Nigerian capital market will officially transition to a T+2 settlement cycle for equities transactions from Friday, November 28.
The move from a T+3 to a T+2 settlement cycle effective Friday is designed to align with global best practices and enhance market efficiency. This market-wide upgrade is aimed at delivering a faster and more seamless trading experience for investors.
What is T+2 settlement cycle?
It is the settlement cycle where the completion of a securities trade, including the transfer of ownership and payment, occurs two business days after the trade is executed. For instance, a trade executed on Monday (trade day) will be settled by Wednesday (trade day + 2 business days).
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How it works
Trade day (T): When a transaction is carried out (example, an investor buys shares) on Monday, the seller receives cash, and the buyer receives securities on the second business day after the trade (in this case, Wednesday).
What does this change mean?
It means that beginning this Friday, November 28, all equity transactions in Nigeria will now settle within two business days. A trade executed on a Monday will be finalised by Wednesday. Whether you are buying or selling equities, your shares or funds will be available sooner.
Under the new settlement cycle, all trades executed on Friday, November 28, will settle on Tuesday, December 2. But trades executed on Thursday, November 27 (before the November 28 official transition date) will also settle on December 2, coinciding with the first batch of T+2 settlements.
What instruments are affected?
The reduction impacts all tradable instruments except for fixed income instruments and commodities, which already settle on a T+2 cycle. The settlement cycle will normally impact secondary market transactions and is to be implemented on the following exchanges: The Nigerian Exchange Limited (NGX), the NASD OTC Securities Exchange, and the Lagos Commodities & Futures Exchanges (LCFE).
The Central Securities Clearing System (CSCS) Plc believes that the transition to T+2 marks a major milestone in enhancing market efficiency, strengthening risk management, and improving investor experience.
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The new cycle marks a defining milestone – CSCS
Haruna Jalo-Waziri, managing director/CEO, Central Securities Clearing System (CSCS), said the transition to a T+2 settlement cycle marks a defining milestone in the evolution of Nigeria’s capital market.
“It’s a clear signal that our market is advancing – becoming faster, more efficient, and globally competitive,” he said. “For us at CSCS, leading this change is about more than just shortening settlement time; it’s about improving liquidity, managing more effectively, and deepening investor confidence.”
Jalo-Waziri stressed that the timing couldn’t be more important, noting that as technology advances and more investors increasingly look toward emerging markets, Nigeria must continue to demonstrate that it is ready to play on the global stage.
T+2 settlement cycle boosts market liquidity – SEC
Emomotimi Agama, director-general, Securities and Exchange Commission (SEC), said recently during the Trade Associations Roundtable that the move was not just a technical reform but a major milestone that would make the Nigerian market more competitive and resilient.
“A shorter settlement cycle is a hallmark of a mature, dynamic, and competitive market. It directly addresses several key objectives. It significantly reduces counterparty risk and market exposure,” Agama said.
He said some of the upsides of the transition include less time between trade execution and final settlement, and the lower the potential for a default to ripple through the system.
“It boosts market liquidity by returning capital to investors more quickly, allowing for its redeployment and fostering greater market activity. It aligns our market with international best practices, enhancing our attractiveness to foreign investment and reinforcing Nigeria’s position as a key player in the global financial arena. Ultimately, a more efficient and safer settlement system strengthens the bedrock of our market—investor confidence,” Agama added.
It brings forth more agile trading – Futureview
In their recent view on key advantages of T+2, research analysts at Lagos-based Futureview said, “The transition comes with several benefits that enhance your experience: Quicker access to cash after selling your shares; improved market liquidity and activity; shorter settlement periods, reducing operational and counterparty risks; more agile trading, allowing you to capitalise on market opportunities faster; and alignment with international best practices, strengthening the competitiveness of the Nigerian market.”
Ahead of Friday’s transition to T+2 settlement cycle for equities transactions, SEC noted that the migration is expected to significantly enhance the Nigerian capital market by allowing investors quicker access to funds, thereby enhancing overall market liquidity and reducing counterparty risk exposure.
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Nigeria is adopting the T+2 settlement cycle to align with global standards, improve market liquidity, enhance investor confidence, and boost competitiveness. Major financial markets already use a T+2 or faster cycle for settlement of capital market transactions.
Faster settlement reduces counterparty risk and frees up capital quicker for reinvestment. A shorter cycle minimises price fluctuations and uncertainties between trade and settlement, thus boosting investor confidence. It also attracts more foreign and domestic investors by meeting international standards and increasing operational efficiency.
