An Empirical Examination of Regulatory Arbitrage in Nigeria’s Financial Services Sector After the FCCP Act 2018

Regulatory arbitrage, whereby financial service providers structure activities to exploit inconsistencies between regulatory frameworks, is a recognised risk in multi-regulator financial systems, and Nigeria's financial sector, regulated by the CBN, SEC, NAICOM, and FCCPC across overlapping jurisdictions, provides a particularly relevant context for empirical examination. This study empirically examines regulatory arbitrage behaviour in Nigeria's financial services sector following the FCCP Act 2018, which added a consumer protection layer over existing sector-specific regulation. A mixed-methods design combining quantitative analysis of regulatory filing data, complaint patterns, and enforcement gaps with qualitative interviews of 25 financial compliance officers and five regulatory officials was adopted. Analysis of regulatory arbitrage incidents documented in CBN, SEC, and FCCPC annual reports from 2019 to 2023 was conducted. Results indicate that the most prevalent arbitrage involves classifying regulated financial products as technology services to avoid financial services licensing, exploiting the gap between CBN fintech regulatory sandbox participation and full licensing requirements. Consumer credit offered through digital platforms avoids CBN interest rate regulations through fee structuring. The study fills an important empirical gap in Nigerian financial regulatory scholarship and concludes that regulatory arbitrage is structurally incentivised by the current multi-regulator framework. Recommendations include a Financial Services Coordination Committee with joint jurisdiction over technology-enabled financial products and activity-based rather than entity-based regulatory principles.

Keywords: regulatory arbitrage, financial services regulation, FCCPC, CBN, Nigeria