Nigeria’s SEC Eyes Easier Access to Capital for Small Firms with Crowdfunding Reforms

Nigeria’s Securities and Exchange Commission (SEC) has announced plans to ease restrictions on crowdfunding, aiming to provide smaller firms with better access to much-needed capital. SEC Director General Dr. Emomotimi Agama revealed this in an interview with Bloomberg, signalling potential reforms that could help micro, small, and medium enterprises (MSMEs) raise funds more effectively.

Crowdfunding, Agama explained, began as a way for the public to donate small amounts of money online to support creative projects such as those by artists, musicians, and filmmakers. However, in recent years, it has become a popular method for small businesses and start-ups seeking investment capital to launch or grow their ventures.

Under existing SEC regulations, which were introduced in 2021, companies can raise debt or equity capital through registered crowdfunding portals. These rules also outline the responsibilities of issuers, intermediaries, and investors involved in the process. Currently, only MSMEs with at least two years of operating history in Nigeria are eligible to participate, and they can issue shares, bonds, or other investment instruments in exchange for funding.

However, Agama acknowledged that the current limits on the amount businesses can raise through crowdfunding have been a constraint. Medium-sized enterprises can raise a maximum of N100 million within 12 months, while smaller firms are capped at N70 million and micro-enterprises at N50 million.

“We are actually taking a new look to make it a little bit easier for people to come in,” Agama said, hinting that the SEC is considering raising these limits, potentially on a case-by-case basis. This move would offer greater flexibility to businesses in dire need of capital, especially in Nigeria’s current high-interest rate environment, where borrowing costs remain elevated.

With the benchmark interest rate sitting at 27.25%, small businesses face significant challenges in securing affordable financing. SEC’s planned reforms, which could result in new draft rules by the first quarter of 2025, are expected to provide a vital lifeline for firms grappling with the rising cost of capital.

The SEC’s re-evaluation of crowdfunding regulations comes at a critical time, as Nigeria’s economic conditions continue to challenge business growth. By expanding access to funds, the commission hopes to stimulate entrepreneurial activity and offer a more viable alternative to traditional financing in the country’s evolving financial landscape.