Article by Joshua Ishola, Head of Investments, Capital Markets and Treasury at Canary Point
The Central Bank of Nigeria’s recent announcement that it will assume full operational control of the fixed income market starting in November 2025 has generated significant buzz across financial circles. For those outside the trading desks, this might sound like just another regulatory shuffle. But as someone who has spent years navigating Nigeria’s bond and treasury bill markets, I can tell you that this is a watershed moment that signals the CBN’s determination to reshape how the “cost of money” is determined in Africa’s largest economy.
What’s Actually Changing? Less Than You’d Think, More Than You’d Expect
Here’s the interesting paradox: structurally, not much is changing on the ground. Nigeria’s fixed-income market, where government treasury bills and bonds worth trillions of naira trade annually, already operates under the CBN’s regulatory umbrella. In 2024 alone, FMDQ Group, the market infrastructure backbone, recorded a staggering ₦461.34 trillion in total market turnover, with treasury bills and bonds accounting for 22% and 6% respectively of this volume.
The trading infrastructure has remained remarkably consistent. Banks execute trades through the Bloomberg Fixed Income Quotations (FIQ) platform. At the same time, settlement happens through the CBN’s own Scripless Securities Settlement System (S4) an electronic book-entry system that has been processing billions in transactions since its deployment. FMDQ’s Q-ex platform, integrated with S4 since 2018, already provides straight-through processing, minimising human intervention in post-trade workflows.
What’s genuinely transformative is the CBN’s intent to take a more active, hands-on role in overseeing trading itself, not just settlement. Think of it as the difference between being the landlord who owns the building versus being the property manager who actively runs daily operations. The CBN is moving from the former to the latter.
The Foreign Exchange Precedent: A Blueprint for Transparency
This move isn’t happening in a vacuum. It’s part of a broader pattern we’ve witnessed with the CBN’s recent foreign exchange market interventions. In late 2024, the CBN introduced the Electronic Foreign Exchange Matching System (EFEMS) via Bloomberg’s BMatch platform, which fundamentally transformed FX trading by mandating real-time price visibility and centralised order matching. The results have been striking: reduced speculative trading, improved price discovery, and most importantly, enhanced transparency.
The fixed income market reform appears to follow this same playbook. By centralising oversight and establishing “end-to-end visibility,” the CBN aims to replicate the transparency gains achieved in the FX market. For traders like myself, this means our transactions will be subject to even greater scrutiny but it also means the playing field becomes more level, with pricing anomalies harder to exploit.
Why This Matters Now: Following the Money
The timing of this announcement is hardly coincidental. Nigeria has experienced a notable resurgence in foreign portfolio investment (FPI) over the past 18 to 24 months. After years of capital flight and investor skepticism, FPI inflows surged to $3.48 billion in the first half of 2024 alone a dramatic turnaround from the $756 million recorded in the same period of 2023. By Q1 2024, total capital importation had reached $3.38 billion, representing a 198% year-over-year increase, with portfolio investment accounting for 61.48% of these flows.
This isn’t random. Global investors are responding to Nigeria’s ongoing reform momentum, from the removal of fuel subsidies to the unification of exchange rates and aggressive monetary tightening that pushed the policy rate to 27.75%. The CBN’s move to tighten its grip on the fixed income market can be seen as an effort to capitalise on this newfound investor confidence by creating a more robust, transparent marketplace that encourages longer-term participation rather than short-term speculative positioning.
In practical terms, offshore investors, particularly the institutional funds managing billions in emerging market debt, want certainty. They want to know that when they buy a Nigerian treasury bill yielding 20%+, the settlement process is bulletproof, the pricing is transparent, and there are no hidden friction costs. The CBN’s enhanced oversight aims to provide exactly that assurance.
What Could Go Right: The Upside Scenario
If executed well, this reform could be transformative. Enhanced transparency could attract a different class of investor, pension funds, sovereign wealth funds, and insurance companies that have been sitting on the sidelines. These institutional players want to see the kind of regulatory certainty and operational integrity that this reform promises in a way that can act as a risk mitigant.
