THE NIGERIAN CAPITAL MARKET 
REGULATION 
0.0. Oladele 
Introduction 
The capital market is a vital instrument of economic growth. It is a 
market where capital funds (equity and debt) are traded. Thus, it 
offers corporate business organizations and governments the forum 
and means to raise long-term funds at a cheaper cost than that of 
the money market. The Nigerian Capital Market is an important 
market in Africa, second only to the South African market in terms 
of sophistication and market capitalization. Government and self- 
regulatory organizations regulate the capital market because of its 
importance to the economic growth of the country. The regulation 
seeks to ensure that the market is fair, efficient and transparent to 
such an extent as to adequately protect investors and the 
economy, the latter from systemic effect of market failure. 
This article presents an overview of the Nigerian Capital Market 
and its regulatory structure. It defines a capital market and 
discusses the functions of a capital market as well as the objectives 
for the establishment of the Nigerian Capital Market. It traces the 
evolution of the capital market as well as its regulation, and 
evaluates the current structure for regulating the market as well as 
for settling disputes among the market participants. In conclusion, it 
offers suggestions for a more effective regulation of the market so 
	as to enable it cope with new challenges. 	• 
The Capital Market 
A capital market is a market for trading capital funds (debt and 
equity). It is a forum for corporate business organizations and 
governments to raise long-term capital, and it traditionally exists in 
contra distinction to the money market in which short-term debt 

142 

Nigerian Capital Market Regulation 

instruments are traded. I The cost of capital in the capital market is 
lower than that of the money markeP 
A capital market also is " ... the complex of institutions and 
mechanisms through which intermediate-term funds and long-term 
funds are pooled and made available to business, government. .. 
and instruments already outstanding are transferred."3 
The Functions of Capital Market 
The capital market is an instrument of economic growth that 
performs the functions of capital formation, provision of liquidity 
and risk management. In the process of capital formation, the 
market brings together "capital laden investors and capital needy 
businesses" for equity (common stock and preferred stock) or debt 
securities (debentures, notes, bonds, commercial paper) 
tronsoctions.s The capital raiser issues the securities that the 
investors subscribe for their money. The market provides liquidity, 
I Rerni R. Bakare. Financial Market Glossary (Lagos. Nigeria: Prince of Prints Ltd.) s. v. 
"Capital Markets." 
It is important to keep in mind that the recently introduced universal banking has 
opened the capital market door to commercial banks that were money market 
institutions only. Hitherto. these banks participated in capital market activities indirectly 
through their subsidiaries. but they can now do not only through those subsidiaries but 
also directly through the designated departments. The Guidelines Oil Universal Banking 
have enhanced the definition or "banking business" in section 61 or the Banks and 
Other Financial Institutions Decree (BOFIO) No. 25 of 1991. It added ·· ... consultancy 
and advisorv services relating to corporate and investment mailers: making or 
managing investment on behalf of any person. and the provision of insurance marketing 
	service and capital market business 	Thus the strict compartmentalization of 
financial institutions into money market and capital market institutions respectively is 
lpsing most of its significance. However. universal banking raises regulatory concern. 
Traditionally. the Central Bank of Nigeria regulates banking; the Securities and 
Exchange Commission regulates the Capital market; while the National Insurance 
Commission regulates insurance business. To the extent that these agencies will share 
regulatory functions. there must be cooperation. coordination and a regular exchange of 
information. The government may need the Finance System Regulatory Coordinating 
Committee (FSRCC) to effectively do these. 
2 In the year 2000. more than twenty Nigerian companies and two state governments (Edo 
and Delta) raised over N 17 billion from the Nigerian Capital Market. 
3 H.E. Dougall & J.E. Gaurnnitz, Capital Markets and Institutions (Englewood Cliffs. 
New Jersey: Prentice Hall Inc .. 1975). p.3. 
4 Allan R. Palmiter. Securities Regulation (New York. NY: Aspen Law and Business. 
1998). p. 3 

