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Introduction
The regulatory landscape in Nigeria continues to see significant developments this past month amidst gaping economic challenges. Notably, there have been regulatory updates from various sectors across the country. This edition of our regulatory digest builds on previous developments across relevant agencies, highlighting updates, trends and insights and their relevance to the Nigerian economy. These regulatory developments are expected to significantly impact the Nigerian economy, driving growth, innovation, and social development. As the country navigates its economic challenges, these regulatory changes may provide a glimmer of hope for a brighter future.
On June 21, 2024, the SEC released the Framework on Accelerated Regulatory Incubation Program for the Onboarding of Virtual Assets Service Providers (VASPs) and other Digital Investments Service Providers (DISPs) (the “ARIP Framework”). The ARIP Framework regulates the Accelerated Regulatory Incubation Program (ARIP), an initiative aimed at the onboarding of VASPs and DISPs.
Consequently, all current and prospective VASPs are mandated to complete the application process for the ARIP on the SEC ePortal within 30 days of the circular's release date, as the SEC plans to commence enforcement actions against any operating VASP that fails to comply with these directives. To get more details regarding the Framework, read our publication here.
Following the Central Bank of Nigeria’s (CBN) announcement of the recapitalisation of banks in March 2024 and recognising the capital market’s crucial role in raising the necessary funds, the SEC has published the Framework on Banking Sector Recapitalisation Programme 2024. This framework serves as a comprehensive guide for banks, holding companies, and market participants to navigate the recapitalisation process effectively. It outlines the guidelines and procedures banks must follow to raise capital through rights issuances, private placements, public offers, or other approved methods during the recapitalisation period. Additionally, the framework details the documentation requirements, applicable fees, and other essential requirements for these banks.
Implementation of Enterprise Risk Management: All Capital Market Operators (CMOs) have been directed by the SEC to implement an Enterprise Risk Management (ERM) framework that conforms to international standards such as the Committee of Sponsoring Organisations of the Treadway Commission (COSO), the International Organisation for Standardisation (ISO 31000), Financial Action Task Force (FATF) Recommendations, and any other internationally recognised risk management standards.
The ERM framework, which should be developed based on the organisation’s operational structure, business activities, client demographics, and products and services, including delivery mechanisms, is aimed at strengthening the implementation of Risk-Based Supervision (RBS), including Anti-Money Laundering(AML)/Countering the Financing of Terrorism (CFT)/Countering Proliferation Financing (CPF) measures in the capital market is
Consequently, all CMOs are required to submit a board-approved risk management policy by September 30, 2024, and to submit an annual risk profile by January 31st of each year.
Supervisory Oversight: In furtherance of its supervisory oversight, the Commission recently issued a disclaimer on meme coins (cryptocurrencies inspired by memes and internet jokes) following the sudden popularity of the meme coin known as $Davido. Dissociating itself from these coins, the commission warned that meme coins are highly risky, speculative, lack fundamental value, and should only be engaged with a full understanding of the associated risks.
The Commission also cautioned CMOs against associating with meme coins, as they fall outside the Commission's regulatory purview. Consequently, meme coins should not be distributed or monitored through any capital market mechanism.
In the same vein, the Commission issued a warning to the public against investing in an entity called the Alpha Trust Investment Club, as the entity is not registered nor authorised by the Commission. Emphasising that operating as an investment professional or conducting investment and securities business without prior registration with the commission is a serious contravention of the Investments and Securities Act 2007, the commission advises the public to always verify the registration status of any person or entity, as well as the investment products being promoted, with the commission before engaging with them.
NITDA Launches Digital Trustmark: the National Information Technology Development Agency (NITDA) announced the launch of the Nigeria Digital Trustmark through its official X account. This initiative aims to enhance trust and security within the Nigerian digital landscape. The Digital Trustmark is a certification awarded to online entities that comply with stringent guidelines and a code of conduct established by NITDA. These guidelines ensure a secure digital environment for all users by promoting responsible online practices.
Online entities can acquire the Digital Trustmark through trusted third-party partners recognized by NITDA. These partners, known as Digital Trustmark Issuers, are appointed or licensed by the agency to assess compliance with the Digital Trustmark framework. By displaying the Digital Trustmark, organisations demonstrate their commitment to providing safe, reliable, and trustworthy online services. This fosters a more confident and secure digital experience for all users, encouraging wider participation in the Nigerian digital economy.
FCCPC Raises Awareness on Fair Business Practices: During a meeting with the National Association of Supermarket Operators of Nigeria, the FCCPC discussed the problem of inconsistent price displays at supermarkets. The FCCPC emphasised the importance of transparent pricing, as it creates a fair environment for consumers to make informed choices and thrive. The Commission also organised a sensitisation conference for traditional rulers and religious leaders in Bauchi state, who were selected as champions and ambassadors of consumer rights and fair practices in the state.
A Federal High Court in Abuja has sentenced the Managing Director of Famzhi Interbiz Limited to five years imprisonment without the option of a fine for defrauding investors of over two billion Naira. The court also ordered that all properties belonging to the defendants be forfeited to the federal government and sold, and the proceeds used to compensate the victims of the crime.
Recall that the SEC in December 2020 had previously warned the public that Famzhi Interbiz Ltd was not registered to operate in the Nigerian capital market, as the company failed to meet certain regulatory preconditions required for registration. However, the company unlawfully solicited funds from the public for products neither registered nor approved by the Commission, promising guaranteed returns on investment, in clear violation of the Securities and Investment Act (ISA) 2007. Consequently, the Commission referred the company to the appropriate law enforcement agency leading to the court’s decision.
Based on the developments and initiatives witnessed across various sectors, particularly in the financial sector, there is a trend that indicates the government's continued effort to stabilise the country's economy.
The collaborative efforts between government agencies, industry stakeholders, and regulatory bodies indicate a unified push to manoeuvre through Nigeria's economic landscape effectively. These combined efforts are essential in propelling Nigeria towards its established developmental objectives. The active involvement of various stakeholders is pivotal in bolstering the country's economic robustness, fostering adaptability to changing circumstances, and encouraging innovative practices.
