Regulatory Crossfire: CBN’s Foray into FIM Oversight Erodes SEC Authority
Nigeria’s financial market are witnessing a subtle but significant regulatory upheaval following the Central Bank of Nigeria’s (CBN) recent move to assert control over the fixed-income market (FIM).
This decision, while framed as a measure to enhance transparency and market efficiency, has sparked deep concern among financial analysts and capital market operators.
The development is viewed as a sharp deviation from existing statutory provisions under the Investment and Securities Act (ISA) 2007 and more recently, its proposed ISA 2025 revision which unequivocally designate the Securities and Exchange Commission (SEC) as the apex regulator for all securities and capital market activities in Nigeria.
At the heart of the controversy lies a fundamental regulatory overlap. The SEC, empowered under Section 13 of the ISA 2007, retains exclusive authority over the regulation of securities markets, including bonds, derivatives, and other fixed-income instruments.
The CBN, on the other hand, is primarily tasked under the CBN Act of 2007 with monetary policy formulation, exchange rate stability, and financial system supervision.
However, by seeking direct control over the trading, settlement, and reporting framework of Nigeria’s fixed-income instruments, the CBN risks blurring the demarcation between monetary oversight and capital market regulation.
This duality, according to analysts, could unsettle the delicate institutional balance between the CBN and the SEC, creating a “regulatory duplication” that confuses market participants and undermines investor confidence.
The forthcoming ISA 2025 update reinforces the SEC’s primacy as the single regulator for all securities-related products, including government and corporate bonds.
The Act is explicit in mandating that all Financial Market Infrastructures (FMIs) such as exchanges, clearing houses, and settlement systems must be registered and supervised by the SEC.
Analysts argue that the CBN’s recent initiative to establish its own settlement and trading infrastructure for government securities, reportedly under the S4 settlement platform, contravenes this principle.
The platform’s operation without SEC registration or recognition raises compliance concerns and exposes market transactions to potential legal challenges.
Such parallel systems could lead to regulatory arbitrage, where market operators exploit differences between the SEC and CBN frameworks to evade scrutiny or compliance obligations, an outcome detrimental to market integrity.
Under Section 31 of the CBN Act, the Bank is prohibited from engaging directly in commercial ventures except through a separate legal entity and with the approval of the Federal Government.
Critics argue that the CBN’s direct involvement in establishing or running trading and settlement systems effectively places it in a commercial operational role, blurring its mandate as a regulator.
This legal ambiguity expose the apex bank to reputational and governance risks, particularly if market participants perceive it as both “player and referee.”
Such perceptions weaken investor trust in the neutrality of Nigeria’s financial oversight ecosystem especially as global investors increasingly demand clarity and independence in regulatory governance.
The immediate fallout of this regulatory tug-of-war is already being felt in the capital market. The FMDQ Exchange, a key player in Nigeria’s fixed-income trading ecosystem and a SEC-registered platform, faces potential value erosion as its core operations risk being displaced or duplicated. Investors holding equity in FMDQ could see diminished returns if transaction volumes shift toward a CBN-backed system.
Furthermore, regulatory uncertainty discourages foreign portfolio investment (FPI), as global investors prize clear and consistent regulatory frameworks.
With Nigeria already struggling to attract long-term capital inflows amid macroeconomic instability, this dispute could further dampen investor sentiment and exacerbate liquidity challenges in the debt market.
Market experts and policy analysts converge on several key recommendations:
1 Clarify Jurisdictional Boundaries:
The Federal Government and National Assembly should urgently mediate and codify the regulatory limits of both the CBN and SEC to prevent future jurisdictional conflicts.
2 Register All Financial Market Infrastructures (FMIs):
Every settlement, trading, or clearing platform regardless of sponsor should be duly registered under the SEC to ensure consistency with ISA provisions and international best practices.
3 Leverage Existing Market Infrastructure:
Rather than duplicating trading and settlement systems, the CBN should partner with existing SEC-supervised institutions such as FMDQ and CSCS to enhance efficiency while maintaining regulatory integrity.
4 Strengthen Inter-Agency Coordination:
Establish a Joint Financial Market Oversight Committee between the SEC, CBN, and DMO to coordinate regulatory decisions, share market intelligence, and harmonise policy implementation.
Nigeria’s ambition to build a robust and transparent fixed-income market hinges not merely on institutional power plays, but on regulatory harmony and market confidence.
While the CBN’s intentions may be rooted in improving market efficiency and transparency, the unilateral approach risks undermining established legal structures and investor trust.
To safeguard the stability and credibility of the Nigerian financial system, regulatory collaboration not competition must define the future of market governance.
The ultimate goal should be a unified, transparent, and investor-friendly marketplace that aligns with both domestic laws and international standards. Bitcoin Falls to $113,400 as Rally Fizzles Out
