The Central Bank of Nigeria (CBN) has taken a bold step in the fight against fraud in the financial services sector, issuing a new policy that makes banks and fintechs directly responsible for fraudulent transactions that slip through their systems. The regulator has directed the Nigeria Inter-Bank Settlement System (NIBSS) to debit bank settlement accounts for any fraudulent funds received, burdening financial institutions with the responsibility to tighten their fraud prevention measures.

This tough-love approach stems from the CBN's growing concern over rising fraud rates in Nigeria's financial services sector. Nigerian banks lost ₦42.6 billion ($27.7 million) to fraud in Q2 2024, highlighting the urgent need for stronger safeguards. The CBN has been increasingly scrutinising fintechs for compliance issues since early 2024, and this new directive suggests that the regulator is taking no chances.

While the new policy is still taking shape, it's clear that banks will improve their Know Your Customer (KYC) processes and fraud detection systems. As one banker told me, "If a bank allows a fraudulent transaction to pass through its system, it has to bear the consequences." The banking sector is bracing for the impact of this new policy, with some banks already implementing stricter controls on transactions.

In a related development, a major bank lost ₦7 billion ($4.5 million) to fraud in December 2024, and NIBSS debited the settlement accounts of the fintech that received some of the proceeds of the funds without explanation, according to people close to the matter. This incident highlights the need for banks and fintechs to take fraud prevention seriously, as the consequences of non-compliance can be severe.

The CBN's new fraud policy is a critical step in fighting fraud, and it's likely to have a significant impact on the financial services sector. While the jury is still out on the industry-wide response to this move, one thing is clear: tightening accountability is a critical step in combating fraud. As the sector adjusts to this new reality, it will be interesting to see how banks and fintechs respond to the challenge.

In other news, Airtel Money, Kenya's second-largest mobile money operator, has doubled its market share from 2.9% to 7.6% in just one year, chipping away at M-Pesa's customer base. Airtel Money's strategy hinges on affordability, with lower transaction fees and free Airtel-to-Airtel transfers.

Zenith Bank, a Nigerian tier-1 commercial bank, has raised the bar in Nigeria's banking industry by increasing salaries for nearly 10,000 employees by 20%, effective January 2025. However, it falls short of the 40% salary increase set by GTBank, another tier-1 lender, in September 2024.

The Nigerian government is also looking to provide respite for households who have had to cope with increased electricity prices amid soaring cost of living. The government is about to secure a deal that might subsidise electricity tariffs for poor households, with a pitch to investors at a World Bank energy summit in Tanzania to raise $15 billion from private investors to plug an estimated $23 billion funding gap it needs to revitalise its struggling power sector.

These developments highlight the dynamic nature of the financial services sector in Africa, with regulators, banks, and fintechs constantly adapting to new challenges and opportunities. As the sector continues to evolve, it will be interesting to see how these trends shape the future of finance in Africa.