Introduction
Nigeria’s investment landscape has entered a distinctly new chapter following the enactment of the Investment and Securities Act (ISA) 2025. Signed into law by President Bola Ahmed Tinubu in March 2025, this landmark legislation repeals the Investment and Securities Act No. 29 of 2007, marking the most significant overhaul of the nation’s capital market framework in nearly two decades. In a rapidly evolving global financial environment, characterized by technological innovation and the emergence of new asset classes, the ISA 2025 aims to modernize Nigeria’s regulatory structures, bolster market integrity and transparency, align with international best practices, and, critically, enhance the protection afforded to the investing public. For every investor, market operator, and stakeholder within the Nigerian capital market, understanding the key reforms introduced by this Act is not just beneficial, but essential.
The previous ISA, enacted in 2007, predated many significant developments that have reshaped modern finance, most notably the rise of digital assets and the increasing complexity of financial instruments. The ISA 2025 addresses these changes head-on, seeking to create a regulatory environment that is both robust and adaptable. Its enactment is seen by policymakers and market stakeholders as a crucial step towards achieving Nigeria’s ambitious economic goals, including the target of a $1 trillion economy, by fostering a more attractive, reliable, and efficient capital market.
Strengthening the Apex Regulator: The Enhanced Role of the SEC
Central to the ISA 2025 is the reaffirmation and significant strengthening of the Securities and Exchange Commission (SEC) as the apex regulatory authority for the Nigerian capital market. The Act equips the SEC with enhanced powers comparable to benchmark global securities regulators, enabling more effective oversight, supervision, investigation, and enforcement. This includes a clearer mandate to regulate the derivatives market and solidifying its authority over the entire commodities ecosystem.
Crucially, these enhanced powers are designed to help Nigeria maintain its ‘Signatory A’ status under the International Organisation of Securities Commissions (IOSCO) Enhanced Multilateral Memorandum of Understanding (EMMoU), a vital benchmark for credibility and cooperation in global financial markets. Furthermore, in a move to bolster its investigative capabilities, the Act grants the SEC the power to obtain subscriber records, payment details, and communication content from telecom and internet service providers in Nigeria when investigating violations of the Act. While intended to facilitate enforcement, this particular provision highlights the expanded reach of the regulator under the new regime.
A Renewed Emphasis on Investor Protection
Investor protection lies at the heart of the ISA 2025. Recognizing the damage inflicted by fraudulent schemes, the Act takes a zero-tolerance stance against Ponzi schemes and other unlawful investment structures, explicitly prohibiting them. More significantly, it introduces stringent penalties for promoters and operators, including potential imprisonment terms of up to 10 years and fines ranging from N20 million to N40 million (approximately $12,500 – $25,000), alongside the recovery of illicitly obtained funds. This marks a substantial increase in deterrent measures compared to the previous Act.
The Act also strengthens the existing safety nets. It mandates the remittance of unclaimed dividends to an Unclaimed Dividend Trust Fund, managed under SEC supervision, ensuring these funds are handled transparently. Notably, the scope and operation of the Investor Protection Fund (IPF), maintained by securities exchanges, has been clarified and expanded. The IPF is designed to compensate investors who suffer losses due to the insolvency, bankruptcy, or negligence of dealing member firms, providing a crucial layer of recourse. Penalties for market infractions such as insider trading and market manipulation have also been stiffened. Additionally, foreign collective investment schemes seeking to attract Nigerian investors must now register with the SEC, failing which they risk heavy penalties, thus protecting local investors from potentially unregulated offshore offerings.
Enhancing Market Integrity and Transparency
Transparency and integrity are foundational pillars of the new Act, addressed through several key reforms. A significant step towards international alignment is the mandatory use of Legal Entity Identifiers (LEIs) by participants in capital market transactions. The LEI is a global standard that provides a unique identifier for legal entities participating in financial transactions, significantly improving transparency for regulators and counterparties.
The ISA 2025 brings much-needed regulatory clarity to the burgeoning digital asset space. It explicitly recognizes virtual/digital assets and certain investment contracts as ‘securities’, bringing Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges firmly under the SEC’s regulatory purview. This move aims to curb illicit activities within the space while fostering legitimate innovation and providing investors with a regulated environment for engaging with this asset class.
The Act also introduces structural reforms for market infrastructure. It classifies securities exchanges into ‘Composite Exchanges’ (allowed to list and trade all security types) and ‘Non-composite Exchanges’ (limited to specific asset classes). It establishes a comprehensive legal framework for the regulation of critical Financial Market Infrastructures (FMIs), such as Central Counterparties (CCPs), Clearing Houses, and Trade Depositories, ensuring their stability and sound operation. Notably, transactions conducted through these regulated FMIs are granted specific exemptions from the application of general insolvency laws, further bolstering market stability.
Furthermore, a dedicated new Part within the Act provides for the regulation of Commodities Exchanges and Warehouse Receipts, aiming to develop the full potential of the commodities ecosystem in Nigeria. The Act also expands the possibilities for capital raising by relaxing previous restrictions on Sub-National entities (State and Local Governments) and their agencies, allowing them greater flexibility to access long-term funding from the capital market for developmental projects.
What Does This Mean for Nigerian Investors?
The cumulative impact of these reforms under ISA 2025 points towards a more secure, transparent, and potentially dynamic investment environment for Nigerians:
- Enhanced Safety: Stricter regulations and penalties against fraud, coupled with strengthened investor compensation mechanisms, aim to create a safer market.
- Greater Clarity: Clearer rules govern both traditional securities and newer digital assets, reducing ambiguity for investors and operators.
- Improved Transparency: Mandatory LEIs and enhanced SEC oversight contribute to a more transparent market where information is more reliable.
- Potential for New Opportunities: Regulation of digital assets, commodities exchanges, and expanded capital raising options may lead to new investment products and avenues.
- Increased Confidence: Alignment with global standards (IOSCO) and a focus on market integrity can boost both local and international investor confidence in the Nigerian market.
Conclusion
The Investment and Securities Act 2025 is undeniably a transformative piece of legislation. It represents a concerted effort to modernize Nigeria’s capital markets, address contemporary challenges, protect investors, and lay a robust regulatory foundation for future growth. While the successful implementation and diligent enforcement by the SEC will be key, the Act itself provides the necessary tools and framework. As Nigeria strives towards its economic aspirations, the ISA 2025 is positioned as a critical enabler, fostering the trust and efficiency needed for the capital market to effectively mobilize resources and fuel development. Navigating this new landscape requires awareness and understanding, and investors are encouraged to stay informed about how these changes impact their financial decisions.