Lesotho L J. Vol. 15 No. 1 

143 

that is, ready marketability of investment instruments, by bringing in 
contact those who wish to sell and those who wish to buy those 
instruments. It also offers investors the means to minimize their 
investment risk through diversification and hedging.5 The Nigerian 
capital market performs all of these important functions. 
The Objectives for the Establishment of the Nigerian Capital Market 
The objectives for the establishment of the Nigerian Capital Market 
are largely similar to those for establishing such markets elsewhere 
in the world; the only addition being the taking into account of our 
peculiar domestic needs at the time the market was established. In 
its memorandum to The Panel on the Review of the Nigerian 
Capital Market (1996), the Securities and Exchange Commission 
("SEC"), the apex regulatory agency for the capital market stated 
the objectives, inter alia, as to: 
mobilize savings from the surplus economic units for on- 
lending to deficit units to ensure efficient and effective 
allocation of scarce financial resources; 
create an avenue for the populace to participate in the 
economy; 
reduce over-reliance on the money market for industrial 
financing; 
provide seed money for venture capital development; 
promote solvency, efficiency and a competitive financial • 
sector; 

encourage corporate 
accountability; 

financial 

discipline 

and 

provide long-term financial sector requirements without 
increasing the tax burden on the citizens (of Nigeria); 
promote Stock Market culture. 
'Id. Hedging is a means of offsetting investment risk. The manager of a large pool of 
funds such as a pension fund may hedge his or her exposure to interest rate or currency 
risk by buying or selling derivatives (futures or options contracts). 

144 

Nigerian Capital Market Regulation 

Added to the above was the need to provide Governments an 
avenue to raise long-term ccpitol.s 
In 1961, at the inception of the Lagos Stock Exchange (now 
Nigerian Stock Exchange), a foundation council member and the 
managing director of one of its promoters, the Nigeria Industrial 
Development Bank Limited ("NIDB") stated the objectives of the 
Nigerian capital market as follows: 
the mobilization of savings for economic growth; 
diversion of capital from less productive sectors such as 
real estate to more productive sectors such as industries; 
to augment the banking system and reduce the 
dependence of Government on taxation for economic 
development; 
to decentralize the ownership of assets ad create a 
healthy private sector; 
avoidance of excessive concentration of economic power 
in the hands of Government; 
avoidance of excessive concentration of economic power 
in the hands of a small private group; 
to encourage more even distribution of wealth; 
to facilitate co-operation between indigenes and aliens in 
fostering economic development. 
The Panel on the Review of the Nigerian Capital Market affirmed 
the- validity of these objectives, and reported that most of the 
problems the market set out to solve still remain unsolved. Scarce 
financial resources flow to properties still; economic power is yet 
largely in the hands of Government; the economy still over- 
depend on the banking sector; the private sector is yet unhealthy; 
6 The first Federal Government of Nigeria Loan Stock was floated in London long before 
the Lagos Stock Exchange was established. 

Lesotho L.J. Vol. 15 No. 1 

145 

there are still not enough foreign investors and the problems of 
distribution and concentration of wealth persist.' 
When the Lagos Stock Exchange was incorporated, its 
memorandum of association stated the objectives of the market, 
inter alia, as follows: 
(a) To provide facilities to the public, in Nigeria for the 
purchase and sale of funds, stocks and shares of any 
kind and for the investment of money .... ; 
(e) To correlate the stock-broking activities of its members 
and facilitate the exchange of information for their 
mutual advantage and for the benefit of their clients 
and to offer facilities whereby the public can be 
informed of prices dealt in by members ... 
(f) To co-operate with the Association of Stockbrokers and 
Stock Exchanges in other countries and to obtain and 
make available to members information and facilities 
likely to be of advantage to them or their clients .... 
The Evolution of Nigerian Capital Market Regulation 
The principal statute that regulates the Nigerian Capital Market is 
the Investment and Securities of 1999 {"ISA"}.B The ISA has re- 
established the Securities and Exchange Commission {"SEC"}9 as 
the regulatory apex organisation for the capital market. It also 
makes extensive provisions to regulate dealings in securities and 
market participants. It empowers the SEC to make rules and 
regulations for the capital market. pursuant to which the SEe has 
made extensive rules following the pattern of those that regulate 
the major capital markets of the wortd.'? 
7 See the Report of the Panel on the Review of the Nigerian Capital Market. 
s 1999. No.45. 
9 Decree No. 71 of 1979 (now repealed) originally established the SEe. 
10 See Securities and Exchange Commission. Rilles and Regulations Pursuant to 
Investments and Securities Act (ISA) of 1999 cf The United States Securities Act of 
1933 - General Rilles and Regulations 17 CFR 230 and Rules and Regulations Under 
the Securities Exchange Act 1934 17 CFR 240. For a compendium of the U.S. securities 
statutes, rules and forms, see R. W. Jennings. et al., Federal Securities Laws - Selected 
Statutes, Rules and Forms 1999 Edition (New York. New York: Foundation Press. 

