Central Bank of Nigeria
Nigeria’s Central Bank is cracking down on fraud with a new directive that’s set to change the game. As of January 2025, the Central Bank has instructed the Nigeria Inter-Bank Settlement System (NIBSS) to debit the settlement accounts of commercial banks that receive fraudulent proceeds. This move aims to curb fraud in the financial services sector and hold banks and fintechs accountable for lapses in their transaction monitoring systems.
The directive is a response to the alarming rate of fraud in Nigeria’s financial sector. In Q2 2024, Nigerian banks lost a staggering ₦42.6 billion to fraud. To make matters worse, most financial institutions have been hesitant to report fraud incidents due to fear of reputational harm.
Under the new rule, banks that fail to properly vet incoming transactions or detect fraudulent activity will face instant debits once the activity is reported. This is expected to encourage financial institutions to improve their Know Your Customer (KYC) and due diligence practices, critical areas for safeguarding Nigeria’s financial ecosystem.
The new directive has been unofficially in effect since December 2024, when a major bank lost ₦7 billion to fraud. NIBSS reportedly debited the settlement accounts of the fintech that received some of the proceeds without explanation.
This move is part of a broader effort to promote financial system stability and strengthen the Know Your Customer procedures in all financial institutions. With the new directive, commercial banks are likely to implement more rigorous controls on transactions, which will help to prevent fraudulent activities and protect customers’ funds.