SEC’s New Capital Rules Raise Concerns Among Portfolio Managers: Market Recapitalisation in Focus

Nigeria’s Securities and Exchange Commission (SEC) has unveiled its most significant overhaul of capital requirements in a decade, sparking anxiety among portfolio managers and fund operators. The new rules, aimed at strengthening market resilience and investor protection, require top-tier firms to hold at least N5 billion in capital and tie certain thresholds to assets under management (AuM). While regulators argue these measures are necessary, many market participants fear that the reforms could trigger consolidation, stifle competition, and weaken funding for the real sector.

Fund managers, particularly mid-sized firms, are expressing concern over the timeline and scale of the requirements. Initially, asset-backed capital for large firms was set at 10% of AuM, but regulators later reduced it to 0.1%, reflecting a partial concession. Still, operators warn that the push for recapitalisation may force them to liquidate investments and recall funds from the real economy, potentially slowing economic growth and curbing innovative niche services.

Despite the concerns, financial experts defend the SEC’s approach as crucial for long-term market stability. Stronger capital buffers, they argue, will improve firms’ ability to handle larger and more complex transactions, mitigate systemic risks, and enhance investor confidence. Industry leaders highlight that the reforms align with global standards and are particularly important as Nigeria seeks to deepen its capital market and attract long-term investment.

Critics, however, emphasize the pressures on smaller firms competing with larger operators and the potential for market crowding. They note that banks and insurance companies are also undergoing recapitalisation, creating competition for scarce long-term capital. Experts like Dr. Muda Yusuf and Dr. Uche Olowu maintain that while recapitalisation strengthens operators, the real challenge lies in broader systemic factors such as credit guarantees, infrastructure, and reliable power supply—not the capital rules themselves.

Prof. Sheriffdan Tella suggests a more accommodative timeline, recommending 24–30 months for compliance to reflect Nigeria’s current financial realities. He highlights that foreign investment inflows could ease pressures on the market and support recapitalisation efforts. As the SEC pushes forward with its programme, operators, investors, and policymakers will closely monitor how the new rules reshape competition, innovation, and funding across Nigeria’s capital markets.

source: The Guardian