The Securities and Exchange Commission (SEC) has announced new initiatives aimed at simplifying access to funds for smaller firms, highlighting crowdfunding as a pivotal mechanism for this purpose. In an interview reported by Bloomberg, SEC Director General Dr. Emomotimi Agama emphasized the importance of crowdfunding in providing essential investment capital to small businesses and startups.
Crowdfunding, which originally emerged as a platform for the public to donate small amounts of money to support creative projects—such as those by artists, musicians, and filmmakers—has evolved into a viable financial strategy for entrepreneurs seeking to launch or expand their ventures. Agama noted that this funding approach can play a significant role in stimulating the growth of small enterprises, particularly in a challenging economic landscape.
The SEC has previously established a regulatory framework for crowdfunding through guidelines released in 2021. These regulations outline the processes for the registration and operation of crowdfunding platforms and intermediaries, defining the eligibility criteria and obligations for issuers, crowdfunding portals, and intermediaries. This framework aims to create a safe and efficient environment for businesses to raise both debt and equity capital through crowdfunding initiatives.
Dr. Agama stated, “By promoting crowdfunding, we are opening doors for small businesses that might struggle to secure traditional financing. This approach not only diversifies funding sources but also empowers the entrepreneurial ecosystem within the country.”
The SEC’s commitment to enhancing funding access aligns with broader economic goals, as small and medium-sized enterprises (SMEs) are recognized as vital contributors to job creation and economic growth. With the new measures, the SEC aims to foster innovation and support the diverse needs of startups, providing them with the tools and resources necessary to thrive.
Issuance of Debt Instruments by Subnationals Indiscriminately
Meanwhile, the Securities and Exchange Commission (SEC) of Nigeria has called upon Capital Market Operators (CMOs) to reassess the issuance of debt instruments by state and local government agencies. This plea was articulated by Mr. Bola Ajomale, Executive Commissioner of Operations at the SEC, during the 2024 International Credit Rating Webinar organized by DataPro Limited.
Ajomale, who represented the SEC’s Director-General, Dr. Emomotimi Agama, emphasized that relying solely on Irrevocable Standing Payment Orders (ISPOs) from state governments is insufficient as a measure of assurance and risk mitigation. He urged Credit Rating Agencies (CRAs) to revise their assessment metrics to reflect the increasing risk levels and evolving sustainability requirements associated with instruments issued by state or quasi-government bodies.
In his address, Ajomale highlighted the growing trend of state governments issuing private bonds that are guaranteed by the state. However, he pointed out that these processes often lack evidence of secondary market value and need thorough evaluations to ensure they meet their intended project objectives. “The financial landscape is changing, and so must our approaches to risk assessment,” he stated.
The SEC’s initiative aims to enhance the integrity and sustainability of Nigeria’s capital markets, ensuring that investors have a clear understanding of the risks associated with government-issued debt instruments. By advocating for more comprehensive evaluation frameworks, the SEC seeks to bolster investor confidence and promote responsible financing practices among state and local government entities.
Ajomale’s remarks serve as a reminder of the need for transparency and accountability in public finance, particularly as governments explore various funding mechanisms to support infrastructure and development projects. The SEC is committed to working closely with CMOs and CRAs to foster a more resilient financial environment that prioritizes sustainable growth. As the dialogue continues around effective risk management in the capital markets, stakeholders are encouraged to collaborate and develop innovative solutions that align with the evolving economic landscape.
