By Suleyman A. Ndanusa, PhD, OON
Financial regulation is one of those subjects that becomes most interesting immediately after something has gone wrong. When a bank fails, an investment scheme disappears with people’s savings, an insurer cannot meet its obligations or pension assets are endangered, the public question is usually swift and unforgiving, where was the regulator?
It is a legitimate question. But it is not the only one.
We should also ask whether the regulator had the right mandate, sufficient information, adequate capacity and appropriate legal instruments. We should ask whether another regulator was watching a different part of the same institution and whether the two regulators were speaking to each other. We should ask whether the relevant rule was properly designed, realistically implementable and directed at the actual problem.
Sometimes the failure is not the absence of regulation. It is the presence of several regulations pulling in different directions. A financial institution may satisfy one agency and still offend another. It may comply with every requirement separately and discover that the combined burden has made the underlying business unnecessarily expensive or practically unworkable.
In such circumstances, every regulator may be correct within its own statutory room while the financial system becomes uncomfortable in the whole house.
Nigeria therefore needs a serious conversation about the quality of financial regulation. The question is no longer simply whether financial institutions are regulated. It is whether the regulations themselves are lawful, necessary, evidence based, proportionate, coordinated and capable of producing the outcomes for which they were introduced.
This conversation must begin with a recognition that is both obvious and easily overlooked. Nigeria does not have an empty financial regulatory landscape.
We already have the Central Bank of Nigeria, Securities and Exchange Commission, Nigeria Deposit Insurance Corporation, National Insurance Commission and National Pension Commission. Other institutions have responsibilities relating to competition, consumer protection, financial intelligence, company administration, data protection and market conduct.
Each regulator operates under enabling legislation. Each has its own governance arrangements, regulatory instruments, supervisory processes and enforcement powers. There are also ministerial relationships, market consultation practices, inter agency mechanisms, specialised tribunals and the regular courts.
This is not an empty plot of land. It is a neighbourhood, although, like many neighbourhoods, some occupants may have extended their fences, a few access roads may be unclear, and not everyone attends the residents’ meeting.
Before adding another structure, we should first understand the structures already standing. A good architect does not begin renovation by ordering more cement. He inspects the building, studies the foundation and asks why the roof is leaking.
The first step in enhancing regulatory quality should therefore be a comprehensive mapping of Nigeria’s financial regulatory universe. We need to establish who regulates what, under which law, through which process and with what accountability.
We should identify where mandates overlap, where important activities fall between institutions and where two or more regulators impose similar, conflicting or badly sequenced obligations on the same entity. We should also examine whether the real weaknesses arise from poor rule design, inadequate consultation, weak coordination, ineffective enforcement, limited capacity, slow dispute resolution or failure to measure outcomes.
These are different illnesses. They should not all receive the same prescription.
If a sound rule is not enforced, another impact assessment form will not solve the problem. If two regulators issue inconsistent requirements, the answer may be better coordination. If a regulation imposes excessive costs because the market was not properly consulted, the remedy may be stronger consultation. If regulators consult extensively but routinely disregard credible evidence, consultation has become a ceremony rather than a policy instrument.
Diagnosis matters because public administration has a natural tendency to answer every institutional weakness by creating another institution. Whenever existing agencies are not speaking to each other, we establish a new body to coordinate their silence.
Regulation itself is not a single event. It is a chain.
The chain begins with identifying a problem. It proceeds through research, engagement with affected parties, consideration of alternatives, drafting, institutional approval and publication. It then moves into implementation, supervision and enforcement. Where a regulated person disputes a decision, administrative, tribunal and judicial review may follow. Finally, although this is often the forgotten relative at the family meeting, the regulator should determine whether the rule actually worked.
The capital market provides a useful illustration. Rules made by the Securities and Exchange Commission are not ordinarily conceived in isolation and delivered to an unsuspecting market. They emerge through engagement and collaboration between the Commission and market participants. They pass through the Commission’s governance process and are forwarded to the Minister of Finance, who has a statutory period within which to raise an objection.
The Commission’s regulatory and enforcement decisions are also not beyond challenge. They may be reviewed by the Investments and Securities Tribunal, with further appeals through the Court of Appeal and ultimately the Supreme Court. The architecture therefore contains market participation, regulatory decision making, limited executive oversight and independent adjudication.
Similar, though not identical, safeguards exist in other parts of the financial system. They may require improvement, but they cannot be treated as though they do not exist.
The task is consequently not to replace Nigeria’s regulatory architecture but to strengthen the quality of decisions produced within it.
A common Financial Sector Regulatory Quality Framework could provide the required discipline. It should establish minimum standards for significant regulation while leaving statutory authority and final responsibility with the relevant regulator.
The first test should be legality. A regulator must establish that the proposed intervention falls within its mandate and that the correct legal instrument is being used. Good intentions cannot compensate for the absence of legal authority.
