A harmful Focus of Energy: Is CBN’s Fastened Earnings Securities Takeover a Ticking Bomb for Nigeria’s Economic system?  

BY BLAISE UDUNZE

The Central Bank of Nigeria’s resolution to take full management of presidency securities issuance has been described by some as a daring transfer towards transparency and market effectivity. But, beneath the floor of this reform lies an internet of structural risks that might tighten credit score even additional, push rates of interest greater, escalate exchange-rate instability, set off regulatory turf wars, and strangulate the non-public sector, particularly small and medium enterprises (SMEs) that already wrestle to outlive in Nigeria’s high-cost economic system.

The coverage shift grew to become extra pronounced with the rollout of a brand new Treasury Payments (T-Payments) public sale regime, mandating that every one bids be submitted by way of the CBN’s S4 digital interface. This transition formally bypasses the longstanding Major Supplier Market Maker (PDMM) framework and represents the clearest signal but that the apex financial institution is asserting full management over how authorities securities are issued, priced, and distributed. In actual fact, the primary main take a look at of this technique will happen with the federal authorities’s deliberate N700 billion T-Payments issuance scheduled for November 20, 2025 which is an unprecedented rollout that successfully transfers public sale energy from market intermediaries on to the CBN.

Analysts say this shift is just not merely operational; it’s structural. The S4 interface, which has existed since 2014 however by no means totally deployed as the first submission platform, now turns into the unique gateway for presidency securities issuance. All bids, whether or not retail or institutional should be lodged by way of S4 between 8:00 a.m. and 11:00 a.m., with the CBN sustaining full discretion to regulate the provide quantity or reject bids it considers inconsistent with market circumstances. Settlement will happen inside 24 hours.

In line with market skilled Tajudeen Olayinka, CEO of Wyoming Capital Companions, the coverage “is in keeping with the CBN’s sign that it will take cost of the first phase of the fixed-income market the place authorities securities are issued.” One other veteran supplier put it extra bluntly: “With S4, no supplier can see what price others are quoting. All bids now meet on the identical window. This dismantles the previous benefit PDMMs loved.”

Though transparency is improved by eradicating sellers’ visibility over competing bids, issues have intensified over the broader penalties of the CBN monopolizing the federal government securities market. The hazard is that this reform which is unaccompanied by robust institutional coordination between the CBN, the DMO, and the Ministry of Finance may set off deeper systemic imbalances.

Some of the urgent fears is the crowding-out impact. If the CBN aggressively points extra authorities securities as a part of its liquidity-management operations, banks, already closely invested in authorities debt, will divert much more of their portfolios towards these risk-free devices moderately than lending to the actual economic system.

Nigeria’s high 5 banks often called the FUGAZ group (First HoldCo, UBA, GTCO, Entry Corp, and Zenith Bank) present compelling proof of this shift. Their monetary statements present a mixed N49.152 trillion funding in securities and Treasury Payments as of September 2025, a pointy rise from N42.204 trillion on the finish of 2024. In simply 9 months, they added practically N7 trillion to those holdings.

Curiosity earnings from these investments surged by 33 %, hitting N4.8 trillion within the first 9 months of 2025 in comparison with N3.6 trillion in the identical interval of 2024.

–       Entry Company led the pack with N15.25 trillion in securities holdings,

–       adopted by UBA with N13.59 trillion,

–       Zenith at N9.05 trillion,

–       First HoldCo with N6.35 trillion, and

–       GTCO at N4.91 trillion.

These investments generated strong returns: Entry earned N1.3 trillion; Zenith N1.14 trillion; UBA N1.03 trillion; FBN HoldCo N720 billion; and GTCO N570 billion.

For analysts, these numbers expose a structural vulnerability as Nigerian banks are rapidly reworking into large-scale authorities lenders moderately than engines of private-sector credit score. As Dr. Muktar Mohammed of Lagos Enterprise School explains, “Banks have discovered refuge in authorities devices as a result of they’re protected, liquid, and yield excessive returns in a unstable economic system, however this behaviour constrains credit score progress to the actual sector.”

Lending information confirms this.

–       Zenith Bank’s loan-to-deposit ratio slipped from 43 to 40 %;

–       Entry Company maintained a flat 41.2 % regardless of rising deposits;

–       UBA’s ratio dropped to twenty-eight.2 %;

–       GTCO’s remained stagnant; and solely

–       First HoldCo confirmed notable enchancment.

This development is harmful. Nigeria’s non-public sector, particularly SMEs is already starved of credit score. Lending charges hover between 28 % and 35 %, making capital unaffordable for many small companies.

With the CBN taking full management of securities issuance, the chances are excessive that extra liquidity might be absorbed by way of T-Payments and OMO payments, pushing rates of interest additional upward. The extra engaging authorities securities grow to be, the much less incentive banks should lend to SMEs. That is how economies slide into cycles of low productiveness, excessive unemployment, and weak home funding.

