1. INTRODUCTION
The Nigerian capital market has undergone a significant regulatory transformation with the recent enactment of the Investment and Securities Act 2025 signed into law on March 31, 2025, by President Bola Ahmed Tinubu, which repealed the erstwhile Investment and Securities Act 2007.1
This legislative overhaul responds to the dynamic evolution of the Nigerian capital market over the past eighteen years. It aims to align the regulatory framework with global best practices and address emerging trends such as the proliferation of digital assets.1 The extended period since the last major update to investment and securities law shows the growing necessity for modernization and the need to effectively address contemporary challenges and opportunities within the financial sector.
This report provides a comprehensive analysis of the Investment and Securities Act 2025, detailing its salient provisions, highlighting the key changes from the 2007 Act, and discussing its potential future impact on Nigeria's economic and security landscape.
2. SALIENT PROVISIONS OF THE INVESTMENT AND SECURITIES ACT 2025
1. Enhanced Regulatory Oversight For the Investment And Securities Commission (SEC)
The Act empowers the SEC with greater authority, including the ability to access critical data from telecommunication and internet service providers to effectively track and combat illegal activities such as insider trading and market manipulation. This enhanced power signifies a shift towards a more proactive regulatory stance, enabling the SEC to better monitor market activities and protect investors from fraudulent practices.
2. Strigent Penalties Against Ponzi Schemes And Illegal Investment
The Act introduces stringent measures to combat the persistent issue of Ponzi schemes in the Nigerian capital market.1 Promoters of such schemes now face severe penalties, including a fine, a term of imprisonment, or both, indicating a firm commitment to eradicating these harmful activities and restoring investor confidence in the capital market.
3. Mandatory Use of Legal Entity Identifiers
To further enhance transparency and reduce the risk of fraud, the ISA 2025 mandates the use of Legal Entity Identifiers (LEIs) for all participants in capital market transactions.1 This requirement aligns with global standards for financial transparency, facilitating better tracking of financial activities and improved risk management.
4. Inclusion of Digital Assets
The ISA 2025 officially recognizes virtual assets and investment contracts as securities, bringing them under the regulatory oversight of the SEC2. This landmark development provides much-needed clarity for Fintech companies operating in Nigeria, enabling them to innovate and create new financial products and services within a regulated framework. Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges are now subject to SEC regulations, which are expected to foster greater investment trust and innovation in blockchain technologies while curbing fraudulent activities in the cryptocurrency market.
5. Market Infrastructure Upgrade
The Act introduces market infrastructure upgrades aimed at enhancing the efficiency and transparency of the Nigerian capital market. It establishes a distinction between Composite Exchanges, which can list and trade all types of securities, and Non-Composite Exchanges, which focus on specific asset types3. This classification allows for greater specialization and could cater to diverse investor needs.
Additionally, the law introduces new systems for clearing houses and trade depositories to improve the transparency and efficiency of transaction settlements.
6. Sub-National Fundraising
In a move to support economic development at the sub-national level, the ISA 2025 includes a provision allowing Local and State governments to raise funds through the capital market for infrastructure projects.4 This enables these levels of government to finance essential projects such as roads, healthcare, and education without being solely reliant on federal allocations and commercial borrowing, potentially leading to significant improvements in infrastructure development across the country.
7. Commodities Exchange and Warehouse Receipts
Enhanced regulatory provisions stipulate the mandatory registration of commodity exchanges, clearing houses, and warehouses with the SEC5. Failure to adhere to this requirement will result in significant penalties, including potential imprisonment for a term not exceeding five years, and a minimum monetary fine of N10 million (or N3 million for warehouse operators), with the possibility of additional daily fines for sustained non-compliance. The Commission is also empowered with emergency authority to intervene in cases of market manipulation or disturbances to maintain market order. Additionally, the use of specific professional designations such as "Commodity Exchange" and "Trading Adviser" is limited to registered entities, and unauthorized use will be subject to a financial penalty of N10 million, plus a daily fine of N20,000 for ongoing violations.
By enhancing the regulation of commodities trading, the ISA 2025 aims to improve price discovery in the Nigerian Capital Market, thereby encouraging investment in agricultural production and providing farmers with better access to financing. This framework has the potential to unlock the vast potential of Nigeria's agricultural sector and contribute to economic diversification.
8. Expansion of Issuers Permitted to Raise Funds
The Act has expanded the categories of issuers permitted to raise funds in the capital market, subject to SEC approval.. This broadening of eligibility creates opportunities for a wider range of innovative financial instruments and can foster greater dynamism in the market.
