The House of Representatives’ Ad-hoc Committee investigating the economic, regulatory, and security implications of cryptocurrency adoption and Point-of-Sale operations has flagged what it calls a mounting fraud crisis threatening Nigeria’s financial system.
At a resumed hearing on Monday, Committee Chairman Hon. Olufemi Bamisile revealed that stakeholder engagements exposed “deep gaps” in the nation’s digital finance ecosystem, leaving citizens vulnerable to serious financial and security risks.
Bamisile noted that the Committee had received multiple reports of unprofiled agents, cloned terminals, anonymous transactions, and weak Know-Your-Customer practices.
He warned that these factors have fueled a surge in POS-related fraud across the country.
“We are concerned about the growing rise in fraud associated with POS operations,” he said. “Unprofiled agents, cloned terminals and weak KYC practices continue to expose citizens to preventable dangers.”
He further expressed concern over the integration of unlicensed cryptocurrency activities into POS operations, noting that some operators now provide crypto-related services without regulatory approval.
According to him, such practices present “serious red flags” linked to anti–money laundering risks, terrorism financing, data breaches, and misuse of platforms originally designed for basic payments.
Bamisile added that phoney companies are being registered at the Corporate Affairs Commission using stolen National Identification Numbers and Bank Verification Numbers to launder illicit funds via unverified POS channels.
He also raised alarms over some fintech firms storing sensitive financial data on foreign servers, which undermines regulatory audits, transaction tracing, and compliance enforcement—posing a direct threat to national security.
Despite the concerns, Bamisile reassured operators that the investigation is not intended to stifle growth.
He acknowledged the industry’s challenges, including fragmented regulation, overlapping agency mandates, and inconsistent policies, stressing that the Committee seeks to propose legislation to harmonize rules, strengthen security, enhance consumer protection, and encourage responsible innovation.
The Committee will continue consultations with regulators, fintech stakeholders, and security agencies before submitting its final recommendations to the House.
At the hearing, Mr. Paul Okafor, National President of the Association of Digital Payment and POS Operators of Nigeria, warned that Nigeria’s POS ecosystem had reached a “critical emergency point,” with fraud escalating to levels threatening national security.
He noted that the sector’s explosive growth, from 50,000 POS operators in 2017 to over 2.3 million today—has overwhelmed regulatory capacity, which increased by “less than 10 percent” over the same period.
“This imbalance is what has produced the crisis we are facing today,” he said. “The regulators, especially the CBN, are not incompetent; they are overwhelmed by the sheer speed and scale of growth.”
Citing Nigeria Inter-Bank Settlement System data, Okafor reported that POS, digital-payment, and banking channels lost N17.67 billion to fraud in 2023, affecting over 80,000 customers. He added that in 2024, losses surged to N52.26 billion, an increase of N34.59 billion in just one year.
He highlighted that attempted fraud across financial channels rose by 338 percent, with POS channels alone accounting for 26.37 percent of incidents. Industry monitor FITC also recorded a 95 percent spike in POS fraud in Q4 2024.
“More than 38,000 POS fraud cases were officially reported in one year,” he said, adding, “Unofficially, we estimate that over 70,000 cases go unreported because victims simply give up.”
Okafor warned that criminals increasingly use POS agents as cash-out points for illicit funds, including kidnap ransoms.
“In some states, security agencies report that nearly 40 percent of kidnap ransom payments pass through informal POS cash-out channels. This is no longer a fintech issue; this is a national security threat,” he said.
He called on the Committee to compel the Central Bank of Nigeria to implement urgent systemic reforms, warning that inaction could erode financial inclusion, destroy public trust, and destabilize the payment ecosystem.
To restore order and public confidence, Okafor recommended three immediate steps: mandatory Nigeria Police Force–NCCC Cybercrime Clearance Certificates for all POS operators; compulsory CAC registration for every POS business to ensure traceability; and mandatory membership in recognized trade associations to enforce discipline, training, and self-regulation.
He noted that these measures align with best practices in India, Kenya, Brazil, South Africa, and the United Kingdom, where strict oversight, police vetting, and continuous certification curb fraud.
“No country leaves its financial system open to millions of operators or puts it in the hands of foreigners without strict controls. Nigeria must not be the exception,” he said.
Okafor emphasized that POS services now reach nearly every household, market, and community nationwide.