The second should be necessity. What specific market failure, systemic risk, consumer protection concern or regulatory deficiency requires intervention? How serious is the problem? Who is affected, and what would happen if nothing new were done?
Regulation should not become a solution searching for a problem.
The third should be evidence. The regulator should identify the data, research and assumptions supporting the intervention, including important limitations and areas of uncertainty. Evidence does not remove judgement from regulation; it prevents judgement from arriving at the meeting wearing an evidence name tag.
The fourth should be the consideration of alternatives. Sometimes the problem is not that a rule is missing but that an existing rule is poorly enforced. Guidance, disclosure, market education, targeted supervision or more effective enforcement may produce better results than another broad regulation.
The fifth should be proportionality. A requirement designed for a systemically important institution may suffocate a small market entrant without materially reducing risk. Equal treatment does not always mean identical treatment. Good regulation distinguishes according to size, complexity, risk and capacity without weakening essential safeguards.
The sixth should be net impact. Who benefits, who bears the cost, and what unintended behaviour might the rule encourage? A regulation may reduce one risk while quietly moving it next door. It may protect consumers but reduce access. It may strengthen existing institutions while discouraging new entrants. It may improve stability but unnecessarily constrain innovation, investment or capital formation.
These trade offs should be confronted openly rather than hidden in the footnotes, where difficult questions are often sent to retire.
The seventh test should be implementability. The regulator must possess the capacity to supervise and enforce the proposed requirement, just as regulated institutions must have the systems, personnel and time required to comply.
A rule that looks impressive in a circular but cannot be implemented in practice is not regulation. It is literature.
The final test should be outcomes. Every significant regulation should state what it is expected to achieve and how success will be measured. The inquiry should not end with whether the rule was issued or whether institutions submitted another set of returns. We should determine whether the underlying problem was actually reduced.
Not every regulation requires the same process. Routine clarifications and technical corrections should not be trapped in months of analysis. Material regulations affecting licensing, reporting, fees, governance, conduct or investment should receive a proportionate assessment and meaningful consultation.
Measures affecting capital, liquidity, solvency, market structure, major consumer outcomes or financial stability should undergo more rigorous analysis. This should include scenario testing, cross regulatory consideration, transition planning and formal post implementation review.
Emergency action must also remain possible. A regulator confronting an imminent threat to market integrity or financial stability cannot be expected to organise a stakeholder retreat while the building is burning. It should be permitted to act swiftly, document its reasons and undertake a fuller retrospective assessment when the immediate danger has passed.
Cross regulatory coordination is central to this framework because financial institutions no longer live comfortably within old sectoral boundaries. A banking group may have interests in insurance, pensions, asset management, payments and technology. A rule introduced by one regulator may therefore affect the objectives of several others.
Nigeria already has a Financial Services Regulation Coordinating Committee. Before creating a new coordinating body, we should examine whether the FSRCC has the mandate, participation, procedures, information and institutional support required to perform its responsibilities effectively.
A strengthened FSRCC could maintain a forward calendar of significant regulatory initiatives. This would enable regulators to identify overlaps and prevent several expensive requirements from arriving in the market at the same time, each regulator innocently claiming not to know the others were coming.
It could maintain a register of overlaps, organise joint consultations and assess the cumulative effect of requirements on institutions supervised by more than one agency. It could also develop protocols for data sharing, referrals, emerging risks and emergency cooperation.
Coordination, however, must not become control.
The originating regulator should remain responsible for decisions within its statutory mandate. The Ministry of Finance should provide broad financial sector policy direction, facilitate coordination and exercise functions already conferred upon it by law. Market participants and the public should provide evidence and practical experience. Tribunals and courts should continue to provide independent review.
The governing compact can be stated simply, as regulators regulate, the Ministry coordinates, the market contributes evidence, and independent institutions review regulatory decisions.
This balance matters because a ministry based unit that classifies regulatory proposals, determines the adequacy of their analysis and effectively clears technical rules could gradually become a regulator of regulators. That would blur responsibility and may slow the ability of specialist agencies to respond to changing market conditions.
When such a regulation later produces an unpopular outcome, accountability could become a game of institutional hide and seek. The regulator may say the Ministry cleared it; the Ministry may say the regulator proposed it; and the market may be left holding both the rule and the consequences.
International experience provides useful lessons, but benchmarking must go beyond citing countries whose names lend instant respectability to a paper. The important question is not whether another jurisdiction has an impressive institution. It is what problem that institution solves, how it fits within the country’s legal structure and whether the underlying discipline can be adapted to Nigeria.
Australia offers a long established system of regulatory impact analysis supported by a central analytical office. Its contemporary approach remains agency led. The responsible institution develops the proposal and owns the analysis, while the Office of Impact Analysis provides guidance and quality support. The central office does not replace the statutory decision maker or become a specialist financial sector regulator.
The United Kingdom provides another useful model. The Financial Conduct Authority and Prudential Regulation Authority undertake and publish cost-benefit analyses of significant proposals. Independent statutory panels advise on analytical methods and challenge the quality of the assessments. They do not approve regulatory policy or determine which rules the regulators may pursue.