9. Reform of the Investments and Securities Tribunal
Additionally, the Act reforms the Investments and Securities Tribunal, which is responsible for resolving capital market disputes6. The Act introduces amendments to its composition with an increase from 10 members to 12 members, with the President having the power to appoint members who will act on the Minister's recommendation.
Similarly, the tribunal will, in its, origibal jurisdiction, preside over a matter where the complaint is against a Director of the SEC, where the matter had been referred to SEC and SEC fails to act within 60 days, or where the matter stems from a regulatory action taken by SEC pursuant to the provisions of the Act. Whilst under its appellate jurisdiction, the Tribunal will preside over a matter where the dispute is between participants in the securities market, the matter arises from the administration, management, and operations of a collective investment scheme, or any matter relating to the review, approval and regulation of mergers, takeover and restructuring of public companies.
3. FUTURE IMPLICATIONS FOR NIGERIA'S ECONOMIC GROWTH AND SECURITY LANDSCAPE
Expert legal and economic analyses suggest that the Investment and Securities Act 2025 holds significant positive implications for Nigeria's economic growth and security landscape.3
The Act is viewed as a potential catalyst for sustainable economic growth, with experts anticipating improvements in time to market for new financial products, a deepening of the commodities market ecosystem, the attraction of listings from government-owned enterprises, a simplified process for sub-national governments to access long-term funding, and an overall increase in foreign investment.10
Notably, the inclusion of digital asset regulation in the ISA 2025 presents a pathway for Nigeria to be removed from the Financial Action Task Force (FATF) grey list 7, which would significantly enhance its international standing and credibility in the global financial sector. The formal recognition of digital assets is also expected to attract a new generation of retail investors, particularly the youth, into the capital market, thereby increasing overall investor participation and fostering greater financial inclusion
Overall, the Act aims to create a more robust and responsive capital market ecosystem that fosters innovation, protects investors, and contributes to a more favorable business environment conducive to economic growth. A clear example is the stringent measures implemented to combat Ponzi schemes, which communicate the government's commitment to protecting investors from financial fraud and maintaining the integrity of the capital market, fostering trust in the financial system.
However, ensuring the effective implementation and enforcement of the new, more complex regulations, particularly concerning digital assets and cross-border transactions, will be crucial and may require significant resources and capacity building for the Securities and Exchange Commission. Market participants will need to adapt to the new requirements, and the SEC will need to provide adequate guidance and education to ensure compliance from both traditional institutions and new digital asset operators.9 With increased digitalization, ensuring robust cybersecurity measures to protect investors and market infrastructure will be paramount.11
It is also important to recognize that the Act alone may not be sufficient to overcome broader existing economic challenges such as macroeconomic volatility and infrastructure deficits.31 Finally, the increased data access granted to the SEC may raise data privacy concerns that will need to be carefully addressed.
4. CONCLUSION
The Investment and Securities Act 2025 represents a significant and necessary step towards modernizing Nigeria's capital market regulations. By addressing gaps in the previous 2007 Act and introducing forward-looking provisions for digital assets and other emerging trends, the new legislation has the potential to transform Nigeria's financial landscape.
While the anticipated future impact on Nigeria's economic growth and international standing is largely positive, the successful realization of these benefits will depend heavily on the effective implementation and enforcement of the new regulations, as well as the ability to navigate potential challenges related to adaptation, technological advancements, and broader economic factors. Ultimately, the Act signifies a strong commitment to creating a more dynamic, inclusive, and resilient capital market that can contribute significantly to Nigeria's economic development and enhance its position in the global financial arena.
Footnotes
1 Section 123, Investment and Securities Act 2025
2 Section 350, Investment and Securities Act 2025
3 Section 27, Investment and Securities Act 2025
4 Section 259-264, Investment and Securities Act 2025
5 Section 222-229, Investment and Securities Act 2025
6 Sections 315, 316, 326, Investment and Securities Act 2025.
7 Nairametrics- Nigeria Set to Exit Financial Force Grey List with Robust Crypto Regualtion - https://nairametrics.com/2025/04/10/nigeria-set-to-exit-financial-action-task-force-grey-list-with-robust-crypto-regulations/#:~:text=Nigeria%20is%20on%20the%20verge,its%20AML%20and%20CFT%20regime. Accessed on April 22nd 2025.
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