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The Central Bank of Nigeria’s (CBN) fintech report outlines the country’s readiness to align financial innovation with market-friendly regulations, aiming to create long-term opportunities for digital lenders.
The report highlights the rapid growth of the fintech sector in Nigeria, driven by digital payments, mobile money, lending platforms and innovation in financial services. It underscores the sector’s role in advancing financial inclusion, improving access to financial services and supporting economic growth.
A key policy recommendation of the report is the creation of a digital banking licence to improve access to credit and savings services, positioned as a streamlined route for credit provision.
Although the CBN has yet to provide the granular details of this licensing framework, lending to the real economy in Nigeria remains a problem, one that cannot be solved solely by the introduction of a new licence.
Despite a decade of payments-led financial innovation, lending to Africa’s real economy remains structurally constrained. Across the continent, policymakers, banks and fintechs continue to frame SME and productive-sector credit as the next frontier of growth.
However, the gap between innovation and regulation continues. Credit penetration in the region remains low, lending is short-term and expensive, and capital continues to flow disproportionately to governments, non-tradable sectors and extractive enclaves rather than to industry, agriculture or export-oriented firms.
The African lending paradox
Across Sub-Saharan Africa, fintech lending has grown rapidly in form but not in depth. Digital credit models now span payday lending, mobile network operator-led credit, buy now, pay later (BNPL) and embedded working capital for micro and small enterprises.
Adoption has been strongest in markets with widespread mobile money usage such as Kenya and Nigeria. However, research by the OECD shows that overall credit penetration remains strikingly low by global standards, averaging between 6% and 9% of GDP in major African economies, compared with a global average closer to 19%.
This reflects a fundamental paradox. Africa’s economies are dominated by micro, small and medium-sized enterprises that generate the majority of employment, yet these firms remain chronically under-financed.
The OECD’s research notes that fintech lenders have partially filled gaps left by banks, particularly for thin-file borrowers and informal businesses, but have largely concentrated on short-term, high-velocity credit rather than long-term productive investment.The reasons are macroeconomic and institutional.
The CBN’s macroeconomic outlook for 2026 saw a reduction in the Cash Reserve Ratio (CRR) for commercial banks from 50% to 45%. On the face of it, a 5% reduction may seem like a significant change but in the context of commercial bank lending the challenges remain systemic.
Compared to regional neighbours such as Kenya and South Africa where the CRR fluctuates between approximately 2% and 5%, a CRR of 45% places a heavy burden on banks.
The CRR requires banks to keep a large share of deposits with the central bank, where the funds earn nothing and cannot be used. Despite this, banks must still pay interest on all deposits, cover costs and make profits using only the limited funds left to them.
As a result of the high CRR, banks are forced to charge high interest rates to stay afloat, meaning a significant portion of the population is excluded from the lending process.
This is a problem that needs to be fixed at the monetary policy level. A new banking licence may make it easier for digital lenders to offer credit, but if they are subject to the same rates as commercial banks, then the problem of financial inclusion remains unsolved.
What fintech lending can, and cannot, fix
Fintech lenders have demonstrated how using automation, alternative data and digital distribution can reduce underwriting and servicing costs. Embedded models, particularly those linked to payments or supply chains, improve repayment enforcement by anchoring credit to observable cash flows.
These features explain why fintech credit has scaled faster than bank lending in underserved segments. For example, telecom-led lending in Kenya and embedded trade credit models in Nigeria have reached millions of borrowers previously excluded from formal finance.
However, fintechs do not escape macroeconomics. As platforms grow, they face funding constraints, higher regulatory scrutiny and the same currency and liquidity risks as banks. Default rates in digital lending remain materially higher than in traditional banking channels, reflecting borrower fragility rather than model failure.
Nigeria’s recent licensing and enforcement actions against digital lenders reflect this tension. Although necessary to curb predatory practices, tighter rules also raise compliance costs and reinforce the shift toward better-capitalised incumbents.
The broader challenge is that regulation alone cannot overcome distorted macro incentives. Even perfectly designed consumer protection regimes would not make long-term SME lending viable if inflation is high, currencies are weak and state capacity is low.
Building lending capacity within existing constraints
However, there is light at the end of the tunnel. Rather than relying on broad monetary easing, Nigeria’s emerging digital banking framework offers lenders a pragmatic path to scale credit within existing constraints.
The CBN’s report marks a clear shift from episodic supervision towards system-level enablement, with initiatives such as a Single Regulatory Window, a centralised channel that would streamline engagement across multiple regulatory domains, particularly relevant given the cross-sector nature of many fintech innovations.
The report also includes provisions for standing engagement forums, accelerated open banking and deeper integration with the national identity infrastructure.
Collectively, these reforms are designed to reduce licensing uncertainty, lower onboarding and compliance costs, and improve the economics of regulated digital lending.
Within this framework, the national microfinance bank licence is increasingly positioned as a strategically efficient intermediate step. It allows digital lenders to mobilise deposits, offer savings products and build stable funding pools without immediately assuming the full prudential burden of a commercial banking licence.
When combined with payments-led distribution, embedded finance models and transaction-level data, this structure enables tighter risk pricing, shorter lending tenors, and commercially viable credit extension even in a high-rate environment.
Rather than eliminating macro constraints, the framework aims to reward institutions that design their balance sheets, compliance functions and distribution strategies to operate within them.
A key example is Moniepoint, which started out as a payments platform and is now a CBN-supported microfinance bank offering banking and lending services to more than 80% of the Nigerian population.
In this context, the proposed digital banking licence should be viewed as the next step in a graduated regulatory ladder that allows credible digital lenders to deepen balance sheets as macro conditions evolve.
The long-term view
For firms considering lending in Africa, the strategic question is how to innovate within the peripheries of regulation.
The markets that matter are those where payment scale already exists, regulators are moving towards structured engagement and tiered licensing allows gradual access to deposits rather than an all-or-nothing banking leap.
The priority should be to invest behind transaction infrastructure, data rights and regulatory alignment first, and only then expand credit through embedded working capital and short-tenor products that match local cash cycles.
Over time, this creates the option value to deepen into savings and longer-dated lending as policy and funding conditions evolve. Keeping these factors in mind, these dynamics support a bullish long-term view on African lending.
