The Central Bank of Nigeria (CBN) is pushing to centralize control over the country’s fixed-income market, a decision that has stirred sharp debates among regulators, bankers, and investors about oversight boundaries and market stability.
The apex bank argues that shifting trading and settlement operations to its own systems will boost clarity and streamline processes. However, industry watchers caution that this could blur lines between central banking duties and securities regulation, potentially eroding trust in the financial ecosystem.
At the heart of the discussion are the massive profits Nigeria’s premier banks—known as the FUGAZ institutions (First Bank Holdings, United Bank for Africa, Guaranty Trust Holding Company, Access Holdings, and Zenith Bank)—are reaping from government-backed securities. These five lenders allocated a staggering N49.152 trillion to investment securities and Treasury bills as of September 30, 2025, based on disclosures to the Nigerian Exchange Limited (NGX).
This figure marks a 16.5% jump from the N42.204 trillion held at the end of 2024, with N6.948 trillion added in the first nine months of the year alone. The investments yielded N4.8 trillion in interest income during that period, up from N3.6 trillion a year earlier, highlighting banks’ growing preference for low-risk government paper amid economic headwinds.
Banks’ Heavy Bet on Safe Assets
Individual breakdowns from the banks’ Q3 2025 reports illustrate the scale:
– Access Holdings: N15.25 trillion invested, generating N1.3 trillion in returns
– UBA: N13.59 trillion invested, yielding N1.03 trillion
– Zenith Bank: N9.05 trillion invested, producing N1.14 trillion
– First Bank Holdings: N6.35 trillion invested, earning N720.15 billion
– GT Holding Company: N4.91 trillion invested, returning N570.23 billion
This reliance on sovereign instruments over traditional loans signals a cautious strategy, fueled by elevated interest rates and concerns over currency fluctuations and borrower defaults.
Lending patterns reinforce this conservatism. Despite deposit growth, loan-to-deposit ratios have largely stagnated or declined:
– Zenith Bank’s loans reached N9.37 trillion, but its ratio fell to 40% from 43%.
– Access Holdings grew loans to N15.64 trillion (up nearly 20%), holding steady at 41.2%.
– UBA’s loans edged up to N7.49 trillion, with the ratio dipping to 28.2% from 28.7% as deposits rose 7.7% to N26.54 trillion.
– GTCO boosted loans 16.1% to N3.24 trillion, but the ratio increased only marginally amid 16% deposit growth to N12.06 trillion.
– First Bank Holdings stood out, expanding loans 11.5% to N13.46 trillion and lifting its ratio to 68% from 60%.
The variance shows most banks favoring secure yields, while First Bank pursues more active credit expansion.
CBN’s Ambitious Reform Plan
In a September 2025 directive, the CBN outlined intentions to transfer fixed-income trading and settlement from the FMDQ Securities Exchange—overseen by the Securities and Exchange Commission (SEC)—to its Real-Time Gross Settlement (RTGS) platform and Scripless Securities Settlement System (S4). Implementation is slated for November 2025, unless delayed.
Proponents claim this will curb underreporting, break FMDQ’s dominance, and broaden market access. The CBN, which holds a 16% stake in FMDQ, would assume dual roles as operator and supervisor for government bonds and T-bills.
Mounting Legal and Operational Concerns
Detractors contend the plan exceeds the CBN’s mandate under its governing act, which permits promoting settlement systems but not running trading platforms. The Investments and Securities Act of 2025 vests securities oversight solely with the SEC.
Akin Olaniyan, head of Charterhouse Limited in Lagos, warned that proceeding without SEC involvement risks “overlapping rules, participant confusion, and damaged market credibility.”
Walker Ogogo, a founding registrar at the Institute of Capital Market Registrars, highlighted potential conflicts: “Mixing trading operations with policy-setting could deter international capital and signal governance weaknesses.”
Market voices are split. Highcap Securities CEO David Adonri affirmed the CBN’s role in primary issuances like bond auctions but insisted secondary trading belongs to SEC-regulated entities like FMDQ and NGX. He attributed the push to frustrations with FMDQ’s transparency lapses, noting, “The goal seems to be direct oversight for better data.”
Wyoming Capital’s Tajudeen Olayinka supported the shift for improved accuracy, suggesting linkages between CBN systems and exchanges to maintain liquidity. “FMDQ’s current data gaps could be addressed, fostering fairer pricing,” he said.
Under the new setup, FMDQ and NGX would gain equivalent S4 access, ending FMDQ’s edge and potentially enhancing competition and inclusion.
As Nigeria navigates this pivot, the outcome hinges on inter-agency coordination and adherence to legal frameworks to preserve investor confidence in a market increasingly vital to banking profits.
