The rise of digital banking in Nigeria has brought unprecedented convenience and efficiency, yet it has also opened doors to sophisticated electronic fraud (e-fraud). As highlighted by Dr. Tope Fasoranti, an Economist, Banker, and Consultant on Digital Transformation, while digital banking offers immense benefits for financial inclusion and economic growth, the associated risks cannot be ignored.

Many Nigerians, like Temilayo, a petty trader, and Amaka, a secondary school teacher, are wary of using electronic banking channels due to the fear of fraud. Their concerns are validated by alarming reports of significant financial losses, such as the N44 billion fraud and hacking incidents affecting major banks, as well as a N21.2 billion loss suffered by a fintech company due to a ‘technical glitch.’

In 2024, the value of electronic transactions in Nigeria surged to N1.08 quadrillion, an 80% increase from N600 trillion in 2023, according to the Nigeria Inter-Bank Settlement System (NIBSS). This surge, coupled with the increasing use of POS terminals (reaching N18 trillion in transactions), has made the Nigerian financial landscape a prime target for fraudsters.

Nigeria boasts a wide array of digital banking solutions, including mobile, internet, USSD, and chat banking, along with diverse payment gateways. These channels offer users flexibility but also create multiple entry points for fraud. Total fraud losses reported by Nigerian banks in 2024 reached N52.26 billion from over 70,000 transactions, a staggering 4.5-fold increase from the N11.61 billion lost in the same period in 2023.

E-fraud in Nigeria primarily targets both financial institutions and individuals. Institutional fraud often involves insider collusion, while fraud against individuals typically results from user negligence or lack of awareness. Fraudsters commonly use social engineering tactics, such as scam calls, deceptive messages, malware, and fake websites, to manipulate individuals into revealing their security credentials.

While transaction authorisation in Nigeria relies on various authentication methods, including PINs, passwords, OTPs, and biometrics, successful fraud attempts almost always occur when users unknowingly provide fraudsters access to their accounts. Nigeria's ranking as 11th globally for malware attacks in January 2025, according to Check Point Software Technologies, underscores the severity of the threat.

Combating e-fraud requires a multi-faceted approach involving individual responsibility, enhanced security measures by financial institutions, and robust regulatory oversight. Individuals must adopt safe banking habits, such as choosing reputable financial institutions, using secure banking channels, enabling two-factor authentication, and never disclosing security information.

Financial institutions must strengthen user authentication with biometric technology, integrate advanced fraud detection tools, and enhance internal controls to mitigate insider fraud. Collaboration among financial institutions is crucial for rapid response to reported fraud cases and fund recovery. Regulators need to balance stringent security measures with fostering industry growth, working closely with financial institutions and technology providers to stay ahead of emerging fraud trends.

Despite the challenges, digital banking remains vital for financial inclusion and economic growth in Nigeria. By adopting safer banking practices, enhancing institutional security frameworks, and fostering collaboration among stakeholders, Nigeria can minimise the risks associated with e-fraud while continuing to enjoy the benefits of a secure and efficient digital financial system.