CBN’s Fixed Income Reform Sparks Regulatory Tension as Banks Rake In ₦4.8 Trillion from Securities
The Central Bank of Nigeria’s (CBN) plan to assume control over the nation’s fixed-income market has ignited regulatory tension within Nigeria’s financial ecosystem. While the apex bank insists the reform will enhance transparency and efficiency in government bond trading, market operators and legal experts warn that the move could disrupt the balance between monetary policy management and capital market regulation, potentially breaching existing laws governing securities oversight.
Data from Nairametrics Research reveals that Nigeria’s top five banks — First HoldCo, UBA, GTCO, Access Corporation, and Zenith Bank, collectively known as the FUGAZ group — invested ₦49.152 trillion in investment securities and Treasury bills within the first nine months of 2025. This represents a 16.5% increase from ₦42.204 trillion recorded at the end of 2024. These investments generated a staggering ₦4.8 trillion in interest income, up from ₦3.6 trillion in the same period last year, highlighting how lucrative government-backed instruments have become amid economic uncertainty.
The banks’ preference for fixed income investments reflects a broader shift away from riskier private-sector lending toward safer, yield-driven government securities. Despite strong deposit growth, most FUGAZ members have maintained conservative loan-to-deposit ratios. For example, Zenith Bank’s ratio dropped from 43% to 40%, while UBA’s fell slightly to 28.2%. Only First HoldCo showed a notable uptick, raising its ratio from 60% to 68%, signaling a cautious industry leaning toward less volatile assets amid currency instability and credit risk.
At the center of the dispute is the CBN’s September 2025 circular announcing plans to migrate trading and settlement of fixed income instruments from the FMDQ Securities Exchange — currently regulated by the Securities and Exchange Commission (SEC) — to its own Real-Time Gross Settlement (RTGS) and Scripless Securities Settlement System (S4). Critics argue the move could create dual regulation and conflicts of interest, as the CBN Act does not authorize the bank to operate securities exchanges. Experts like Dr. Akin Olaniyan of Charterhouse Limited caution that such overreach could “undermine confidence in Nigeria’s market governance framework.”
Market reactions remain mixed. While some analysts believe the reform could democratize access and enhance transparency, others warn it could strain institutional boundaries. Highcap Securities CEO, David Adonri, contends that the CBN should restrict itself to primary market operations, leaving secondary trading to the SEC and the Nigerian Exchange (NGX). Others, like Wyoming Capital’s Tajudeen Olayinka, view the reform as a chance to improve data integrity and accountability. Ultimately, the success of the CBN’s fixed income reform will depend on how well it aligns with existing laws, ensures market fairness, and fosters collaboration with the SEC.
source: Nairametrics