We could see improved liquidity across the yield curve, tighter bid-ask spreads, and more efficient price discovery. The CBN’s ability to monitor real-time trading data means it can intervene more effectively to support monetary policy transmission, ensuring that changes in the policy rate actually flow through to market interest rates rather than getting stuck in the plumbing.
There’s also potential for innovation. With better data and oversight, the CBN could facilitate the introduction of new instruments, longer-dated inflation-linked bonds, or more sophisticated repo facilities that improve short-term liquidity management for dealers.
The Risk Register: What Keeps Traders Awake
No major reform comes without risks, and fixed income professionals are quietly watching for potential pressure points. The most obvious concern is concentration risk. While the CBN’s settlement infrastructure has proven remarkably resilient in handling massive volumes during the 2024 FX market surge, there’s always the question of what happens when you centralise too much operational control in a single institution.
Then there’s the FMDQ factor. As a self-regulatory organisation and market infrastructure provider, FMDQ has been the de facto custodian of market rules and trading conventions. The CBN’s encroachment into what has traditionally been FMDQ’s regulatory domain creates an interesting power dynamic. How will this affect FMDQ’s revenue model, which relies significantly on transaction fees and data services? I will say let see.
There’s also the perpetual tension between regulatory oversight and market efficiency. Heavy handed intervention can sometimes choke innovation or create unintended market distortions. Traders thrive on some degree of flexibility and discretion; too much standardisation and real time monitoring could potentially reduce market-making appetite, especially during volatile periods.
The Trader’s Reality Check: Business as Usual, With More Cameras
For those of us on trading desks, the immediate operational impact will likely be modest. We’ll still execute trades on Bloomberg terminals, settlement will still flow through S4, and the basic market mechanics remain unchanged. What changes is the level of oversight. Every transaction will be more visible, every pricing decision more traceable.
This is not necessarily bad news. In fact, for sophisticated participants who operate above-board, enhanced transparency can be an advantage. It squeezes out bad actors, reduces information asymmetry, and creates a more predictable environment. The challenge will be adapting to whatever new reporting requirements or compliance obligations emerge from the CBN’s expanded role.
The Bottom Line for Non-Market Participants
If you’re not a bond trader, why should you care? Because the fixed income market, though invisible to most Nigerians, fundamentally determines the cost of borrowing for everything from government infrastructure projects to corporate expansion. When this market functions efficiently when price discovery is accurate, when settlement is seamless, when foreign capital flows in rather than out it translates to lower interest rates, better access to credit, and ultimately, economic growth.
The CBN’s move is a bet that greater centralisation and transparency will make Nigeria’s fixed income market more attractive to the long-term capital that the country desperately needs. It’s a continuation of the reform agenda that has begun to restore global investor confidence in Nigerian assets.
Whether this gamble pays off depends on execution. The CBN will need to show to us that it can manage increased operational responsibility without creating bottlenecks or stifling innovation. It will need to work collaboratively (a tendency the current administration has shown) with market infrastructure providers like FMDQ rather than simply dictating terms. It will also need to maintain the delicate balance between oversight and flexibility that allows markets to function efficiently.
For now, the fixed income trading community is taking a “wait and see” approach, with dealers finding ways to position themselves. We’ve seen the positive impact of similar reforms in the FX market. We all know that Nigeria’s financial markets need to evolve if they’re to compete for global capital in an increasingly competitive landscape. And we understand that sometimes, the path to a more efficient market runs through a period of enhanced regulatory structure.
Come November 2025, when the CBN takes the reins, we’ll find out whether this bold move marks the beginning of a new era of transparency and efficiency or rearranges the furniture in a house that needs more fundamental repairs. The fixed-income market has the potential to be a beacon for emerging market debt; this reform could be the catalyst that finally unlocks its potential.
Visit Joshua Ishola’s profile on LinkedIn