146 

Nigerian Capital Market Regulation 

The Stock Exchange, a major institution of the capital market and a 
Self-Regulatory Organization ("SRO") also regulates the market and 
is in turn regulated by the SEe. A self-regulatory organization is 
" ... an exchange or organization of market professionals that 
performs certain rulemaking, inspection, investigative, and 
disciplinary functions with respect to its members and their 
personnel." II SROs also offer alternative and expeditious dispute 
resolution avenues for participants in the capital market, They 
stand to perform useful regulatory roles because they are more 
familiar with the market and participants than SEC the government 
regulator.12 Importantly, however, their actions are subject to 
review by the SEC under the ISA that also charges SEC with the 
responsibility for the registration, regulation and disciplining of the 
SROs. 
The ISA and SEC Rules and Regulations of 1999 recognise as well as 
regulate other SROs such as National Association of Securities 
Dealers, Capital Trade Points and Securities Clearing and 
Settlement Agencies. No national association of securities dealers 
has secured registration but the existence of such an association 
will enhance coordination of self-regulation. An association of 
securities dealers must in addition to its memorandum and articles 
of incorporation have by-laws or rules, code of conduct or code of 
dealing for members. Likewise, a capital trade point must have 
listing requirements in addition to its memorandum and articles of 
ossociotion.':' The practice of self-regulation is expected to 
develop with the capital market, 
The Central Bank of Nigeria facilitated the development of the 
Nigerian Capital Market and cooperates with the SEC to regulate 
the market and the SROs. In 1959, it floated the first Federation of 
Nigeria Development Loan of N4 million and worked out the 
arrangement for its marketability. Its representative is on the SEC 
1999). The U.S. rules are wider and more advanced. bearing suitable relevance to the 
age and sophistication or her capital market and legal system. 
II Susan Nash, Robert D. Strahota and Anne H. Sullivan. Building an Effective Regulatory 
Structurefor an Emerging Securities Market 7 Securities Market Journal (Nigeria). 37. 
50. 
I~ Id. 
11 See Rules 23 - 25. 

Lesotho L.J. Vol. 15 No.1 

147 

and was the chairman of the defunct Capital Issues Commission of 
1973. 
Securities Exchange 
The ISA defines a "Securities Exchange" as including "a Stock 
Exchange or an approved securities organisation such as a 
Commodity Exchange, an Over the Counter Market, a Metal 
Exchange, Petroleum Exchange, Option, Futures and Derivatives 
Exchanges and such other forms of securities organisation within 
the meaning of [the] Act."14 The Stock Exchange is a major capital 
market institution. The Nigerian Stock Exchange ("NSE") and the 
Abuja Stock Exchange Pic. ("ASE") dominate the Nigerian Capital 
Market. 
The Lagos Stock Exchange 
The Lagos Stock Exchange ("LSE") was established in 1959, 
although events towards the establishment of the Nigerian Capital 
Market could be traced to the 1940s.15 In 1958, House of Parliament 
appointed a committee under Professor Barback, the Director of 
the Nigerian Institute for Social and Economic Research to find 
ways and means of establishing a shares' market in Nigeria. In 
1960, following the report of that committee, the Central Bank of 
Nigeria collaborated with the Investment Company of Nigeria 
Limited (later known as the Nigerian Industrial Development Bank) 
and the business community to set up the LSE. It was a private 
company limited by guarantee but having a share capital. One of 
the reasons for the establishment of the LSE was to provide avenue 
for Nigerians with surplus funds to invest locally. Hitherto, they 
I. S. 264. 
I)	In 1946. the Colonial Government promulgated the l G-year Plan Local Loan Ordinance 
that provided for the floatation in London of 300.000 Pound Sterling 3% first 
Government Stock. In 1957. the Government and Other Securities (Local Trustee 
Powers) Ordinance came into force. allowing Trustees to invest in the securities of 
public corporations such as the Coal Corporation. the Electricity Corporation. the 
Railway Corporation and the Ports Authority. NOlle of these corporations has raised 
capital from the domestic Capital Market. 

