The Securities and Exchange Commission (SEC) is set to facilitate easier funding access for smaller firms, according to a Bloomberg report. Dr. Emomotimi Agama, the SEC’s Director General, discussed this initiative during a recent interview.
Dr. Agama highlighted crowdfunding as an innovative online fundraising strategy that originated to help artists and creative professionals finance their projects through public contributions via social media. Recently, the concept has gained traction as a viable means for small businesses and startups to secure investment capital.
In 2021, the SEC released regulations governing the registration and operation of crowdfunding platforms and intermediaries. These regulations establish a framework for companies to raise debt or equity capital through crowdfunding while outlining eligibility criteria and obligations for issuers, crowdfunding portals, and intermediaries.
Under the current regulations, all Micro, Small, and Medium Enterprises (MSMEs) incorporated in Nigeria with at least two years of operational history can raise funds through registered crowdfunding portals. They can issue shares, bonds, debentures, or other investment instruments as determined by the SEC.
The regulations delineate key participants in the crowdfunding ecosystem, including the Crowdfunding Portal, Crowdfunding Intermediary, Issuer, and Investor. They also specify investment limits for fundraising: medium enterprises can raise up to N100 million, small enterprises up to N70 million, and micro-enterprises up to N50 million within a 12-month period.
Dr. Agama acknowledged that these limits may act as constraints for many businesses. He stated, “We are actually taking a new look to make it a little bit easier for people to come in,” suggesting that the SEC may raise these ceilings on a case-by-case basis.
This initiative comes at a time of high interest rates in Nigeria, with the benchmark rate currently at 27.25%. Dr. Agama indicated that new draft rules could be introduced as early as the first quarter of 2025, aiming to enhance fundraising opportunities for MSMEs.
