Concerns are mounting within Nigeria’s capital market over the Securities and Exchange Commission’s (SEC) proposed recapitalisation programme, with operators warning that the new capital thresholds could weaken market depth, constrain funding to the real sector, intensify consolidation and ultimately slow economic growth.
The proposed rules represent the most extensive overhaul of capital requirements in Nigeria’s securities industry in more than a decade, replacing the 2015 framework with sharply higher thresholds across all categories of market operators.
Under the new regime, fund and portfolio managers face particularly steep increases. Top-tier firms are required to maintain a minimum capital base of N5 billion, alongside additional requirements that link capital to assets under management (AuM) for larger firms.
Although the initial proposal pegged asset-backed capital at 10 per cent of AuM, this was later revised to 0.1 per cent for large asset managers. The adjustment followed widespread industry concern and placed a spotlight on what some stakeholders described as regulatory inconsistency rather than flexibility.
Specifically, while Tier 1 managers face a baseline requirement of N5 billion, Section 4 of the circular initially stipulated that any fund or portfolio manager with net asset value or AuM exceeding N100 billion must hold capital equivalent to 10 per cent of its AuM. This provision subjected large asset managers to intense recapitalisation pressure before it was scaled down.
The SEC has defended the reforms as necessary to strengthen market resilience, enhance investor protection and better align capital buffers with the evolving risk profile of capital market activities, particularly in technologically complex segments such as digital assets and fintech services.
Despite the regulator’s assurances, industry players have expressed growing concern that the new rules could accelerate consolidation, reduce competition and stifle innovation by forcing smaller and mid-sized firms out of the market.
Stakeholders warn that marginal operators—often responsible for niche services and product innovation—could disappear, leaving key segments dominated by a handful of large players. This, they argue, could undermine creativity, encourage cartel-like behaviour and weaken overall market growth.
There are also concerns that mid-sized firms may struggle to compete under a tiered regime that imposes significantly higher capital obligations without adequate transitional safeguards.
Although Section 6 of the circular provides for transitional arrangements, operators say the provisions are vague and leave too much to regulatory discretion.
“The Commission may, upon application and on a case-by-case basis, consider transitional arrangements where justified,” the SEC stated, adding that detailed compliance guidelines would be issued separately.
Coming at a time when banks have raised trillions of naira to meet new capital requirements and insurance firms are also seeking fresh capital, operators fear the SEC’s directive could further tighten liquidity, heighten credit constraints and deepen the crowding-out of the real sector.
Some market participants warned that firms may be forced to liquidate long-term investments in structured businesses and the real economy to lock up billions of naira as regulatory capital, potentially undermining long-term growth.
A stockbroker, who spoke on condition of anonymity, described the mood in the market as unsettled. “Most operators are confused and struggling to understand the intent of the rules,” he said.
Divergent expert views
While resistance to the proposals remains strong among stockbrokers, fund managers and other operators, some experts have argued that the recapitalisation exercise is both necessary and timely.
They contend that stronger capital buffers would improve operators’ ability to absorb shocks, reduce systemic risks and enhance investor confidence, positioning firms to handle larger and more complex transactions.
Chief Executive of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, dismissed fears that the policy would significantly constrain funding to the real sector, noting that credit creation is primarily the responsibility of banks rather than capital market intermediaries.
Yusuf argued that many banks have already met the Central Bank of Nigeria’s capital requirements and are therefore not severely constrained in their lending capacity. He added that the main challenge to real sector lending remains the high-risk profile of many borrowers, not capital availability.
He also noted that, when adjusted for inflation and currency depreciation, existing capital requirements for market operators are relatively weak in real terms, underscoring the need for periodic reviews. In his view, the sharp increases reflect years of irregular adjustments rather than regulatory excess.
Former President of the Chartered Institute of Bankers of Nigeria (CIBN), Dr Uche Olowu, also defended the policy, arguing that adequate capitalisation is critical to the effective functioning and credibility of the capital market.
According to Olowu, funds raised for recapitalisation do not leave the financial system but circulate within it, supporting broader economic activity. He stressed that even non-custodian market operators require sufficient liquidity to meet settlement obligations and execute transactions efficiently.
Similarly, the President of the New Dimension Shareholders Association of Nigeria, Mr Patrick Ajudua, welcomed the SEC’s decision, particularly as it affects issuing houses and trustees. He linked the move to the Federal Government’s ambition of building a $1 trillion economy, noting that larger and more complex capital market transactions demand stronger intermediaries.
From an academic perspective, Professor Sheriffdan Tella acknowledged that the new capital thresholds are substantial but achievable over time. He, however, urged the SEC to adopt a more accommodating compliance timeline that reflects local market realities.
Tella suggested extending the compliance period to between 24 and 30 months to allow operators to mobilise capital without destabilising their operations or the broader market. He warned that simultaneous capital demands across multiple sectors could compound pressure on private sector funding, particularly if not matched by sustained foreign capital inflows.
While noting recent improvements in foreign investor interest, Tella cautioned that the success of the recapitalisation exercise would depend on careful sequencing, flexibility and policies that prevent unintended harm to market development and economic growth.
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