148 

Nigerian Capital Market Regulation 

invested their surplus funds in London. Another reason was to give 
Nigerians the opportunity to participate in their econornv.t- 
The LSE set out to be a purely self-regulatory organization on the 
terms of its memorandum and articles of association. However, in 
1961, because the Government desired to give it statutory 
protection and exercise some form of control over it, it enacted 
the Lagos Stock Exchange Act17 (repealed by the ISA in 1999) 
granting the Lagos Stock Exchange the monopoly to 
restrict the practice of stockbroking, including 
stockjobbing. in the securities granted quotation by the 
Exchange, to its members; 
admit members, regulate them and report its activities 
quarterly to the Minister of Finance through the Governor 
of the Central Bank of Nigeria, and 
report to the Minister through the Governor whenever the 
Council of the Exchange rejected an application for 
membership." 
Section 7 of the Lagos Stock EXChange Act gave the Central Bank 
of Nigeria the right " ... either on its own behalf or on behalf of 
another person, to sell or offer for sale or purchase or offer to 
purchase stocks and other securities of the Government of the 
Federation, whether or not they are for the time being granted a 
quotation by The Exchange." That section recognized the Central 
Bank of Nigeria ("CBN") as a regulatory agency for the capital 
market. 
The Nigerian Stock Exchange 
The Lagos Stock Exchange metamophorsed into the Nigerian Stock 
Exchange ("NSE") on December 2, 1977,19 with branches in some 
16 See Research Department of the Central Bank of Nigeria. Twentv rears of Central 
Banking in Nigeria, (1979). 
171961. No. 14 
18 ld. 55.3-6. 
19 Following the White Paper on the report of the Pius Okigbos Financial System Review 
Panel (1976). The Federal Government set up that panel in April of that year to study 

Lesotho L.J. Vol. 15 No.1 

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major cities of Nigeria. The Exchange has three categories of 
members, namely council members, ordinary members and 
dealing members. The members of Council are drawn from 
dealing and ordinary members. The National Council of the 
Exchange is the governing and the highest policy-making 
authority, and it functions through committees charged with 
various responsibilities that include listing and delisting of securities, 
admission of new members and discipline. The powers and 
functions of the Council include 
Enforcement of the Articles as well as the Rules and 
Regulations of the Exchange; 
Investigating complaints from investors and members as 
well as settling disputes investors and brokers or 
members inter se; 
Policing the market, and taking disciplinary measures 
against erring members; 
Making, amending or revoking regulations and prescribing 
fees for the effective operation of the Exchange; 
Granting quotation to companies, and deciding to delist, 
suspend or withdraw quotation from a quoted company 
when it deems it necessary; 
Appointing committees suitable to the smooth functioning 
of the Exchange20 
Dealing members combine the functions of stockbrokers and 
jobbers. The Exchange requires dealers to deposit a sum of money 
the structure and operations of the Nigerian financial system and to make 
recommendations for improvement. 
20 For the mode of constituting the Council and its functions. see the Stock Exchange 
Articles of Association (as amended). See also H.I. Alile and A.R. Anao, The Nigerian 
Stock Exchange in Operation. (Lagos: Jerornelaiho & Associates for the Nigerian 
Stock Exchange. 1986). pp.29-30. The branches of the Stock Exchange also have 
branch councils. Although they are not autonomous. they may make by-laws for 
effective functioning of their respective trading floors. They do initial vetting of 
application for membership and make recommendations to the National Council. 

