—OPay, Palmpay, Kuda, and Moniepoint—have hired a total of 24 compliance officers in 2024.

Crypto companies are currently part of a framework that the country’s Securities and Exchange Commission (SEC) is using to regulate crypto. Customer due diligence is key to this process; the regulator is working with crypto startups to track how they collect and store user data and monitor crypto transactions. 

Some crypto startups, like Yellow Card, have made key compliance hires this past year.

Compliance professionals are not the flashy hires like software engineers and product leaders that conventionally show signs of growth in fintechs. But they’re growing in relevance to the financial services sector in its fight against fraud.

The penalty fines on the 29 banks will keep everyone on their toes as they try to tighten security. One message is clear: non-compliance is expensive.

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Long before Nigeria had a cash crunch—due to the ill-timed currency redesign—POS operators were often the last resort for getting cash. These days POS terminals seem to be the only option as there is a cash shortage at ATMs and banking halls.

What was once a solution for many Nigerians is growing to become a nightmare as many Nigerians now rely solely on POS operators—and sometimes cope with their exorbitant charges—to get cash.

On Friday, the CBN said it would begin penalising banks that fail to provide cash to customers at their automated teller machines (ATMs). The announcement will come as a relief for many Nigerians who struggle to access cash.

The CBN has also set up a new monitoring system to ensure banks comply with the directive. Any bank that fails to measure up to the CBN’s new standards will be penalised—although the CBN did not disclose the kind of penalty. 

While the CBN is moving to address cash shortages in banks, its cashless policy also played a part in the cash shortages. The CBN in its bid to encourage cashless policy reduced money supply to banks, limiting weekly over-the-counter withdrawals at ₦500,000 ($298,000). The bank now plans to inject an additional ₦1.4 trillion ($833.5 million) into the economy to alleviate cash shortages at ATMs and bank branches.

Since Nigeria’s Central Bank unified the foreign exchange rates last year, it has sought ways to ensure that the FX market is efficient, well-regulated, and transparent. 

That involved revoking the licences of illegal bureau de change (BDC) operators and cracking down on street traders. In its latest efforts, the CBN will now allow licensed BDC operators to purchase foreign exchange directly from authorised dealers—commercial and merchant banks. In February, the CBN resumed selling FX to BDCs after former CBN Godwin Emefiele had banned the sale for three years. 

“Authorised Dealers—commercial and merchant banks—are required to facilitate foreign exchange transactions to all firms and persons in the FX market, complete due diligence; ensure compliance with extant laws, guidelines and circulars; provide convenient market access channels (including digital solutions); and ensure transparent pricing to their customers,” the CBN said in its Friday November 30 circular. 

The CBN will also place a limit on how much FX banks can sell to BDCs each month. 

Both BDC operators and authorised dealers are now required to send daily reports of all their transactions to the CBN, allowing the CBN to have real-time information about how FX is being used in the market.

The CBN will also publish daily transactional rates, ensuring that market participants, including BDCs, have access to reliable data. The new arrangement would allow Nigerians access FX at fair prices due to the CBN’s focus real-time reporting of all transactions. 

Written by: Faith Omoniyi & Emmanuel Nwosu

Edited by: Timi Odueso & Ganiu Oloruntade