Nigeria's Central Bank Clamps Down on Fintech Accounts Amid Crypto Concerns

The Central Bank of Nigeria has instructed four fintech companies to halt the creation of new accounts, citing concerns over potential exploitation by cryptocurrency traders. A spokesperson from one of these firms has linked the directive to an ongoing audit of their Know Your Customer (KYC) procedures.

The affected fintech companies, namely Moniepoint, Palmpay, Opay, and Kuda, have reportedly been directed by the Central Bank of Nigeria (CBN) to suspend the opening of new accounts, as part of efforts to restrict crypto traders accused of exacerbating the currency’s depreciation.

According to reports from Techcabal, the CBN's directive came shortly after the Economic and Financial Crimes Commission (EFCC) blocked over 1,140 bank accounts allegedly linked to illicit foreign transactions. An insider from one of the fintech firms has hinted that the freeze on accounts is temporary.

A spokesperson from one of the fintech firms, preferring anonymity, echoed the temporary nature of the halt and linked it to the ongoing scrutiny of KYC processes. Additionally, another undisclosed source mentioned engagements between the CBN, Nigeria’s National Security Agency, and the affected fintech firms preceding the directive.

The decision seems rooted in the CBN's belief that many crypto traders were utilizing fintech platforms to disrupt the foreign exchange (FX) market, whereas banks have a more favorable relationship with regulators. This perspective highlights the challenge fintechs face in establishing a similar rapport with the CBN.

This move follows the CBN's previous retraction of a directive issued in February 2021, suggesting a shift in focus towards cryptocurrency traders as contributors to the local currency's devaluation. Nigerian authorities have particularly targeted Binance, alleging it funneled over $26 billion out of the economy.

Despite this, with the naira still struggling against major currencies, Nigerian authorities have broadened their scrutiny to include other cryptocurrency exchanges and now fintech firms. A recent analysis by the EFCC revealed that only a small fraction of the blocked accounts belonged to fintech firms, with commercial banks constituting the majority.