Nigeria’s new capital market laws now classify cryptocurrencies and other virtual assets as securities, marking a significant shift toward greater transparency and investment opportunities. President Bola Tinubu recently signed the Investments and Securities Act (ISA) 2024 into law, replacing the previous ISA No. 29 of 2007.
The Act explicitly recognizes virtual/digital assets and investment contracts as securities, placing Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges under the regulatory oversight of the Securities and Exchange Commission (SEC).
This means businesses dealing in digital assets must register with the SEC and comply with its guidelines—a crucial step in curbing fraud while fostering trust and innovation in blockchain technologies.
SEC Director-General Emomotimi Agama hailed the move as a transformative step for Nigeria’s capital market, emphasizing that the new law will attract more investments in digital assets.
Nigeria initially responded with skepticism to the rise of cryptocurrencies, especially after the 2015 oil price crash led to a naira depreciation. Bitcoin and other digital currencies gained traction as Nigerians sought alternative stores of value, pushing the country to become the world’s second-largest cryptocurrency holder after the United States. However, concerns over the impact on the naira exchange rate led the Central Bank of Nigeria (CBN) to ban banks from facilitating crypto transactions, driving traders to underground peer-to-peer (P2P) exchanges.
Under President Tinubu and CBN Governor Olayemi Cardoso, Nigeria has softened its stance, signaling a shift toward regulation rather than restriction. Agama emphasized that ISA 2024 aligns with the government’s commitment to fostering a dynamic, inclusive, and resilient capital market.
Stakeholder Reactions
Capital market experts have lauded the new Act, highlighting its potential to enhance market integrity, boost investor confidence, and modernize Nigeria’s financial landscape.
- Oluropo Dada, 13th President of the Chartered Institute of Stockbrokers (CIS), described the law as a landmark achievement that promotes transparency and efficiency.
- Sam Onukwue, Chairman of the Association of Securities Dealing Houses of Nigeria (ASHON), noted that the ISA 2024 will strengthen regulatory oversight and provide market operators with diversification opportunities beyond traditional equities and fixed income.
- Eguarekhide Longe, Managing Director of NASD, emphasized that the law enhances investor protection, recognizes virtual assets as securities, and mitigates systemic risks.
- Akin Akeredolu-Ale, Managing Director of the Lagos Commodities and Futures Exchange (LCFE), praised the Act for creating an enabling legal framework for capital market growth.
Key Provisions of ISA 2024
The Act introduces significant reforms to align Nigeria’s market operations with global best practices:
- Classification of Securities Exchanges: Introduces Composite Exchanges (which list all security types) and Non-Composite Exchanges (which specialize in a single security type).
- Strengthening Financial Market Infrastructures: Enhances regulations on Central Counterparties, Clearing Houses, and Trade Depositories.
- Legal Framework for Commodities Exchanges: Establishes regulations for commodities exchanges and warehouse receipts to support market growth.
- Sub-National Securities Issuance: Expands opportunities for sub-national entities to raise funds from the capital market.
- Mandatory Legal Entity Identifiers (LEIs): Improves transaction transparency by requiring LEIs for capital market participants.
- Crackdown on Illegal Investment Schemes: Outlaws Ponzi schemes and prescribes strict penalties for promoters.
- Reinforcement of the Investments and Securities Tribunal: Enhances the Tribunal’s composition and jurisdiction to improve dispute resolution.
Strengthening SEC’s Authority
ISA 2024 reaffirms the SEC’s role as the apex regulatory body of Nigeria’s capital market, granting it enhanced powers comparable to global securities regulators. These powers align with the International Organization of Securities Commissions (IOSCO) standards, reinforcing Nigeria’s credibility as an investment hub.
By establishing a comprehensive legal framework for digital assets, ISA 2024 positions Nigeria at the forefront of financial innovation while ensuring regulatory clarity and investor protection. The Act’s implementation is expected to unlock new investment opportunities, deepen capital market participation, and foster long-term economic growth.
