INTRODUCTION
On March 25, 2025, the President of the Federal Republic of Nigeria, President Bola Ahmed Tinubu, signed the Investment and Securities Act, 2025 into law. This Act repeals the outdated Investment and Securities Act, 2007, addressing longstanding regulatory gaps, particularly in digital finance, market infrastructure, and investor protection. Below are the key reforms introduced by the Act and the implications.
KEY REFORMS
1. Strengthening the SEC's Role and Autonomy
The Act establishes the Securities and Exchange Commission (SEC) as the apex regulatory authority for the Nigerian capital market and affirms its independence in carrying out its functions. Except as otherwise provided in the Act, the Commission now has the authority to operate autonomously, free from interference by any governmental body.
2. Separation of Functions and Expanded Powers
The Act separates the objectives, functions, and powers of the Commission (unlike the 2007 Act, where these were lumped together). It also grants the Commission additional powers to:
- Obtain subscriber records held or maintained by telephone, internet service, and other electronic communication providers within Nigeria.
- In conjunction with the Attorney General of the Federation, provide information and assistance to local and foreign regulators regarding the freezing or sequestration of funds or assets within Nigeria.
- Establish a National Confiscation Wallet and a Multi-Party Combination Wallet.
- Disqualify any person considered unfit from working in the securities industry.
- Integrate all markets in securities with information and communication technology facilities.
3. Categorization of Securities Exchanges
ISA 2025 introduces two categories of securities exchange:
- Composite Securities Exchange: Permits the listing and trading of all types of securities and financial products.
- Non-Composite Securities Exchange: Limited to specific asset classes, such as commodities or derivatives markets.
4. Official Recognition of Virtual Assets
Previously, digital assets operated in a regulatory grey area. The new Act expands the definition of "securities" to include virtual and digital assets, and any other instrument deemed to be securities that can be transferred electronically.
This sets a foundation for a more structured and transparent financial environment, allowing proper regulation of assets such as cryptocurrencies, non-fungible tokens (NFTs), and stablecoins.
5. Prohibition of Ponzi Schemes
To curb the rise of Ponzi schemes, the Act authorizes the SEC to:
- Enter and seal off any prohibited scheme.
- Obtain an order from a tribunal or court to freeze and forfeit the assets of such schemes to the Federal Government of Nigeria.
- Recover investigation and enforcement costs from the funds and properties of the scheme or its owners, promoters, or managers — regardless of whether such assets were acquired legally.
Penalties: Promoters and operators of such schemes may be fined not less than ?20,000,000, imprisoned for up to 10 years, or both.
6. Replacement of "Capital Trade Point" with "Financial Market Infrastructure" (FMI)
Entities formerly known as capital trade points are now classified as FMIs and are required to register with or obtain a certificate from the Commission before commencing operations.
7. Insolvency Provisions for FMIs
Transactions involving FMIs are now excluded from general insolvency laws. Specifically, these laws do not apply to market contracts or actions related to securities exchanges and FMI operations (e.g., clearing, collateral transfers).
If insolvency proceedings are initiated against an FMI participant, market-related transactions take priority over general insolvency claims. This protects the integrity of financial market operations. The SEC may also enforce the recovery of debts owed by defaulting FMI participants.
8. Systemic risk Management
The SEC is empowered to issue directives for monitoring, mitigating, and managing systemic risks in the capital market—either on its own initiative or upon request from another financial sector regulator.
9. Expanded Eligibility for Public Securities Offerings
Under the previous Act, only public companies and corporates licensed under the Banks and Other Financial Institutions Act could invite the public to purchase securities.
The new Act expands this to include:
- Statutory bodies or banks established under an Act of the National Assembly.
- Entities licensed by the Central Bank of Nigeria to accept public deposits or issue securities.
- Collective investment schemes.
- Government agencies.
- Supranational bodies.
- Free trade zone entities with approved capital-raising programs.
10. Warehouse Receipts as Proof of Ownership
Receipts issued by duly registered warehouses with the SEC can now serve as proof of proprietary rights over a commodity.
IMPLICATIONS
- The SEC now operates with greater autonomy, enhancing transparency and regulatory effectiveness.
- The Act supports diversification and specialization in Nigeria's capital markets.
- It ends the legal grey area around digital assets, improving investor protection.
- It strengthens the legal framework against financial fraud and Ponzi schemes.
- Systemic risks can now be identified and addressed proactively.
- Broader categories of entities can now raise capital from the public.
CONCLUSION
The Investment and Securities Act, 2025 marks a pivotal shift in Nigeria's capital market framework. By repealing the 2007 legislation and introducing comprehensive, forward-looking reforms, Nigeria demonstrates a clear commitment to investor protection, innovation, systemic resilience, and international best practices.
Provisions such as the formal recognition of virtual assets, the classification of securities exchanges, SEC's autonomy, and anti-fraud mechanisms position Nigeria to attract both domestic and foreign direct investments.
As implementation begins, collaboration among regulators, investors, and other stakeholders is crucial to fully realize the potential of the Act.
For further guidance on how this may impact your business operations, please reach out to our Business & Compliance Immigration Advisory unit.
Originally published 2025-07-22
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
