Nigeria: Capital Market Master Plan 2015–2025: Legal Imperatives For Achieving Nigeria's Big Dream

Last Updated: 9 May 2019
Article by Ayotunde Owoigbe and Oluwatoba Oguntuase

This article was first published in the second edition of the Capital Market Solicitors' Association of Nigeria (CMSA) Newsletter (Issue No. 2), June 2016.

By the time 'The Nigerian Capital Market Master Plan 2015-2025' ("the Master Plan") was launched by the Securities & Exchange Commission ("SEC") in November 2015, as a 10-year road map for developing the country's capital market into a global financial center, Nigeria had already become, by its rebased nominal GDP, the largest economy in Africa and the 26th worldwide1. In spite of this feat, the size of the Nigerian capital market is undoubtedly small compared to the overall size of the economy. This is in sharp contrast to the situations in other emerging economies with well-developed capital markets such as South Africa and Malaysia.

Earlier in 2009, a committee set up by the SEC had made 32 recommendations with the goal of evolving "a world class capital market that is efficient, transparent, innovative and attractive to investors, both local and foreign, while contributing to and facilitating the growth and development of Nigerian and African economies"2. The Master Plan, a follow-on to this, has a more definitive vision for the Nigerian capital market which is "to be Africa's most modern, efficient and internationally competitive capital market that catalyses Nigeria's emergence as a top 20 global economy"3.

Whilst the Master Plan has out lined three broad strategies (contained in its three parts) for building an advanced capital market that will drive economic growth through the next decade, such a market cannot be self-sustaining and requires an enabling business environment in order to emerge and grow. The aim of this article is to discuss some of the legal and regulatory reforms considered imperative for facilitating the smooth implementation of the three broad strategies, which are contained in the Master Plan.

THE THREE BROAD STRATEGIES

The three broad strategies contained respectively under Parts A, B and C of the Master Plan address the confidence-building frameworks for broadening the depth and breadth of the market by:

  1. driving capital-raising to fund national economic priorities such as agriculture, solid minerals and infrastructure etc. and aligning the market structure, capabilities and competences to the requirements of the economy as well as improving the market's attractiveness, competitiveness and the supportive legal and regulatory frameworks;
  2. encouraging the inflow of capital from all the corners of the world's financial centers, including from non-conventional Islamic sources, through the development of Sharia-compliant, non-interest capital market products and;
  3. taking the capital market to every household in Nigeria through mass literacy campaigns about products available in the market as well as public awareness programs on how the capital market works. To enhance the mass literacy plan, involvement of students, youths and other professional and trade groups outside of the capital market has been recommended.

LEGAL AND REGULATORY REFORM

To facilitate the above objectives, some of the present laws governing the administration and regulation of businesses as well as the adjudication of disputes arising therefrom, need to be amended, streamlined and/or replaced completely. Here are a few prominent recommendations:

Allow crowd funding of private companies

Careful consideration should be given to the possibility of amending the

Companies and Allied Matters Act ("CAMA")4, to increase the number of shareholders for private companies above the statutory maximum of 50, as well as re-visit, to the extent possible, the restriction placed on the transfer of their shares5.

Allow seamless transfer of interests in land

The Land Use Act ("LUA")6 makes perfection of mortgaged-backed securities cumbersome, by making transfers of interests in land without obtaining Governor's Consent, void7. The administrative bureaucracy around this process affects the securitisation of assets and inhibits the development of the capital market and therefore requires an overhaul8.

Make the Investments and Securities Tribunal ("IST") a Superior Court of Record

To boost investors' confidence, the status of the IST should be upgraded by listing it among the superior courts of record recognized in the Constitution9. Alternatively, to end the jurisdictional conflicts between the IST and the Federal High Court ("FHC"), the Constitution can be amended to make the IST a specialized division of the FHC10.

Allow more investment of Sovereign Funds in the Capital Market:

Amendments should be made to the Pension Reform Act ("PRA"), 2014 and the Regulations on Investment of Pension Assets ("RIPFA") made thereunder, to increase the percentage of assets under management that can be invested in the capital market. New Islamic capital market products should also be developed and included in the list of "Allowable Instruments". The same goes for the Nigeria's Sovereign Wealth Fund11.

Demutualisation of the Nigerian Stock Exchange ("NSE")

Data from the World Federation of Exchanges indicate that the world's top Exchanges are demutualised. The ongoing demutualisation of the NSE should be completed in earnest, to allow for inflow of fresh and diverse capital and the thriving of new products such as Futures, Options, Securities Lending and other derivatives. The Investments and Securities Act, 2007 should be amended to accommodate the Demutualisation Legal Framework, when finalised.

National Orientation and Mass Education

We propose that the statutory functions of the National Orientation Agency ("NOA") be amended to include periodic education of the general populace on the gains of capital market investments. The NOA can collaborate with relevant financial system regulators by leveraging on the extant Financial Literacy programme of the Central Bank of Nigeria as well as the ongoing Sensitisation Town Hall Meetings of the SEC and similar initiatives by the NSE and other capital market institutions. In a similar vein, the Federal Ministry of Education should initiate amendments into school curricula, which will introduce compulsory subjects on capital market operations at the senior secondary level while offering same at degree level in higher institutions.

Footnotes

1. Though recent implementation of a floating foreign exchange policy has led to a devaluation of the Naira, with reports that the nation has lost its first position as Africa's biggest economy to both South Africa and Egypt; economic analysts have maintained that going by the Naira's average exchange rate in the last six months, Nigeria remains Africa's biggest economy – See: BUSINESSDAY, August 15, 2016 @ page 4.

2. "Nigeria's capital market: Making world-class potential a reality", SEC, 2009

3. See the "Executive Summary", The Nigerian Capital Market Master Plan (2015-2025) @ pages 8 – 9

4. Cap. C20, Laws of the Federation of Nigeria ("LFN"), 2004

5. Ibid, Section 22

6. Cap. L5, LFN, 2004

7. Ibid, sections 21 and 22. (However, in Awojugbagbe Light Ind. Ltd. vs. P. N. Chinukwe & Anor [1995] 5 NWLR [Pt .390] 409, the Supreme Court held that a transaction concluded without obtaining the requisite Governor's Consent is not void but merely "inchoate")

8. Ibid

9. CFRN, 1999 (as amended); see Section 6(5)

10. Ibid, Section 249

11. See Part XII (Sections 85-91), PRA 2014 and Section 4.0, RIPFA. See also the Nigeria Sovereign Investment Authority Act, 2011

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions