Nigeria is now, more than ever, tidying up its regulatory environment with a series of reforms aimed at simplifying legal frameworks and bringing in offshore capital to stimulate growth.
The country, through the Securities Exchange Commission (SEC), is harmonising policies captured in its ‘Capital Market Master Plan’, geared towards eliminating regulatory arbitrage that hinders the attractiveness of Africa’s top crude producer as a destination for capital.
“Our first order of business is to transform our regulatory framework into a competitive advantage,” Emomotimi Agama, director-general SEC, said at BusinessDay’s policy roundtable series Tuesday, themed ‘Reclaiming Capital: Policy Solutions For Fund Domiciliation in Nigeria.’
“This will help us provide clarity, simplicity, and robustness that global fund managers demand. It will create a clear, predictable pathway for establishing and operating all forms of investment funds in Nigeria.”
In a bid to ensure regulatory harmony, Agama revealed that the new Investment Securities Act (ISA 2025) incorporated the National Pension Commission and the Central Bank of Nigeria as serving board members of the SEC.
Nigeria, like many other African countries, continues to raise billions yearly in pensions, retail savings, and diaspora flows, yet most funds are domiciled abroad, a situation that limits capital for small and medium enterprises and slows financial market growth.
While funds slip off the shores of Nigeria, they make way to Mauritius with the island nation of a population less than 2 million people home to more than $80 billion Asset Under Management. That compares with about $15 billion in Africa’s most populous nation.
Investors, fund managers want the government to implement investor-friendly fiscal policies, ensure predictable currency convertibility, and strengthen judicial efficiency and dispute resolution to unlock fund domiciliation in Nigeria, according to a report presented by Gwen Abiola-Oloke, CEO of Di Africa and member of the Collaborative of Fund Domiciliation in Africa.
But the SEC is making efforts to rewrite that script by issuing regulatory frameworks to incentivise capital mobilisation. “Clarity on withholding tax will be advocated for a clearer, competitive, and long-term policy for domiciled funds, providing the certainty investors crave,” Agama said.
“We will explore options in consultation with PENCOM to subtly incentivise pension funds to allocate a portion of their portfolios to SEC-registered Nigerian domicile funds, creating a strong domestic demand base.”
According to the DG, works are in the pipeline to ensure the Nigerian market is ready to absorb incoming capital, including overhauling the usual delay in the transaction process on securities as part of the sweeping reforms to incentivise investors.
“We are doing what we call the STP, the straight-through process, so that all of the payment systems within the securities market come through to everybody seamlessly and digitised,” Agama said. “We are also reducing the payment cycle. And, of course, by November 28th, we’ll start T plus 2. And, of course, six months later, we’ll go to T plus 1.”
Still, stakeholders believe challenges persist. For Akinbola Akintola, head of Investor Relations and Research at PenOp, fears of investors remain consistency in regulation and provision of legal frameworks, stressing that “things are improving”.
“Pension funds are increasingly investing in private markets, in alternatives. I think one of the key issues is, and I think for the whole country, is local currency financing. We can’t depend on foreigners bringing in capital when we have the capital here,” Akintola said.
“And I think the allocation of pension funds to private markets, private equity, private debt, has doubled in the last three years. So the picture is getting better.”
Echoing the same sentiment, Azeezah Muse-Sadiq, partner, Banwo & Ighodalo said there are structural imbalances in the regulatory guidance from both SEC and PENCOM, a condition that has now created inconsistency.
“SEC should help in creating products, but not regulate those who want to invest in the products. Now, the SEC issued rules and tried to prescribe how PFAs can invest in private equity funds, whereas PENCOM is doing that already. Now, in replicating the rule, there is an inconsistency,” Muse-Sadiq said.
“The PENCOM rule had additional exemptions, which the SEC rule did not cover. The rules won’t change halfway through the game. If I read it and I interpret it, the interpretation across the room should be consistent.”
