Crowdfunding in Nigeria

As per the SEC-proposed crowdfunding rules, SMEs operating in Nigeria for no less than 24 months (and registered in the country) are allowed to attract funds via Nigerian crowdfunding portals approved by the SEC. To be able to do that, they must issue bonds, stakes & other SEC-required investment vehicles.

Pursuant to the new rules, issuers won’t have to abide by ISA requirements. They’re also allowed to sell securities & other SEC-approved investment vehicles without having to register them as per ISA regulations. In their turn, PLCs, government agencies & banking institutions have a right to:

• issue shares & bonds;
• offer securities & accept deposits.

Those interested in crowdfunding regulation in the Federal Republic of Nigeria should keep in mind that the new rules impose some restrictions on issuers of securities, namely:

• maximum number of securities/investment vehicles offered within a year mustn’t be exceeded;
• issuers are to be Nigeria-registered & accredited with crowdfunding portals whose services they intend to use.

Crowdfunding Portals

Apart from being SEC-registered, crowdfunding portals must also ensure uninterrupted communication between fundraisers & investors. This requirement is applicable to portals that:

• are Nigeria-maintained/operated;
• have a physical presence in the Federal Republic of Nigeria;
• aren’t based in Nigeria but attract Nigerian investors by promoting themselves in Nigeria.

Mediators are allowed to take part in transactions related to selling securities via Nigerian crowdfunding portals. Only alternative trading entities, brokers or dealers can register as crowdfunding mediators in the Federal Republic of Nigeria.

Those seeking to register a Nigerian crowdfunding portal should keep in mind that they’ll be required to:

• disclose information;
• perform DD;
• provide information on their issuers;
• ensure complete confidentiality;

• abide by data protection legislation.