The Nigerian fintech sector has experienced substantial growth over the past decade, now supporting over 500 startups, predominantly focused on payments. Despite this rapid expansion, the industry faces significant challenges including regulatory uncertainty, infrastructure deficiencies, and high compliance costs, according to a recent report by the Central Bank of Nigeria (CBN). This report, based on executive surveys, workshops, and roundtables held in 2025 and 2026, underscores the urgent need for addressing these issues to sustain and broaden fintech innovation.

Regulatory and compliance challenges are consistently highlighted as the most pressing concerns for stakeholders. A substantial 62.5% of surveyed fintech executives reported that delays in regulatory approvals and ambiguity in guidelines severely impede product development and innovation timelines, with 37.5% stating that bringing a new product to market can take over a year. Compliance-related expenditures, encompassing fraud controls, cybersecurity investments, and anti-money laundering/countering the financing of terrorism (AML/CFT) infrastructure, impose a heavy burden on innovation capacity, as indicated by 87.5% of stakeholders. Interestingly, there's a divided perception of the regulatory environment, with half viewing it as supportive and the other half as restrictive. To streamline engagement across various regulatory domains, 62.5% of stakeholders advocate for a centralized channel, believing it would reduce friction, accelerate market entry, and improve inter-agency coordination.

Infrastructure shortcomings also present significant hurdles to development. Fintech stakeholders point to a lack of universal access to digital identity verification, limited broadband penetration, incomplete data-sharing systems, and insufficient open-data frameworks. Although digital identity systems exist in Nigeria, their fragmentation diminishes effectiveness, leading 37.5% of respondents to prioritize a national digital ID authentication system. An equal share emphasized the critical need for robust open banking interfaces to facilitate seamless data exchange, addressing current issues like fragmented APIs and inconsistent data-sharing protocols that make integration across platforms challenging.

For Nigerian fintech companies, regional expansion is deemed vital for achieving scale and success, with 62.5% already operating or planning operations across other African markets. Consequently, a similar proportion of respondents support a regulatory passporting framework that would enable mutual recognition of licenses. This framework would alleviate administrative and regulatory complexities associated with cross-border operations by allowing a license granted in one jurisdiction to be recognized in others. Ghana, Kenya, South Africa, Uganda, and Senegal were suggested as ideal countries for piloting this model. Stakeholders also expressed interest in bilateral technical infrastructure collaborations, such as trialing interoperability between Nigeria's and Ghana's payment systems to enhance cross-border transactions and support real-time regional settlement.

The report also delves into the cryptocurrency sector, acknowledging its potential to foster cost-effective cross-border transactions, boost financial inclusion, and catalyze new digital asset markets. However, stakeholders equally recognized significant risks, including illicit financial flows, speculative bubbles, and consumer protection issues. There was broad consensus on the necessity of a risk-based, activity-focused regulatory framework, with calls for clear guidelines on permissible activities for licensed institutions, consumer advisories regarding volatility and fraud, and strengthened international cooperation on AML/CFT compliance and information sharing. Additionally, the establishment of sandbox tracks for exploring relevant use cases like remittances, capital markets, and central bank digital currencies (CBDCs) in Nigeria was advised.

Artificial intelligence (AI) adoption is notably on the rise within the Nigerian fintech landscape, primarily for risk management and operational efficiency. A high 87.5% of surveyed companies are either using or exploring AI for fraud detection, highlighting the pervasive nature of fraud as a “big issue” in the industry. Other key AI applications include chatbots and customer service (62.5%), credit scoring and risk modeling (37.5%), and customer onboarding/Know Your Customer (KYC) processes (37.5%). Despite enthusiasm, challenges persist, with 50% of companies citing access to high-quality data infrastructure as a critical need for scaling responsible AI innovation, and 25% emphasizing the importance of pilot partnerships with regulators or research institutions. These findings underscore that robust data foundations and collaborative efforts with regulators and academics are essential for developing ethical and compliant AI solutions.

In conclusion, while Nigeria's fintech sector demonstrates remarkable growth and innovation potential, particularly in payments, its sustained progress hinges on overcoming significant regulatory and infrastructural hurdles. Addressing these challenges through clear and consistent regulations, enhanced digital infrastructure, regional cooperation, and responsible AI adoption will be crucial for unlocking the industry's full potential and diversifying beyond its current focus.