150 

Nigerian Capital Market Regulation 

with, pay annual dealership fee and maintain an effective 
presence in at least two floors of the Exchange. 21 
The NSE has General Listing Requirements. These are a set of rules 
and regulations on companies that may be admitted to listing on 
the Exchange and the conditions for quotation of securities. They 
also specify payment of listing fee, the rights attached to the 
shares quoted on the Exchange and other obligations of the listed 
cornponies." 
On April 30, 1985, the Federal Government established the Second- 
tier Securities Market ("SSM") for businesses that could not meet the 
Listing Requirements of the NSE. The SEC gave the purpose for 
which the SSM came into operation as " ... providing stock market 
access to small businesses at less demanding admission rules/costs 
than full quote as a means of creating opportunities for economic 
growth and employment through the growth of small 
businesses.t'A The SSM provides "a wider and cheaper source of 
funding for small/medium ... enterprises."24 
The Central Securities Clearing System 
In 1992, the NSE incorporated the Central Securities Clearing 
System Limited ("CSCS") as a part of its effort to modernise and 
make the Stock Exchange more efficient following the 
recommendation of the International Finance Corporation. The 
CSCS is a subsidiary of the Stock Exchange, its clearinghouse and 
depository. As a clearinghouse it facilitates the validation, delivery 
and settlement of securities transactions, and as a depository, it 
facilitates the exchange of stock and bond certificates as well as 
21 F~r further reading on membership and governance of the Exchange. see 1-1.1. Alile and 
A.R. Anao. supra .. 19-33. 
22 Generally the Listing Requirements permit free transferability of fully paid-up shares. 
All listed companies must advertise a proposed Annual General Meeting conspicuously 
in at least two widely read newspapers at least 7 days before the meeting. The 
subscription monies pending allotment and return of funds to the subscribers must be 
deposited in a designated bank account appointed by the Issuing House and the 
Company. All accrued interests must be paid to the Company to onset part of the cost 
ofthe Issue. The Council ofthe Exchange. its policy-making organ may at its discretion 
add to or subtract from the Listing Requirements at anytime. 
c.1 Securities Exchange Commission Quarterly Vol. 2. No. I (March 1985). p.I. 
c4 lei 

Lesotho L.J. Vol. 15 No.1 

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offers custodian services. The NSE owns 51 per cent of its shares 
while stock registrars, stockbrokers, investment banks and other 
nominees hold the remaining 49 per cent. 
Because of an apprehension that the CSCS will not be able to 
efficiently cope with the volume of transactions on the securities 
market, the SEC and the National Council on Privatisation ("NCP") 
have considered the establishment of another clearinghouse. 
However, the NSE, in a preemptive move to forestall the 
establishment. is willing not only to reduce its shareholding in the 
CSCS by admitting more shareholders, but also to change the 
name of the clearinghouse for a more national one.> 
The Abuja Stock Exchange 
The Abuja Stock Exchange Pic. ("ASE") was incorporated on 17 
June 1998. Its promoters include the CBN, the Nigeria Reinsurance 
Corporation, the Nigeria Bank for Commerce and Industry, the 
Nigeria Industrial Development Bank and the National Insurance 
Corporation Pic. The ASE is an automated market as it has a 
trading system called the Abuja Stock Exchange Automated 
Trading System ("ASEATS"). The system has software module for 
Initial Public Offering ("IPO") of securities and an order-driven, 
screen-based facility for the secondary market as well as security 
clearing and depository facility. Thus, the market is accessible on- 
line and efficient. With these facilities, the Nigerian Capital Market 
is set to join the modern major markets of the world. The ASE has 
three subsidiaries, namely Securities Clearing and Depository 
Limited ("SCDL"), ASE Properties Limited and ASE Publications 
Limited. 
The SEC registered the ASE to create a level ground and an 
environment conducive for competition by qualified capital 
market institutions. The monopoly to deal in shares and stocks that 
the Lagos Stock Exchange Act granted the LSE and, albeit, the 
NSE, was contrary to free market enterprise. Therefore, in 1999, the 
ISA repealed the Act. The repealed CIC Decree and successive 
SEC Acts provided for the licensing of multiple stock exchanges but 
25 Williams Ekanern, "NSE Opens Up CSCS for New Shareholders" Punch, 19 January 
2002. p.24. 

