A Legal Analysis Of The Securities And Exchange Commission's Revised Minimum Capital Framework For Capital Market Operators In Nigeria

Introduction

On 16 January 2026, the Securities and Exchange Commission ("SEC" or "the Commission") issued Circular No. 26-1 pursuant to its regulatory powers under the Investments and Securities Act, 2025. The Circular introduces a comprehensive revision of the Minimum Capital Requirements (MCR) applicable to all categories of entities regulated within the Nigerian capital market.

This regulatory intervention represents a significant shift in the capital adequacy regime governing capital market operations and reflects the Commission's strategic response to evolving market risks, increased product complexity, and the emergence of new asset classes, including digital and commodity-based instruments.

Statutory and Regulatory Basis

The authority of the SEC to prescribe minimum capital thresholds derives from its statutory mandate under the Investments and Securities Act, 2025, which empowers the Commission to regulate, develop, and maintain orderly capital markets in Nigeria. In exercising this mandate, the Commission is obligated to ensure investor protection, market integrity, and systemic stability.

Circular No. 26-1 constitutes a subordinate regulatory instrument intended to operationalize these statutory objectives by recalibrating capital requirements in line with contemporary market realities.

Policy Objectives of the Revised Minimum Capital Regime

The revised MCR framework is designed to achieve several interrelated regulatory objectives. These include strengthening the financial soundness and operational resilience of market operators, aligning capital requirements with the scope, complexity, and risk exposure of regulated activities, and enhancing market stability through systemic risk mitigation.

Additionally, the framework seeks to facilitate innovation and orderly market development, particularly in emerging segments such as financial technology, virtual assets, and commodity markets, while maintaining adequate safeguards for investors.

Scope of Application

The Circular applies broadly to all entities regulated by the SEC, without limitation. These include core and non-core capital market operators, market infrastructure institutions, capital market consultants, fintech operators, virtual asset service providers (VASPs), and commodity market intermediaries. The expansive scope reflects the Commission's intention to adopt a holistic, market-wide approach to capital adequacy regulation.

Revised Minimum Capital Requirements for Core Market Operators

Under the revised framework, substantial increases have been introduced for core regulated functions, including brokerage, dealing, inter-dealer brokerage, and fund and portfolio management services. Brokerage firms engaged in client execution, proprietary trading, margin lending, and advisory services are now subject to materially higher capital thresholds, reflecting the heightened risks associated with such activities.

Fund and portfolio managers are stratified into tiers based on the scope of their operations, assets under management (AuM), and exposure to foreign instruments. Tier 1 portfolio managers with full-scope operations and significant exposure to collective investment schemes and alternative investment funds are required to maintain a minimum capital of ₦5 billion. Notably, the Circular introduces an additional prudential safeguard by mandating that any fund or portfolio manager with assets exceeding ₦100 billion must hold capital equivalent to at least ten per cent of its NAV or AuM.

Capital Requirements for Non-Core Operators and Market Infrastructure Institutions

Non-core regulated functions, including issuing houses, registrars, trustees, underwriters, and rating agencies, are similarly affected by the revised MCR. Issuing houses offering underwriting services are now required to maintain a minimum capital of ₦7 billion, a significant increase from the previous ₦200 million threshold.

Market infrastructure institutions are subject to some of the highest capital requirements under the revised regime. Central Counter Parties (CCPs), composite securities exchanges, and clearing and settlement companies are required to maintain capital levels commensurate with their systemic importance and the potential contagion risks associated with their operations.

Regulation of Fintechs, Virtual Assets, and Commodity Market Intermediaries

A notable feature of Circular No. 26-1 is the formal incorporation of capital requirements for fintech operators and virtual asset service providers. Categories such as robo-advisers, crowdfunding intermediaries, digital asset exchanges, custodians, token issuers, and real-world asset tokenization platforms are now expressly regulated with defined capital thresholds.

The Circular also prescribes revised capital requirements for commodity market intermediaries, including collateral management companies, warehousing operators, and commodities brokers and dealers, with tiered thresholds based on operational scale and geographic reach.

Compliance Timeline and Transitional Arrangements

All regulated entities are required to comply with the revised minimum capital requirements on or before 30 June 2027. The Circular provides that entities failing to meet the prescribed thresholds within the stipulated period may be subject to regulatory sanctions, including suspension or withdrawal of registration.

However, the Commission retains discretion to approve transitional arrangements on a case-by-case basis, subject to application and justification by affected entities. Further regulatory guidance on compliance procedures and capital verification is expected to be issued separately.

Legal and Regulatory Implications

The revised MCR framework signals a decisive shift towards a more risk-sensitive and prudentially robust regulatory regime. While the increased capital thresholds may drive consolidation within the capital market and raise barriers to entry for smaller operators, they are likely to enhance market confidence, investor protection, and systemic stability over the long term.

From a legal perspective, regulated entities must proactively reassess their capital structures, licensing scope, and operational models to ensure continued compliance with the SEC's evolving regulatory expectations.

Recommended Immediate Actions

1. Conduct a gap analysis between current capital levels and revised MCR
2. Review license scope to confirm alignment with capital capacity
3. Engage financial advisers on recapitalization or restructuring options
4. Prepare compliance roadmaps ahead of the 30 June 2027 deadline
5. Consider applying for transitional arrangements, where necessary

Conclusion

Circular No. 26-1 represents a landmark regulatory development in Nigeria's capital market landscape. By aligning capital requirements with modern risk profiles and expanding regulatory coverage to emerging market segments, the SEC has reaffirmed its commitment to fostering a resilient, transparent, and investor-protective capital market framework.

The revised Minimum Capital for regulated entities are set out below. All capital figures are stated in Nigerian Naira (₦).

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.