SEC capital hike triggers pushback from brokers, fund managers

Nigeria’s decision to sharply raise minimum capital requirements for capital market operators has triggered pushback from analysts and fund managers, who warn the policy could squeeze returns, deter innovation and force smaller firms into restructuring.

The Securities and Exchange Commission (SEC) last week announced sweeping increases in minimum capital across brokers, fund managers, registrars and issuing houses, marking the first major review in a decade. While the regulator said the move is aimed at strengthening market resilience and investor protection, critics argue the new thresholds are misaligned with the actual risk profile of many operators.

Under the revised framework, top-tier portfolio and fund managers face the steepest increases. Tier-1 managers overseeing more than ₦20 billion in assets – or with significant foreign exposure – must now hold at least ₦5 billion in capital, up from ₦150 million previously. Firms managing over ₦100 billion are required to maintain capital equal to at least 10% of assets under management.

Broker-dealers offering full-service operations, including proprietary trading, margin lending and advisory services, will now need ₦2 billion in capital, compared with ₦300 million under the old rules. Tier-2 issuing houses that underwrite securities must raise capital to ₦7 billion from ₦200 million, while smaller players are also affected. Minimum capital for brokers focused solely on client execution has tripled to ₦600 million, and digital sub-brokers now require ₦100 million, ten times the previous threshold.

The SEC has given operators until June 30, 2027 to comply, warning that firms that fall short risk suspension or loss of registration.

“Obnoxious” and “counterproductive”

Abdulrauf Bello, an investment analyst, questioned the logic of forcing asset managers to hold capital equal to as much as 10% of assets under management – funds they neither own nor warehouse.

“Asset managers do not take the risks that banks take,” Bello wrote on X under the handle @Rufybaba. “So why am I being charged 10% capital on monies that I do not have or use?”

Bello argued that even a well-run firm managing ₦20 billion would struggle to generate returns that justify locking up ₦2 billion to ₦5 billion in capital, estimating potential returns on equity of about 4%.

“This sort of policy will only kill innovation because the barrier to entry becomes high,” he said, adding that the sector’s real problems lie in weak supervision, poor enforcement and governance failures, not capital size.

Others framed the debate in global terms. Nnaemeka Obiaraeri, an investment banking executive, contrasted Nigeria’s thresholds with U.S. broker-dealer rules, noting that firms in a $100 trillion market face far lower capital requirements.

“In a country trying to deepen its capital market, this kind of regulation is counterproductive,” Obiaraeri said, warning it could push professionals to seek licences abroad.

Still, the reaction within the industry is far from uniform.

Aruna Kebira, chief executive of Globalview Capital, said the recapitalisation should not have come as a surprise, noting that the SEC had signalled the timeline well in advance through Capital Market Committee meetings.

“They promised January 16, and they delivered,” Kebira told Nairametrics, adding that industry groups had been consulted throughout the process.

While broadly supportive, Kebira flagged a technical inconsistency in the broker-dealer requirement, arguing that combining broker and dealer licences should have resulted in a lower figure than ₦2 billion. Even so, he said the clarity removes ambiguity for operators.

Concerns about mass exits are overstated, Kebira added, pointing to the long compliance window. “What we may see is downgrading – not collapse,” he said.

David Ogogo, a former president of the Institute of Capital Market Registrars, echoed that view, saying operators had years to engage the regulator and that the dollar-equivalent capital levels are not excessive by global standards.

“The conversation has been on for years,” Ogogo also told Nairamterics. “The deadline gives adequate room for adjustment.”