152 

Nigerian Capital Market Regulation 

only the NSE was registered up till 1998. The Federal Government 
permitted the establishment of the ASE following the 
recommendation of the Odife Panel on the review of the Nigerian 
Capital Market in October 1996 that a national stock exchange of 
an international standard be established in Abuja. The ASE has 
added to the number of SROs on the capital market. 
The ASE with its automated trading system is one of the most 
remarkable innovations by the SEe. In consonance with that, the 
SEC has issued comprehensive guidelines on dual listing and 
multiple trading of securities in the Nigerian Capital Market.26 Rule 
109 (c) of the SEC Rules and Regulations27 made pursuant to the 
ISA permits issuers to list their securities on more than one exchange 
since the listing is a business decision of the issuer. Rule 119 (A) 
provides that " ... a Securities Exchange shall by its rules permit the 
trading of a security not listed on it provided that such security has 
been registered and listed on any recognised Securities 
Exchange." The Securities Exchange has the discretion to "impose 
conditions for granting such "permitted trading status" and file it 
with the [SEC)." 
By virtue of Rule 42 (1), once it has registered with the SEe. a broker 
or dealer may be a member of more than one Exchange. "Where 
the broker effects transactions on any Exchange and over-the- 
counter Market, the appropriate Self Regulatory Organization shall 
be the Exchange and the Association of Securities Dealers."28 In 
order to preserve the sanctity of dual listing, Rule 136 (8) prohibits 
Securities Exchanges from preventing their dealing members from 
trading on any other recognised Exchange or penalising them if 
they did. However, the Rule recognises that the Exchanges 
involved may have a Memorandum of Understanding ("MOU") on 
the subject matter that they must file with the SEe. Rule 122 (4) (iii) 
prohibits arbitraging by stipulating that the "highest closing price of 
a security on any of the exchanges shall be the opening price on 
all the other exchanges." 
26 SEC Guidelines on Dual Listing and Multiple hading a/Securities (2000). 
27 Securities and Exchange Commission (SEe) Rules and Regulations Pursuant to 
Investments and Securities Act (15/1) of I 999 (hereinafter referred to as the SEe Rules). 
28 /d, Rule 42 (4). 

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The Federal Government curiously and unilaterally converted the 
ASE into a Commodities Exchange on 8 August 2001 thereby 
creating another monopoly in share trading. This action has raised 
a number of questions - Why should the Government sacrifice 
competition for monopoly? Should the establishment of a Stock 
Exchange be a political decision rather than an economic 
decision? Could the Government validly convert the ASE to a 
Commodities Exchange? What will the ASE really be?29 One may 
add, why take so much trouble making rules for multiple stock 
exchanges? How do we optimise the gains of the facilities on the 
ASE? How do we truly internationalise our capital market? 
The Central Bank of Nigeria 
The Central Bank of Nigeria ("CBN") came into operation in 1958, 
not only as banker's bank, but also to regulate the Nigerian Capital 
Market in some areas of operation. The debates in the House of 
Representatives on the desirability of establishing the bank 
revealed the nexus between it and the capital market. When the 
Dr. K.O. Mbadiwe proposed a private member's motion for the 
establishment of the bank, the expatriate Financial Secretary to 
the Government opposed the motion because he was of the 
opinion that: 
[y]ou must have institutions, such as banks, insurance 
companies. building societies, mortgage societies, finance 
houses and the like, who are prepared to buy and sell 
securities at short notice. You must have a highly 
organised stock exchange through which these security 
(sic) can be marketed.'? 
Though the Government established the CBN before the Lagos 
Stock Exchange, the bank came to regulate the capital market. 
Section 4 of the Central Bank Act, 195831 charged the CBN "to 
promote monetary stability and sound financial structure in 
Nigeria." Sections 39 of the same Act enjoins the CBN to cooperate 
29 See Ahmed Abdulai. supra., 3D 
30 See Research Department of the Central Bank of Nigeria. Twenty Years of Central 
Banking in Nigeria, (1979). p.38. quoting from the House of Representatives Debates. 
First Session. March/April 1952. Vo1.2. 
31 Cap.3D. Laws of the Federation of Nigeria and Lagos. 1958. 

