CBN Flags Fintech’s Heavy Reliance on Foreign Capital

The Central Bank of Nigeria (CBN) has cautioned that Nigeria’s fast-growing fintech sector remains heavily reliant on foreign capital, exposing it to risks from global market volatility and external economic shocks.

The warning is contained in the apex bank’s 2025 Fintech Policy Insight Report, which acknowledged the sector’s innovation-driven expansion but noted that limited access to domestic funding continues to undermine its long-term stability and resilience.

According to the report, Nigerian fintech startups raised an estimated $520 million in equity funding in 2024, underscoring continued investor interest despite a challenging global funding climate. However, the figure represents a significant decline from the approximately $747 million raised in 2019, a peak year when Nigeria accounted for nearly 37 per cent of total startup investment across Africa.

The CBN noted that the drop reflects tightening global financial conditions, reduced risk appetite among foreign investors, and heightened exposure of local startups to international capital cycles. It warned that excessive dependence on offshore funding leaves fintech firms vulnerable to sudden capital reversals, currency pressures and shifts in global monetary policy.

While acknowledging Nigeria’s position as one of Africa’s leading fintech hubs, the report stressed that sustainable growth would require deeper domestic capital markets and stronger local investor participation. The apex bank said the current funding structure limits the sector’s ability to scale consistently and absorb external shocks.

“Despite strong innovation and market adoption, the fintech ecosystem remains constrained by insufficient domestic financing options,” the report stated, adding that this imbalance poses systemic risks as the sector becomes more intertwined with the broader financial system.

The CBN highlighted the need for policies that encourage greater participation by local institutional investors, including pension funds, insurance firms and development finance institutions, in startup financing. It also called for improved regulatory clarity to boost investor confidence and unlock long-term capital.

In addition, the report urged fintech firms to diversify funding sources, strengthen corporate governance, and adopt sustainable business models that are less sensitive to foreign capital inflows. Enhanced collaboration between regulators, financial institutions and technology firms was identified as critical to building a more resilient ecosystem.

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Despite the challenges, the CBN maintained that Nigeria’s fintech sector remains a key driver of financial inclusion, digital payments and innovation, particularly among underserved populations. It said targeted reforms and strategic investment could help convert the sector’s rapid growth into durable economic value.

The apex bank concluded that reducing reliance on foreign capital and strengthening domestic funding frameworks would be central to safeguarding the fintech industry and ensuring its contribution to Nigeria’s long-term economic development.