The United Kingdom’s Financial Services Regulatory Initiatives Forum and Regulatory Initiatives Grid promote coordination, sequencing and advance notice. HM Treasury participates in the forum, but the FCA and Bank of England/PRA co-chair it. Treasury is part of the conversation; it is not a general technical clearance office.
Canada provides a valuable example of a common regulatory management framework across government. Federal departments and agencies are required to examine the positive and negative effects of proposed regulations, consider feasible alternatives, analyse costs and benefits and identify how impacts are distributed.
Canada’s approach is particularly relevant because it demonstrates that common standards and central quality assurance can coexist with the authority assigned to regulators by law. Coordination does not have to mean that every technical decision must travel to the centre for permission.
South Africa may offer one of the most relevant comparisons for Nigeria. Its Twin Peaks model separates prudential regulation from market conduct regulation while formally recognising the need for coordination and joint standards where mandates intersect.
The attraction of the South African example is not that Nigeria should immediately import Twin Peaks. Regulatory models are not football jerseys; changing into another country’s colours does not automatically improve performance. The more useful lesson is that institutional boundaries can be clearly defined while joint regulatory action is expressly provided for where necessary.
Singapore presents a different model. The Monetary Authority of Singapore combines central banking and extensive financial supervisory responsibilities within an integrated institution. This naturally reduces some coordination problems because many of the relevant officials are already under one roof.
Nigeria cannot simply reproduce that structure, nor should it try. The transferable lesson from Singapore is the importance one hears repeatedly across successful institutions: strong analytical capacity, regulatory clarity, disciplined consultation, timely decisions and willingness to adapt as markets change.
The United States provides an additional perspective. Its notice and comment process, public rule making records, economic analysis and judicial scrutiny reinforce the importance of evidence and procedural discipline. They also demonstrate that a poorly supported regulation may spend years in litigation, acquiring legal fees instead of regulatory credibility.
No single jurisdiction offers a complete model for Nigeria. Some employ integrated regulators, others use Twin Peaks, while several retain multiple specialised agencies. What the better systems increasingly share is not one institutional diagram but a common discipline: clear problem definition, evidence, consultation, consideration of alternatives, proportionality, assessment of costs and benefits, coordination and post implementation review.
The lesson is therefore not that financial regulation must be centralised. It is that regulatory independence should be accompanied by transparent reasoning and accountability.
Nigeria should adopt what works, adapt what fits and politely leave behind what belongs to someone else’s constitutional and institutional wardrobe.
A practical reform programme should begin with a time bound diagnostic exercise. Each regulator should submit a map of its statutory mandate, rule making process, regulatory pipeline, coordination arrangements and review mechanisms. A representative sample of recent significant regulations across banking, capital markets, insurance, pensions and payments should then be examined retrospectively.
The exercise should ask simple but revealing questions. What problem was the rule intended to solve? What evidence supported it? What alternatives were considered? Who was consulted? What did compliance cost? Which other regulators and markets were affected? What happened after implementation? Was the rule subsequently amended, and if so, why?
The outcome should not be another report launched with refreshments, photographed for posterity and thereafter treated as confidential even by those expected to implement it.
It should produce a map of the regulatory universe, a register of overlaps and gaps, an assessment of cumulative burdens, a review of enforcement and redress, and a prioritised programme of reform.
A common regulatory quality standard should then be piloted on a small number of significant proposals. This would allow the regulators, Ministry and market to determine what adds value, what creates unnecessary delay and what should be adjusted before broader adoption.
An independent panel of economists, lawyers, market specialists and consumer representatives could provide methodological advice on the most significant assessments. Its role should be to improve the analysis, not to take over the regulator’s decision. Advice is valuable; an additional veto is something else entirely.
Success should not be measured by the number of impact assessments written, meetings held or pages submitted to the Minister. Public institutions sometimes mistake the weight of a document for the weight of its argument.
Success should be measured by fewer conflicting rules, better evidence, lower avoidable compliance costs, more realistic implementation periods, quicker resolution of inter regulatory issues and a greater willingness to amend or withdraw measures that do not work.
The ultimate test is whether the financial system and the Nigerian economy are better off.
Nigeria needs high quality financial regulation. But regulatory quality is not synonymous with regulatory quantity, and coordination is not synonymous with ministerial control. The objective should be a system in which every significant regulation can answer four plain questions: Why is it necessary? What evidence supports it? Is the burden proportionate? What has it achieved?
Before we build another room, let us inspect the regulatory house already standing. We may discover that some rooms require renovation, some doors need opening and some occupants simply need to speak more regularly to one another.
What we should avoid is adding another floor merely because the existing residents have not yet learned to share the staircase.
Suleyman A. Ndanusa, PhD, OON, is an economist, lawyer, strategic studies scholar, and public policy thinker and practitioner with extensive experience in financial markets, regulation, governance, national Security and development.
