Explainer: What capital threshold review means for market operators

Last Friday, the Securities and Exchange Commission (SEC) officially announced an increase in  minimum capital requirements for all categories of capital market operators (CMOs). In a circular, the commission explained that the upward review was informed by the need to strengthen market resilience, enhance investor protection. According to the SEC, the revised minimum capital framework […]

Last Friday, the Securities and Exchange Commission (SEC) officially announced an increase in  minimum capital requirements for all categories of capital market operators (CMOs).

In a circular, the commission explained that the upward review was informed by the need to strengthen market resilience, enhance investor protection.

According to the SEC, the revised minimum capital framework also seeks to align capital requirements with the scope, complexity, and risk exposure of regulated activities.

Other objectives of the exercise include promoting market stability and systemic risk mitigation, and supporting innovation and orderly development of new market segments, including digital assets and commodities markets.

SEC said, “This circular applies to all entities regulated by the commission, including but not limited to core and non-core capital market operators; market infrastructure institutions; capital market consultants; financial technology (FinTech) operators; virtual Asset Service Providers (VASPs); and commodity market intermediaries.”

Under the review, the minimum capital for brokerage services was significantly raised.

According to the SEC, brokers handling client execution will now be required to maintain N600 million, up from N200 million, while dealers engaged in proprietary trading must raise up to N1 billion, compared to the previous N100 million.

Broker-dealers offering combined services, including margin lending and advisory, will need N2 billion, up from N300 million, while inter-dealer brokers will now be required to have N2 billion minimum capital, compared to N50 million previously.

For fund and portfolio management, tier-1 portfolio managers with assets above N20 billion must now hold N5 billion, up from N150 million, while tier-2 managers will require N2 billion.

The regulator increased the capital base of private equity fund managers to N500 million, while venture capital fund managers will now need N200 million.

For issuing houses, Minimum capital has been raised to N2 billion for non-underwriting firms and N7 billion for those offering underwriting services, from N200 million previously.

The capital for registrars was increased to N2.5 billion, while rating agencies will now require N500 million, up from N150 million.

Trustees are now required to maintain N2 billion capital, while SEC slammed N5 billion on underwriters, with Investment Adviser (Corporate) expected to have between N5 million to 50 million, and N2 million to N10 million for Investment Adviser (Individual).

Market infrastructure institutions were also affected by the review. Central counterparties (CCPs) must now hold N10 billion, clearing and settlement companies N5 billion, and composite securities exchanges N10 billion.

For digital asset operators, the SEC introduced new capital thresholds. Digital asset exchanges must maintain N2 billion, digital asset custodians N2 billion, while digital asset offering platforms will require N1 billion.

Fintech operators such as robo-advisers must now hold N100 million from N10 million, while crowdfunding intermediaries will require N200 million from the previous N100 million.

Commodity market intermediaries also face higher thresholds, with warehousing operators now required to maintain up to N500 million, while collateral management companies with national or international reach must hold N500 million– up from N50 million.

Capital requirements for capital market consultants were revised upward to N25 million for corporate entities from 5 million, N2 million for individuals from N0.5 million, while the partnership category was raised to N10 million from N2 million.

The SEC said it may grant transitional arrangements on a case-by-case basis where justified, adding that detailed guidance on compliance and capital verification processes will be issued separately.

The commission noted that the circular takes immediate effect and is issued pursuant to its statutory mandate under the Investments and Securities Act, 2025, to regulate and develop Nigeria’s capital market.

The SEC directed all affected entities to comply with the revised minimum capital requirements on or before June 30, 2027, warning that failure to meet the deadline could attract sanctions, including suspension or withdrawal of registration.

Industry experts expect the new capital thresholds to trigger consolidation in the industry, as smaller firms may downscale, merge, or exit.

While there are fears that the new requirements could force smaller firms out of the market, many believe operators have 18 months to comply.Meanwhile, the Association of Securities Dealing Houses of Nigeria (ASHON) has demanded a downward review of the SEC’s new minimum capital requirements for market operators (CMOs).

In a statement, ASHON, which represents all stockbroking houses in Nigeria, said it is engaging members to ensure compliance with the new requirements before the deadline.

“As the umbrella trade association representing all Stockbroking Houses in Nigeria, the Association of Securities Dealing Houses of Nigeria (ASHON) , we want to say that we cannot run away from this capitalization review.

“In the meantime, we have commenced consultations and engagements aimed at ensuring that our members are well-positioned to comply with the new requirements before the deadline while also mobilizing for a downward review of the new capitalization,” it said.

The body noted that it is not challenging the regulator’s directive but is seeking to facilitate a smooth, orderly and considerate recapitalisation process for its members.

Dr. David Ogogo, pioneer Registrar and former President of the Institute of Capital Market Registrars (ICMR), in an interview said operators had sufficient notice and engagement.

“The conversation has been on for years. Those who were uncomfortable should have made representations, and I am aware some did,” Ogogo said, adding, “SEC must have considered these before arriving at the final figures.”

While he noted that the timing could have been pushed slightly later in the second or third quarter of the year, he acknowledged that the June 2027 deadline provides adequate room for adjustment.

 

Revised Minimum Capital in line with global standards – Prof. Uwaleke

Reacting to the development, Prof. Uche Uwaleke, Professor of Capital Market and President Capital Market Academics of Nigeria stated that the June 30, 2027 deadline, which is 18 months from January 2026, is defensible by international standards.

 

He however noted that it is undeniably demanding in the Nigerian context.

“Globally, regulatory-driven recapitalisation of Capital Market intermediaries typically allows between 12 and 24 months. Examples include the EU and UK investment-firm prudential reforms, which provided about 18-24 months, as well as India and South Africa, where Stockbrokers and other market intermediaries were given roughly 12 to 24 months depending on size and activity.

“Seen against this backdrop, the SEC’s timeline is not out of line with global practice,” he said

Speaking further, he noted that “be that as it may, adequacy of timelines depends less on the headline date and more on local market realities.

“It is a fact that many Capital Market operators in Nigeria are privately owned, thinly capitalized, and operate in an environment of high interest rates and limited access to long-term capital. For such firms, 18 months must accommodate valuation, due diligence, regulatory approvals, and actual capital raising.

 

“This makes the timeline feasible for large, well capitalized firms, but challenging for small and mid-tier operators-  likely accelerating consolidation, which appears to be the intended policy outcome,” he said.

 

Prod. Uwaleke added that to ensure success, the Commission will need to complement the deadline with thoughtful implementation.

 

“It goes without saying that clear and early guidance on compliance modalities is crucial.

 

“I recommend a phased or tiered approach with interim milestones that signal progress. This is vital if the experience of other Jurisdictions is any guide.

 

‘By the same token, fast-tracked approvals for mergers, acquisitions, and strategic investments, and limited regulatory forbearance for firms making demonstrable good-faith efforts would significantly improve outcomes

 

“All said, the timeline is internationally consistent and policy-credible, but domestically tight.

 

“Its adequacy will ultimately be judged not by the date itself but by how flexibly and transparently the SEC manages the transition while balancing market stability, investor protection, and orderly industry restructuring,” he added