- By Wahab Elias and Oluwole Ololade Adeosun
Getting off the Financial Action Task Force (FATF) Grey List is a genuine reform success — and one that deserves recognition. Greylisting had raised the cost of doing business, discouraged investment, and signalled governance weakness. FATF’s decision to remove Nigeria from enhanced monitoring restores a measure of credibility, but it remains a fragile victory. The harder work begins now.
At the heart of that challenge lies crypto and digital-asset oversight. While FATF’s Recommendation 15 on virtual assets was not what landed Nigeria on the grey list, it became central to the country’s commitments for exiting it. Nigeria’s experiment with crypto regulation has been episodic, fragmented, and shaped largely by a security mindset. To sustain reform momentum, digital finance must be treated not as a compliance afterthought but as a test of financial sovereignty.
Between 2017 and 2020, the Central Bank of Nigeria (CBN) tolerated crypto informally while the Securities and Exchange Commission (SEC) studied how to classify it. Then, in 2021, the CBN abruptly barred banks from servicing crypto exchanges — a move that ushered in an era of “shadow regulation.” A year later, the SEC released its first digital-asset guidelines and promised a sandbox regime, but no firm has yet graduated from that experiment. By 2023, the banking ban was partially lifted, though still without new licences.
Today, three institutions dominate the space: the CBN, the Federal Inland Revenue Service (FIRS), and the Office of the National Security Adviser (ONSA). The SEC remains the statutory regulator under the Investments and Securities Act 2025, but it lacks the operational heft to make that authority meaningful. Sociologically, this oscillation reflects a familiar Nigerian pattern — where authority is personalised and discretion replaces discipline when formal systems are weak. From a market-governance perspective, such fragmentation erodes compliance and confidence, discouraging long-term capital.
Since 2021, Nigeria has governed crypto through circulars, bans, and quiet reversals. Banks were told to block exchanges — and later told to unblock them. Telcos restricted unlicensed platforms; users responded with VPNs and offshore brokers. This stop-start approach bought time but undermined trust, pushing activity off-grid and out of regulatory reach. The consequences have been predictable: more volatility, capital flight, and deep uncertainty about whether Nigeria is open for innovation or still improvising.
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The most dangerous outcome has been the explosion of peer-to-peer (P2P) trading. What began as a technical workaround has become a main channel for illicit finance. FATF classifies unhosted P2P transactions as the highest-risk corridor for money laundering, terrorism financing, and election-season slush funds. Thousands of brokers now operate through messaging apps, settling via informal transfers or gift-card swaps. The mix of anonymity, speed, and zero oversight attracts both speculators and bad actors. Unless policy shifts before the 2027 elections, these networks could become the preferred rail for dark finance. Reducing their appeal is not censorship — it is financial hygiene. The remedy is straightforward: make the regulated path cheaper, faster, and safer than the unregulated one.
The Approval-in-Principle regime (ARRIP) was meant to bridge that gap — a sandbox for innovation under supervision. In practice, it has become a holding pattern. The SEC administers it in name but lacks the resources to enforce timelines or graduate participants. Meanwhile, the CBN plans to launch a Digital Finance Supervision Unit next year, linking bank rails, tax reporting, and prudential oversight. From an accounting-governance perspective, this could provide the missing bridge between innovation and accountability. If successful, it could turn ARRIP from fiction into framework. If not, it will confirm Nigeria’s habit of drafting regulations faster than it can implement them.
South Africa’s formal registration of crypto service providers has built credibility. Kenya’s early permissiveness followed by crackdowns created instability. Ghana’s cautious diplomacy built trust but delayed clarity. Nigeria risks combining the worst of all three — costs without credibility, and restrictions without stability.
The path forward demands discipline, not invention. Nigeria’s financial regulators must act as partners, not rivals: the CBN, FIRS, and ONSA need to coordinate their mandates and speak with one voice. Transparency, not transactional decision-making, is the foundation of trust; backroom directives only weaken both compliance and confidence. Substance must replace slogans — the focus should be on building reliable systems for lawful digital finance while closing the loopholes that invite abuse. What the country needs is not another acronym or policy promise, but a framework that truly works.
Nigeria’s fintech users are resourceful and resilient, yet resilience is not the same as trust. Without credible oversight, innovation drifts offshore, capital escapes, and the naira suffers. FATF delisting has bought time but not immunity. The true measure of reform will be Nigeria’s ability to design a regulatory architecture that is both innovative and enforceable — one that curbs illicit flows before politics weaponises them. Beyond greylisting lies a tougher mission: ensuring that digital finance serves Nigerians, not the shadows.
- Elias is Professor of Sociology at Lagos State University, and Adeosun is Managing Director of Chartwell Securities and President of the Chartered Institute of Stockbrokers, write on governance, regulation and the future of Nigeria’s financial system.
