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Financial markets

Regulatory Overlap Threatens Nigeria's Financial Markets

Strategic Insights

— 2 min read

The brewing regulatory overlap between the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) is raising concerns across the financial markets. The CBN's plan to expand its influence over fixed-income trading and market infrastructure risks destabilizing confidence and undermining statutory mandates set out in Nigeria's Investment and Securities Act (ISA) 2007 and its updated 2025 version. Analysts warn that the CBN's recent initiative appears to sidestep provisions that confer regulatory powers exclusively on the SEC.

Key Takeaways:

  • The CBN Act does not allow the Bank to directly run commercial ventures without federal approval and separate incorporation.
  • The S4 settlement platform is not registered under ISA 2007 or ISA 2025 requirements.
  • Direct regulatory and operational influence by the CBN risks a clear conflict with the SEC's statutory authority.
  • FMDQ Group, Nigeria's dominant fixed-income and foreign exchange trading infrastructure, is at the centre of the dispute.
  • Critics argue that the CBN's attempt to assume functions currently performed by FMDQ could lead to commercial displacement and value erosion for its shareholders.
  • The CBN should support the strengthening of current FMIs while leaving regulatory enforcement with the SEC to ensure accountability, market transparency, and investor protection.
  • Excessive regulatory expansion by the CBN risks blurring the line between its monetary stabilization mandate and fiscal-related activities involving government securities issuance and trading.
  • Historically, the CBN has contributed significantly to the evolution of Nigeria's fixed-income market, but its well-intended intervention could trigger a "Cobra effect" that erodes market confidence and disrupts governance clarity.
  • Industry experts and policy observers are calling for urgent dialogue between the CBN, SEC, and other market institutions to reaffirm regulatory boundaries and protect the integrity of the capital market ecosystem.

Statistics:

  • 3 main issues identified by market intelligence from Proshare Economic and Market Intelligence Unit (EMIU):

+ The CBN Act does not allow the Bank to directly run commercial ventures without federal approval and separate incorporation.

+ The S4 settlement platform is not registered under ISA 2007 or ISA 2025 requirements.

+ Direct regulatory and operational influence by the CBN risks a clear conflict with the SEC's statutory authority.

  • 1 recent position paper circulating among industry operators questions the legality of the CBN's request to assume direct responsibility for the Nigerian fixed-income market infrastructure.
  • 1 source pointed to a recent episode where state governors publicly thanked the CBN Governor for 'supportive fiscal policy' - an acknowledgment that underscores a growing but improper shift.
  • 1 senior market analyst warned that 'interloping always creates chaos' and that the CBN should not jeopardise its reputation by venturing into an area where the SEC is clearly empowered by law.

Sources:

  • Proshare Economic and Market Intelligence Unit (EMIU)
  • Nigeria's Investment and Securities Act (ISA) 2007 and its updated 2025 version
  • CBN Act
  • FMDQ Group
  • Financial Markets Dealers Association (FMDA)
  • Position paper circulating among industry operators
  • An unnamed source

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