SEC Nigeria Issues Guidelines On Revised Minimum Capital For Regulated Entities

1. Background and Regulatory Context

On 18 March 2026, the Securities and Exchange Commission issued the Guidelines on Revised Minimum Capital for Regulated Entities. These Guidelines were made under the Investments and Securities Act 2025 and other enabling legislations, with the aim of updating and strengthening the capital requirements applicable to operators in the Nigerian capital market.

The document is far more than a routine administrative adjustment. Its stated objectives include improving investor protection, strengthening the resilience and integrity of the Nigerian capital market, establishing a more risk sensitive and proportionate capital framework, supporting effective supervision and early regulatory intervention, and bolstering both domestic and international confidence in the prudential soundness of the market. These aims are consistent with global standards, including IOSCO principles.

In practical terms, the Guidelines introduce a significant recalibration of the prudential baseline for a broad range of operators. The reforms affect not only firms seeking new registration, but also existing operators whose current capital structure, licence mix, group arrangements or funding model may no longer meet the revised thresholds.

2. Scope and Binding Effect

The Guidelines apply to all entities licensed, registered, or otherwise regulated by the SEC to perform capital market activities. This includes existing capital market operators as well as applicants seeking new registration. A notable feature for multiservice firms is the SEC's adoption of a functionbyfunction approach. Where an operator carries out more than one regulated activity, it must meet the capital requirement applicable to each function performed. For diversified businesses, the impact therefore depends not only on the primary licence held, but on the full range of regulated services actually being provided

The Guidelines are expressly binding. Noncompliance may attract regulatory sanctions as prescribed under the Investments and Securities Act 2025 and relevant SEC rules.

3. Transitional Arrangements and Compliance Timetable

The transition framework is commercially significant and requires board-level attention immediately. Existing CMOs must comply with the revised minimum capital requirements on or before 30 June 2027. Every existing CMO must also submit a board-approved capitalization plan, or alternatively a downgrade or scale-back plan, to capitalbase@sec.gov.ng on or before 30 April 2026.

For new applicants, compliance with the revised minimum capital requirements is stated to be a precondition for registration from 16 January 2026. The Guidelines further provide that CMOs with pending applications as of 16 January 2026 must submit written board-approved plans to comply by 30 June 2027. Applicants whose applications had been pending for at least 12 months as of that date are required to file fresh applications and comply with the revised regime.

There is an apparent drafting or timing issue worth noting. The Guidelines are dated 18 March 2026, but the transitional provisions refer back to 16 January 2026 for new registrations and pending applications. Regulated entities with pending applications may therefore wish to seek clarification from the SEC on how those provisions will be applied in practice.

4. What Counts as Qualifying Capital

The Guidelines define 'Capital Base' as the shareholders' funds of a regulated entity, comprising qualifying capital components net of accumulated losses. 'Qualifying Capital' must be fully paid-up, freely available, unencumbered, and capable of absorbing losses on a going-concern basis

The SEC recognises the following as qualifying components of capital base:

• Fully paid-up ordinary share capital.
• Fully paid-up irredeemable preference shares, provided they are non-redeemable, subordinated to all creditors, and do not impose mandatory dividend obligations.
• Share premium arising from fully paid-up capital issued for cash or other eligible consideration.
• Retained earnings arising from audited profits, less any unrealised gains.

The restrictive formulation is important. The SEC is signalling that only real, loss absorbing and immediately available capital will count for prudential purposes.

5. Non-Qualifying Capital and Regulatory Exclusions

The Guidelines expressly exclude several balance sheet items that some operators may previously have regarded as part of their capital support. The following do not qualify as capital for the purposes of the new regime:

• Revaluation reserves and gains from asset revaluation.
• Unrealised or fair value gains not crystallised in cash.
• Borrowed funds, shareholder loans, and other debt instruments, whether secured or unsecured.
• Client monies, client assets, or securities held in custody or trust.
• Contingent assets and deferred tax assets.
• Any capital subject to lien, charge, pledge, or other encumbrance.

For operators currently relying on a balance sheet inflated by non-cash or non permanent components, the compliance gap may be considerably wider than it first appears. A purely headline comparison of shareholders' funds against the revised thresholds may therefore be misleading unless the balance sheet is rebuilt using only qualifying components.

6. Recognition Rules and Financial Statement Evidence

Only qualifying capital components reflected in audited financial statements not older than nine months will be recognised for compliance purposes, unless the SEC approves another period. The SEC also reserves the right to require interim audited or revised financial statements where necessary for supervisory purposes.

This means the exercise is evidential as well as financial. Operators will need to ensure that the form, timing, and audit support for their capital position align with the Guidelines. Firms approaching the threshold through late-stage capital injection or internal restructuring should plan carefully for documentation timing, audit treatment, and regulatory verification.

7. Permitted Modes of Capitalisation

The Guidelines recognise three principal routes to compliance.

7.1 Capital Injection

Capital may be injected by cash deposits or by certain eligible non-cash instruments, subject to valuation and verification. These include quoted equity securities, units of collective investment schemes, bonds issued by federal, state, or local governments, supranational institutions, or investment-grade corporate issuers, and unquoted securities actively traded on SEC-recognised OTC platforms Annex I provides the valuation rules for non-cash capital instruments. Valuation is generally based on close of business on the date of transfer, using official closing price for quoted securities, latest published NAV for CIS units, and market price for bonds.

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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.