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Background

In a bid to transform Nigeria’s financial landscape, President Bola Ahmed Tinubu signed the Investment and Securities Act (ISA) 2024 into law on 29 March 2025. This new legislation, which replaces the Investments and Securities Act No. 29 of 2007, introduces comprehensive reforms to strengthen the country’s capital market framework, enhance investor protection, improve regulatory oversight, and enhance the nation’s credibility in international financial markets.

The ISA 2024 presents notable amendments, which can transform the operations of the Nigerian capital market. The following and the key highlights of the new legislation.

Classification of Stock Exchanges

Section 27 of the Act introduces a new structure for the security exchanges by classifying types of stock exchanges into Composite and Non-composite Exchanges. A Composite Exchange is one in which all categories of securities and products can be listed and traded, while a Non-composite Exchange focuses on a singular type of security or product.

Recognition of Digital Assets as Securities

Section 350 of the Act recognises virtual and digital assets, including cryptocurrencies, as securities, thereby bringing them under the regulatory authority of the Securities and Exchange Commission (SEC). Consequently, entities involved in crypto assets and platforms, such as exchanges and dealing companies, are now mandated to register with and adhere to SEC regulations, similar to traditional financial institutions.

This crucial step intends to mitigate fraudulent activities within the digital asset ecosystem while simultaneously encouraging trust and fostering innovation in blockchain technologies. Furthermore, the Act broadens the definition of securities to encompass virtual/digital assets and investment contracts, explicitly extending the SEC's regulatory oversight to Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges.

Empowering SEC for Systemic Risk Oversight

Section 82 of the Act grants the SEC the authority to compel any capital market participant to provide necessary information or documents for monitoring, mitigating, and managing systemic risks, and this authority includes acting upon requests from other financial regulators. Failure to comply with such SEC requests incurs a minimum penalty of N20,000,000, plus a daily penalty of at least N50,000 for continuing non-compliance. These provisions establish a framework for proactive management of systemic risk within the Nigerian capital market.

Public Company Mergers and Restructurings

Section 140 of the Act mandates that all public companies must obtain the prior approval of the SEC before undertaking any scheme, transaction, arrangement, or issuing securities related to corporate actions and restructurings. This ISA 2024 also provides a statutory foundation for the SEC's authority to control mergers and similar activities involving public companies in Nigeria, thereby reinforcing the existing provisions outlined in the Federal Competition and Consumer Protection Act 2018.

Enhanced Market Oversight

To bolster transparency and mitigate systemic risks within Nigeria's securities market, Section 123 of the Act mandates the use of Legal Entity Identifiers (LEIs) for all entities, whether directly or indirectly involved in securities transactions. An LEI is defined as a unique code obtained from an authorised issuer identifying distinct entities engaged in financial transactions. The mandatory use of LEI aims to ensure the accuracy of financial data and strengthen overall risk management within the capital market, ultimately preventing market manipulations.

Penalties for Ponzi and Other Illegal Schemes

Ponzi and pyramid schemes are expressed to be prohibited schemes. The penalties prescribed for Ponzi and other unlawful investment schemes include fines and hefty jail terms for the promoters and operators of such schemes. Section 196 of the Act stipulates that promoters and operators of any entity engaged in a prohibited scheme commit an offence and is liable on conviction to a penalty of not less than N5,000,000 or imprisonment to a term of 10 years or both.

Boost for Commodity Exchanges

Part XVI of the Act establishes a crucial legal framework for the operation of commodity exchanges and the utilisation of warehouse receipts. This development holds significant potential for vital sectors of the Nigerian economy, including agriculture, mining, and manufacturing. By creating this structured environment, the Act aims to facilitate more organised financing opportunities for commodity traders, mitigate risks for both investors and other market participants, and ultimately contribute to Nigeria's efforts in diversifying its economy away from heavy reliance on the oil sector.

Efficient Dispute Resolution

The Act reinforces the authority and operational capacity of the Investments and Securities Tribunal (IST), the specialised court dedicated to resolving capital market disputes, with the aim of expediting issue resolution and safeguarding investor rights. Key provisions in Part XVIII of the Act focus on enhancing the tribunal's effectiveness through changes such as increasing its membership from 10 to 12, defining its constitution more clearly, outlining the qualifications and appointment process for the Chief Registrar, and clearly spelling out the original and appellate jurisdiction of the tribunal.

The IST has exclusive original jurisdiction where a complaint is directly against an action taken by the SEC, or where a matter was referred to the commission but it failed to act within a 60-day period. The tribunal’s appellate jurisdiction allows it to review disputes that have already been addressed by other bodies, mainly involving the SEC. This includes a wide range of capital market issues such as conflicts between market participants (like operators, exchanges, and investors), matters concerning collective investment schemes, and cases related to the approval and regulation of mergers, takeovers, and restructuring of public companies. These amendments are strategically designed to optimise the tribunal's ability to fulfil its mandate efficiently and effectively.

Issuance of Securities by Sub-National Entities

Part XVII (A) of the Act has ushered in a significant change by removing the restrictions on sub-national entities seeking capital market funding. The new flexibility empowers state and local governments to independently raise funds for crucial public initiatives, including infrastructure development and healthcare improvements. By facilitating direct access to the capital markets for sub-national entities, the Act intends to decrease their reliance on federal allocations and traditional debt instruments, fostering economic advancement at the grassroots level and promoting greater accountability in the deployment of public funds.

Insolvency Protection

Part V (C) of the Act introduces specific provisions to shield Financial Market Infrastructures (FMIs) from the potential disruptions of general insolvency laws. Recognising the unique structure, operations, and transactions inherent in FMIs and their participants, the Act establishes insolvency procedures distinct from those outlined in the Companies and Allied Matters Act 2020. This tailored approach aims to ensure the continuity and stability of critical financial market operations, even in situations of financial distress among participants.

Takeaway and Conclusion

The recent enactment of the Investment and Securities Act 2024 is anticipated to significantly reshape Nigeria's investment landscape. By establishing a more transparent and predictable market environment, the new legislation is poised to attract a greater influx of both domestic and international investors. Furthermore, the Act aims to foster innovation within the financial sector by providing a well-defined structure for the burgeoning areas of digital assets and fintech investments. This improved regulatory framework is also expected to enhance access to crucial capital for businesses and governmental bodies, thereby fuelling economic growth. Ultimately, a key objective of the Act is to bolster investor confidence through the implementation of stricter regulations designed to combat fraud and financial misconduct, thereby fostering a more secure and reliable investment climate.

The Act marks a significant stride in Nigeria's efforts to modernise its capital market. By adopting global best practices, intensifying the fight against fraudulent investment schemes, and promoting greater financial transparency, this new legislation establishes a robust framework for a more resilient, innovative, and globally competitive market. As Nigeria actively pursues economic diversification and broader financial inclusion, the Act stands as a vital instrument for stimulating capital formation, cultivating investor trust, and unlocking fresh avenues for sustained economic growth.

Detail Commercial Solicitors is distinct as Nigeria’s first commercial solicitor firm to specialise exclusively in non-courtroom practice. Based in Lagos, Nigeria’s business capital, DETAIL is totally committed to its clients’ business objectives and reputed for dealing with the minutiae. Email: info@detailsolicitors.com.