Nigeria’s capital market is entering a decisive transition phase as regulators tighten prudential standards to match rising risk, scale and investor expectations. But as new Minimum Capital Requirements (MCR) take effect, a growing consensus among market experts is clear: recapitalisation must be firm—but also flexible.
At the centre of this debate is a call for measured regulatory forbearance to help credible market operators meet higher thresholds without destabilising the ecosystem.
The New MCR: What Changed and Why It Matters
The Securities and Exchange Commission has announced a sweeping upward review of minimum capital thresholds for regulated capital market entities, citing the need to strengthen market resilience, enhance investor protection and align capital buffers with evolving risk profiles.
Under the revised framework:
- Issuing Houses (non-underwriting) now require ₦2 billion, up from ₦200 million
- Issuing Houses with underwriting services must hold ₦7 billion, up from ₦200 million
- Registrars’ minimum capital has increased from ₦150 million to ₦2.5 billion
- All affected entities must comply on or before June 30, 2027
Failure to meet the deadline, the SEC warned, could trigger sanctions including suspension or withdrawal of registration.
From a regulatory standpoint, the intent is sound: deeper capital buffers improve financial soundness, operational resilience and systemic stability—all essential for a market seeking global relevance.
The Forbearance Argument: Capital Is Not Raised in a Vacuum
Reacting to the policy shift, Uche Uwaleke, President of the Capital Market Academics of Nigeria, argues that outcomes will be better if the SEC pairs firmness with flexibility.
“Granting limited regulatory forbearance to firms making demonstrable progress toward compliance will significantly improve outcomes,” said Uche Uwaleke, President, Capital Market Academics of Nigeria.
He also urged the regulator to fast-track approvals for mergers, acquisitions and strategic investments, which are likely to be the primary routes through which firms meet the new capital thresholds.
Timeline Reality Check: Global Norms vs Local Constraints
On paper, the 18-month window from January 2026 to June 30, 2027 aligns with international practice.
“Globally, regulatory-driven recapitalisation typically allows between 12 and 24 months,” Uwaleke noted.
“The EU and UK provided about 18–24 months. India and South Africa allow roughly 12–24 months depending on size and activity.”
Yet Nigeria’s market structure complicates the picture. Many operators are privately owned, thinly capitalised, and operating in a high-interest-rate environment with limited access to long-term funding.
“For such firms, 18 months must accommodate valuation, due diligence, regulatory approvals and actual capital raising,” Uwaleke said.
This is the crux: time adequacy is contextual, not cosmetic.
Implementation Is the Differentiator
Beyond deadlines, success will hinge on execution quality. Market experts stress three imperatives:
- Early, unambiguous guidance on compliance pathways
- Regulatory agility in approving consolidations and capital injections
- Targeted forbearance for firms showing credible progress and governance discipline
Without these, the risk is a wave of forced exits that could shrink competition, reduce market depth and concentrate risk—the opposite of the policy’s intent.
Development Lens: Stability Without Stagnation
From a development economics perspective, recapitalisation should catalyse—not constrain—market growth. Well-capitalised intermediaries improve trust and attract capital, but overly rigid enforcement in a tight liquidity cycle could choke innovation and job creation.
Nigeria’s challenge is to raise the floor without lowering the ceiling—strengthening institutions while preserving diversity and dynamism in the capital market.
BRANDECONOMY Insight
The SEC’s MCR reset is a necessary evolution, not an overreach. But capital reform works best when discipline is paired with discretion. Limited, rules-based forbearance—alongside faster approvals for consolidation—can turn a demanding deadline into a durable upgrade. Done right, this reform could mark the moment Nigeria’s capital market matures into a deeper, safer and more investable ecosystem.
