The Securities and Exchange Commission (SEC) has announced its intention to enforce stricter regulations within Nigeria’s fintech ecosystem to address issues of fund mismanagement and ensure operators comply with existing capital market rules.
This was revealed by SEC Director-General Emomotimi Agama, during his keynote address at the Nigeria Fintech Week held on Tuesday.
Agama emphasized that the primary objective of the new regulations is to safeguard investors’ funds while promoting the sustainable growth of the fintech industry.
The move follows the shutdown of seven Nigerian fintech startups in 2023, which resulted in a loss of $79.15 million in investor funding.
These shutdowns were attributed to various factors, including failure to raise additional capital and a lack of proper corporate governance structures.
Agama highlighted that fintech companies engaged in fundraising activities must now adhere to capital market rules, particularly those that are public limited companies.
“If you are raising funds as a fintech company and are a public limited entity, you must come under the supervision of the SEC. However, private fundraising must also comply with the laws,” he stated.
He further stressed that the fast-growing fintech sector cannot be left unchecked, noting the potential risks of data misuse and unregulated public fundraising by companies.
“We cannot afford to leave this growing sector unchecked. Large amounts of investment data could be misused without consent, and companies are increasingly raising public funds without adequate regulatory control,” Agama added.
To strike a balance between regulation and innovation, the SEC is adopting a “smart regulation” approach, which tailors existing capital market laws to the specific needs of fintech operators.
The Commission’s innovation and fintech portal, FinPort, was established to assist new and existing fintech companies in navigating regulatory requirements; smart regulation takes into account the peculiarities of products in the fintech space and adapts regulations to fit them, rather than applying a one-size-fits-all approach.”
Additionally, the SEC has introduced a ‘three-pronged approach’ to fintech regulation, focusing on regulatory compliance, stakeholder confidence, and investor validation.
This strategy aims to ensure that innovative solutions meet security and consumer protection standards while fostering sustainable growth in the market.
“We want to create a regulatory environment that fosters innovation while protecting investors. Our framework is designed to encourage growth while ensuring that fintech solutions adhere to the necessary standards,” Agama stated.
Acknowledging the presence of over 200 fintech companies currently operating in Nigeria, Agama assured stakeholders that the SEC remains a supportive institution, particularly given the youthful and often inexperienced nature of many fintech founders.
“The current SEC is friendly and accommodating, knowing that many people involved in fintech are young and inexperienced. A lot don’t even know what to do,” he remarked.
However, Agama made it clear that the SEC will no longer tolerate regulatory breaches, stating that the days of overlooking gaps in the system are over.
He reiterated the Commission’s commitment to enforcing regulations that provide structure to the fintech space without stifling innovation.
In his remarks, Ade Bajomo, President of the Fintech Association of Nigeria (FinTechNGR), emphasized the need for a regulator that supports innovation within the fintech sector. He expressed concerns over a decline in investment, noting that funding in Nigeria’s fintech sector fell to $186 million in the first half of 2024, compared to $826 million in the same period of 2023.
The SEC’s enhanced regulatory oversight is expected to provide greater stability to the fintech ecosystem while encouraging responsible innovation and protecting investor interests.
By Ibe Wada