The implications don’t finish there. Extreme issuance of presidency securities may additionally destabilize the alternate price. When rates of interest stay artificially excessive to draw international portfolio buyers into T-Payments, Nigeria turns into depending on “scorching cash” which seems to be short-term international inflows that exit the economic system on the slightest shock. This sample has traditionally triggered sharp naira depreciation, panic within the FX markets, and extreme liquidity shortages within the banking sector. If the CBN makes use of this securities-controlled regime to maintain excessive yields, Nigeria dangers attracting unstable capital inflows that can exit quickly, placing strain on the naira.

Past financial and credit score dangers, there’s a troubling regulatory dimension. The CBN’s transfer emigrate fixed-income buying and selling and settlement from the FMDQ Securities Alternate, which is underneath SEC oversight to its personal Actual-Time Gross Settlement (RTGS) and S4 platforms has ignited a full-blown turf struggle between the CBN and the Securities and Alternate Fee.

Beneath the Investments and Securities Act (ISA) 2025, the SEC holds unique authority over buying and selling venues. Critics warn that the CBN’s try to function exchange-like infrastructure violates statutory boundaries and dangers destabilizing the market.

Dr. Akin Olaniyan, CEO of Charterhouse Restricted, described the transfer as “a possible recipe for twin regulation and confusion,” arguing that it might undermine investor confidence. Equally, Dr. Walker Ogogo, pioneer Registrar of the Institute of Capital Market Registrars, famous that for the reason that CBN already owns 16 % of FMDQ, working parallel infrastructure creates conflicts of curiosity that ship destructive indicators to international buyers.

MoneyCentral studies that the migration may set off a 67 % drop in FMDQ’s buying and selling quantity, weakening a system that has lengthy supported Nigeria’s fixed-income ecosystem.

Veteran banker Victor Ogiemwonyi said, “the CBN is just not an alternate; it shouldn’t be concerned in issuing, dealing, and settling securities. Conflating these roles creates pointless danger.” His issues are grounded within the precept that market operators should be impartial from regulators to stop conflicts of curiosity. The CBN’s twin position as each regulator and operator blurs these strains and will set a harmful precedent.

The true casualties of those structural conflicts might be SMEs and the broader non-public sector. These enterprises depend on financial institution credit score to fund stock, purchase equipment, increase operations, and stand up to financial shocks. When banks desire authorities securities over lending,

–       SMEs face greater charges,

–       stricter collateral necessities,

–       fewer mortgage merchandise, and shorter tenors.

–       Many might be compelled to downsize, lay off employees, or shut altogether.

In an economic system the place SMEs account for over 90% of jobs, this contraction can be disastrous.

One other main overarching danger is that:

–       The CBN’s consolidation of securities issuance energy with out corresponding checks from the DMO and Ministry of Finance creates an unbalanced monetary structure the place financial priorities overshadow fiscal realities and private-sector progress.

–       Insurance policies crafted in silos hardly ever produce macroeconomic stability. They produce distortions, uncertainty, and systemic fragility.

Nigeria stands at a essential junction. Securities issuance may be made clear with out centralizing all energy within the CBN. Fastened-income markets may be cleaned up with out dismantling the institutional steadiness that preserves confidence. What the nation wants is coordination, not consolidation; collaboration, not domination.

If the CBN continues its takeover with out strong guardrails, the consequence could also be a monetary system the place banks cease lending, SMEs proceed to break down, rates of interest stay excessive, the naira stays unstable, and regulatory conflicts scare away each native and international buyers.

To keep away from the damaging dangers forward, Nigeria should:

1. Strengthen collaboration between CBN, DMO, and Ministry of Finance. Debt issuance should replicate each financial and monetary realities not simply liquidity wants.

2. Prioritize long-term bonds over short-term T-Payments. This reduces rollover danger and supplies steady funding at decrease long-term value.

3. Implement SME-focused credit score interventions by way of non-public banks, not direct CBN lending. Financial coverage mustn’t try to switch business banking.

4. Cut back authorities’s home borrowing wants. This requires fiscal reforms, spending self-discipline, and income growth no more debt.

5. Shield private-sector credit score allocation. Regulators ought to discourage extreme financial institution funding in authorities securities.

With out these safeguards, the economic system dangers tilting dangerously towards financial domination and private-sector suffocation.

The features of transparency can’t come at the price of institutional imbalance. Nigeria’s financial restoration is dependent upon a thriving non-public sector, not an increasing authorities debt market. The central financial institution should not grow to be the one strongest issuer, supplier, regulator, and choose in its personal market. That path leads to not stability however to systemic danger, danger that Nigeria’s fragile economic system can unwell afford.

In the meantime, it will be significant for CBN to offer readability on the financial rationale behind this centralisation of energy. The CBN should come ahead to justify how this shift will tangibly profit the economic system, significantly within the areas most delicate to credit score availability, monetary stability and stability for Nigeria’s broader economic system.

Blaise, a journalist and PR skilled writes from Lagos, may be reached by way of: blaise.udunze@gmail.com