CBN Report Flags Rising Banking Risks Despite Tougher Oversight

The Central Bank of Nigeria (CBN) spent much of 2025 battling rising fraud, growing consumer complaints, weak financial institutions and regulatory breaches, even as it intensified supervision across the financial system.

Pinnacle Daily analysis of the CBN 2025 Annual Report shows that while Nigeria’s banking sector remained stable overall, several areas of the financial system came under increasing pressure.

These ranged from persistent inflation and foreign exchange (FX) market volatility to cybercrime, weak governance in some financial institutions and growing concentration risks that could threaten financial stability if left unchecked.

The report also shows that the CBN responded with tighter supervision, new regulations, financial penalties and recapitalisation measures aimed at strengthening confidence in the financial system.

Economic pressures created a difficult operating environment

According to the report, the CBN’s operations during the year were shaped by difficult economic conditions, including persistent inflation that continued to weaken purchasing power, while volatility in the foreign exchange market complicated monetary management.

The Bank also had to contend with increased fiscal deficits, excess liquidity in the banking system, and geopolitical tensions that raised concerns about possible global economic shocks. These factors increased risks across the financial sector and required closer regulatory monitoring.

Banks and payment firms faced tougher regulatory action

The report shows that routine examinations uncovered several cases where regulated institutions failed to comply with existing rules.

A foreign exchange examination covering 34 authorised dealers, comprising 29 commercial banks and five merchant banks, found infractions related to the use of foreign exchange for eligible transactions and compliance with existing regulations.

While the report did not disclose the penalties imposed on individual institutions, it stated that appropriate sanctions were recommended.

Beyond the FX market, the CBN imposed 11 penalties amounting to ₦1.26 billion for regulatory breaches, including failure to respond to supervisory queries.

Another 21 penalties worth ₦430 million were issued against institutions that delayed resolving customer complaints or failed to comply with regulatory directives.

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The apex bank also carried out on-site assessments of 84 payment institutions, stating that most complied with transaction limits, while a few violated the rules and were sanctioned.

These actions suggest that the CBN relied heavily on enforcement to improve regulatory compliance during the year.

Fraud remained a costly threat

Although losses from digital payment fraud declined compared with the previous year, fraud remained a major concern.

The report shows that digital payment fraud still resulted in losses of ₦25.85 billion in 2025, which the CBN attributed mostly to payment service providers with weak fraud monitoring systems.

It also identified a sharp increase in Authorised Push Payment (APP) fraud, where criminals manipulate customers into willingly transferring money to fraudulent accounts.

To address the growing problem, the CBN introduced draft guidelines designed to replace the existing institution-by-institution approach with a unified industry framework.

The proposed guidelines provide for early warning systems to detect fraud quickly, standard customer complaint procedures, clear responsibility between sending and receiving financial institutions, minimum due diligence requirements and mandatory fraud reporting protocols.

The report further warned that unlicensed financial operators continued to provide channels for money laundering, weakening public confidence and reducing the effectiveness of regulatory oversight.

Banking and fintech institutions also became major targets of organised cyberattacks involving ransomware and theft of customer credentials.

Consumer complaints reached record levels

One of the strongest signals in the report is the sharp increase in consumer complaints handled by the regulator.

Claims submitted in local currency more than doubled from ₦17.13 billion in 2024 to ₦40.61 billion in 2025.

Even more striking was the surge in foreign currency claims, which jumped from just $1.06 million in 2024 to $344.2 million in 2025.

Rather than attributing the increase to worsening service alone, the CBN said the sharp rise reflected greater public awareness and stronger confidence in its complaint resolution process. More customers were willing to report disputes because they believed the regulator would intervene.

The report also shows growing concerns over identity-related fraud. Fraudulent BVNs on the watchlist increased to 13,117, while the number of deceased BVN holders on the watchlist rose to 28,754.

Weak specialised financial institutions remained under pressure

Outside the commercial banking sector, the report identifies serious weaknesses in several specialised financial institutions.

The CBN conducted targeted examinations of seven finance companies found to be unsound and insolvent. Many institutions within the subsector were also found to have weak asset quality, poor corporate governance and inadequate capital.

In response, the Bank sanctioned affected institutions, directed them to implement corrective measures within specified timelines and continued its recapitalisation programme to strengthen the industry’s capital base.

The CBN also required finance companies to include the suffix “Finance Company Limited” or “Plc” in their registered names to improve market clarity and prevent public misunderstanding.

Microfinance banks also faced significant challenges, as their average Portfolio at Risk reached 17.99 per cent, far above the regulatory ceiling of 5.0 per cent, indicating elevated credit risk within the subsector.

The report further disclosed that two primary mortgage banks lost their operating licences after recording negative shareholders’ funds and other unsound financial conditions.

Development Finance Institutions also experienced weaker capital positions as their adjusted capital declined from ₦686.78 billion to ₦478.13 billion, causing their Capital Adequacy Ratio to fall below the regulatory minimum of 10 per cent.

Concentration risks remain a major concern

Beyond individual institutions, the report highlights structural risks arising from the dominance of a small number of financial institutions.

Ten banks account for 96.46 per cent of total interbank placements, while eight banks are responsible for 94.10 per cent of total interbank takings.

The report also shows that just five domestic systemically important banks control 57.19 per cent of the industry’s total assets, valued at ₦94.87 trillion.

Such concentration means that serious problems affecting any of these institutions could spread quickly across the financial system.

A similar pattern exists in the payments industry, where a small number of systemically important payment service providers dominate transactions. According to the report, operational failures in one major provider could rapidly affect others because of their interconnected operations.

Digital access expanded for Nigerians abroad

While addressing risks within the financial system, the CBN also expanded financial access for Nigerians living overseas.

In May 2025, the Bank launched the Non-Resident Bank Verification Number (NRBVN) platform, allowing Nigerians in the diaspora and other eligible non-residents to obtain a BVN remotely without travelling to Nigeria.

The platform is intended to strengthen connections between the diaspora and the domestic economy while helping to curb illicit financial flows and improve financial system integrity.

To support the initiative, the CBN also introduced the Non-Resident Nigeria Ordinary Account and the Non-Resident Nigerian Investment Account, enabling eligible users to remit foreign earnings and operate both local and foreign currency accounts.