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Regulatory provisions on crowd-funding underway

By Peter Egwuatu

Regulatory provisions enabling companies in Nigeria to raise funds through crowd-funding is underway.

The Acting Director General of the Securities and Exchange Commission, SEC, Mary Uduk, told Vanguard that the enabler has been included in the recent review of the amendments to the Investment and Securities Act, ISA, now before the National Assembly.

She stated: “I want to assure you that the SEC is very desirous in having rules on crowd-funding. We have severally discussed it and we want to have crowd-funding in this market but we have a challenge.

“Firstly, the CAMA (Companies and Allied Matters Act) which is the primary regulation for all companies, does not have provision for crowd funding and even if it has, ISA (Investment and Securities Act) does not support it.

“But I want to assure you that with the review of ISA that provision is now there and when it is approved we will be able to have it.”

Crowd-funding describes the collective cooperation, attention and trust by people who network and pool their money together, usually informal, in order to provide capital for a business or project.

Usually the cost of raising the funds is much lower than through either the money market or the traditional capital market.

Meanwhile, Uduk has also frowned at high cost of transactions in the Nigerian capital market, saying: “What we did in terms of trying to enhance issuance is to try to look at the entire value chain holistically and look at the issues that actually impede on issuers coming to the market. One of them was transaction cost.

There was a committee that was set up and a study was conducted and it was observed that our market is very expensive in terms of capital issues at the primary level, and the Commission in collaboration with other stakeholders looked at the cost of the issuance.

“If you are coming to the market how much will the issuer pay? The rule has provided a limit of 3.17 percent for equities and 3.97 percent for Fixed Income. What we did in conjunction with other stakeholders is to look at those entire costs and do a haircut.

“Everybody agreed on how to reduce the cost in other to incentivize issuers to come to our market and that is what we did. We reduced the cost of equities from 3.17 percent to 2.21percent and then for Fixed Income from 3.97 percent to 2.38 percent. It was a pilot for one year after which we will do an impact assessment to see how it will impact in the market.”


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