Nigeria’s banking industry must urgently modernise its internal audit functions and governance frameworks to keep pace with the rapid adoption of Artificial Intelligence (AI), industry leaders have said.
They warned that innovation without adequate controls could expose financial institutions to significant operational, regulatory and reputational risks.
The call came at the 64th Quarterly General Meeting of the Association of Chief Audit Executives of Banks in Nigeria (ACAEBIN) held in Lagos, where banking executives, auditors, regulators, law enforcement agencies and risk management professionals examined the implications of AI for governance, fraud prevention and institutional resilience.
Speaking at the event with the theme “Internal Audit Function in the AI Era,” the Group Managing Director and Chief Executive Officer of United Bank for Africa (UBA), Oliver Alawuba, represented by the bank’s Executive Director, Finance and Risk Management, Ugochukwu Nwaghodoh, said AI is already transforming banking operations, customer engagement, fraud detection, transaction monitoring and risk management.
He noted that the challenge facing the industry is no longer whether AI will transform banking, but whether governance, control and assurance functions can evolve quickly enough to safeguard trust in the financial system.
“Artificial Intelligence is no longer a distant conversation. It is already reshaping how banks serve customers, detect fraud, underwrite risk, automate operations, monitor transactions, manage data and compete for relevance,” he said.
According to him, traditional audit approaches based largely on periodic reviews, manual controls and transaction sampling are becoming inadequate in a digital environment characterised by real-time decision-making, automated processes and increasingly sophisticated cyber threats.
“The Internal Audit function of the future must be predictive, technology-enabled, data-driven, continuous, independent and courageous. It must move from simply asking, ‘What went wrong?’ to also asking, ‘What is likely to go wrong, where is it building up, who needs to act now, and how do we prevent it?’” he stated.
Highlighting UBA’s own experience, Alawuba disclosed that the bank has integrated AI and advanced analytics into its internal audit operations through the deployment of TeamMate Internal Audit Management Software and the use of Power BI analytics tools.
He explained that the technology has enabled auditors to move beyond traditional sampling methods and gained a full-population view of transactions, exceptions and emerging risk patterns across the institution.
“This has moved our audit approach beyond the traditional limitations of sampling. Internal Audit now has a more panoramic view of transactions, control indicators and emerging risk patterns, enabling earlier detection of anomalies and stronger predictive analysis,” he said.
He outlined three critical imperatives for internal auditors in the AI era, including capability, independence and collaboration.
On capability, he stressed that auditors must deepen their understanding of AI, machine learning, data governance, cyber security, cloud infrastructure and model risk management to effectively challenge business assumptions and assess AI-driven decisions.
Regarding independence, he cautioned against allowing enthusiasm for innovation to overshadow risk considerations.
“Innovation is desirable, but unsafe innovation is a liability. Speed is valuable, but speed without control is exposure,” he said.
The GMD also called for stronger collaboration among audit, risk, compliance, technology and business teams, noting that AI-related risks cannot be effectively managed in silos.
To strengthen industry preparedness, he proposed five strategic priorities: enhanced AI governance frameworks, increased investment in AI-enabled audit tools, stronger model risk management, heightened cybersecurity assurance and the embedding of ethical considerations into digital transformation initiatives.
Earlier, ACAEBIN Chairman, Aina Amah, said the association has continued to strengthen the capacity of internal auditors through training programmes, stakeholder engagement and collaboration with regulators and law enforcement agencies.
She described the theme of the meeting as both timely and strategic, given the growing influence of AI on banking operations and decision-making processes.
“Artificial Intelligence is transforming banking operations, risk management, fraud detection, customer engagement and decision-making. While it presents significant opportunities, it also introduces new risks relating to governance, ethics, cybersecurity, data quality and model reliability,” Amah said.
She urged internal auditors to acquire new competencies and embrace innovation in order to provide the assurance and strategic insights required for the responsible adoption of AI across the banking industry.
The discussions also highlighted growing concerns over the changing nature of financial crimes in an increasingly digital ecosystem.
Representing the Commissioner of Police, Special Fraud Unit, CSP Sarumi Idris Adeyemi said fraud schemes have evolved from traditional methods into sophisticated technology-driven operations that can move funds across multiple platforms within minutes.
She cited instances involving interconnected fintech platforms where substantial sums were fraudulently transferred through digital channels without obvious system breaches, underscoring the complexity of modern financial crime investigations.
According to her, the speed at which illicit funds move across financial systems requires closer cooperation between banks and law enforcement agencies, particularly in responding to information requests during investigations.
She also expressed concerns about account structures and onboarding arrangements that could complicate efforts to identify beneficial owners and trace fraudulent transactions.
“As businesses become more technology-driven, fraud has also become more cyber-enabled. The threats we face today are significantly different from what existed in the past,” she said.
Providing further insight into AI governance and assurance, Partner at PwC Nigeria, Chioma Obaro, argued that internal auditors must expand their role beyond auditing processes to scrutinising the quality and reliability of AI-generated decisions.
According to her, organisations should establish robust AI governance structures, including clear oversight mechanisms, ethical frameworks and accountability structures.
She suggested that boards may need to consider dedicated AI committees or expand the mandates of existing committees to provide stronger oversight of AI-related risks.
Obaro further stressed the need for internal auditors to be involved in AI projects before deployment rather than after implementation, allowing risks to be identified and addressed at the design stage.
“The auditors are no longer auditing only processes. We are now auditing decisions. With AI, the process may be flawless and yet the decision is wrong,” she said.
She warned against excessive reliance on AI outputs, noting that one of the biggest risks organisations face is the tendency to trust algorithmic decisions without sufficient human challenge or professional scepticism.
“The biggest risk may not be that AI fails. It may be that AI succeeds so convincingly that nobody questions its judgments,” she added.
Obaro also emphasised the importance of model explainability, arguing that highly accurate AI systems that cannot clearly explain how decisions are reached could expose institutions to regulatory and governance challenges.
As banks in the country accelerate digital transformation initiatives, participants at the conference agreed that the future competitiveness of the industry will depend not only on the speed of AI adoption but also on the strength of governance, assurance and trust mechanisms built around emerging technologies.
The consensus among industry leaders was that while AI offers unprecedented opportunities to improve efficiency, risk management and customer service, sustainable growth will require institutions to balance innovation with accountability, transparency and robust internal controls.
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