154 

Nigerian Capital Market Regulation 

with other banks in Nigeria to promote and maintain adequate 
and suitable banking services as well as maintain management 
ethics in the banking system and to pursue other policies that are in 
the national interest. Pursuant to its powers.> the CBN through its 
credit guidelines regulate the volume of money in the economy, 
and albeit the money available for investment in the capital 
rnorket.> 
It also is significant to keep in mind that the fact that the CBN was 
germane to capital market regulation prompted the Government 
to make its representative the chairman of the Capital Issues 
Commission of 1973 and a member of the Securities and Exchange 
Commission ("SEC") of 1979. These Commissions successively have 
been at the apex of capital market requlotion.> 
The repealed Lagos Stock Exchange ACP5 required the Stock 
Exchange to submit quarterly reports of its activities to the Minister 
of Finance through the Central Bank whose governor must 
comment on the writing so as to enable the Government to 
monitor and regulate the capital morket.v The Federal 
Government policy guidelines have revealed that the CBN has 
been able to assist it in the realisation of its economic objectivesY 
The Capital Issues Committee/Commission 
In 1962, the Government set up the Capital Issues Committee as an 
" ... ad-hoc committee ... with the basic understanding that, if 
32 Under the Central Bank of Nigeria (Amendment) Decree No.3 of 1968.·s.2. 
33 The Central Bank oj Nigeria Monetary. Credit, Foreign Trade and Exchange Policy 
Guidelines Jor Fiscal 2()()212()()3 (Monetary Policy Circular No. 36) seeks "to subdue 
inflation to a single digit over the two year-period. Consequently. the central focus 
[included) effective control of anticipated liquidity injection ... in order to ..." , enhance 
" ... greater access to credit for the real sector" ofthe economy - p.9. 
34 Curiously. the Securities and Exchange Act. No. 29 of 1988 reenacted as a chapter of 
the Laws of the Federation of Nigeria. 1990 (which Act has been repealed by the 
Investment and Securities Act. No.45 of 1999) left out the CBN from the then re- 
established SEe. It also left out representatives of the Federal Ministries of Finance 
and Trade (Corporate Affairs Commission from 1990) - see section 2. 
35 S.5 (1). 
36 ld. s.5 (2). 
37 See G.A. Olawoyin. The Nigerian Capital Markel. University of lfe Nigeria Inaugural 
Lecture Series 46 (He-Ire: University of lfe Press. 19RO). p.S. 

Lesotho LJ. Vol. 15 No.1 

155 

experience and market development justified it, a more formal 
structure would be established with a fundamental objective of 
providing the mechanism of regulating the capital market."38 This 
step was consistent with the fact that as a private company, the 
Stock Exchange began as a self-regulatory organization. Even the 
1961 Stock Exchange Act was terse in content. The Committee was 
purely advisory, and although the Stock Market respected its 
decisions, they lacked legal force and sanction. It operated as a 
department of the CBN. Its ad-hoc status made it idle on the 
capital market to the extent that it handled only twenty issues in 
the fourteen years of its existence.> 
In 1973, the Federal Government enacted the Capital Issues 
Decree40 (now repealed) creating the Capital Issues Commission 
("ClC") that replaced the Capital Issues Cornrnittee.« Under the 
Second National Development Plan, the Government had 
promulgated the Nigerian Enterprises Promotion Decree in 1972 to 
pursue the first phase of indigenisation of foreign enterprises doinq 
business in Nigeria. It envisaged that capital market activities would 
increase and raise more than ever the need to protect investors. It 
found the Capital Issues Committee incompetent for that 
important role.v The Capital Issues Decree charged the CIC with 
the duty of determining: 
the price at which the shares or debentures of a company 
are to be sold to the public either through offer for sale or 
by direct issue; 
the timing and amount of any subsequent public issue of • 
shares or debentures by that company; and 
)8 .l.O. Sanusi. "Capital Market in Nigeria" in Nigerian Commercial Laws: Problems and 
Perspectives. eel. I.A. Ayua. (Kaduna: Layon Security and Colour Printers), p. 136. 
)9 Olawoyin. supra. 
40 1973. NO.14. 
41 The CIC comprised the Chairman who was a representative of the CBN and one 
representative each of the Federal Ministries of Finance. Trade, Economic 
Development and Reconstruction and Industries as well as a representative of the Stock 
Exchange, and three other persons appointed by the Minister of Finance. The enabling 
Decree clearly gave the leadership role to the CBN. 
42 Olawoyin. supra p. I 7. 

156 	Nigerian Capital Market Regulation 
such other matters incidental or supplementary to the 
foregoing as the Commission may at its discretion 
determlne." 
The Capital Issues Decree also penalized companies that issued a 
prospectus inviting members of the public to subscribe to their 
shares or debentures without the prior approval of the ClC as 
regards the price at which the shares or debentures were to be 
sold and the timing as well as amount of the sale. The fine payable 
by the company that contravened the law was ten thousand naira 
(or about twelve thousand US dollars then). Any of its officers found 
guilty paid a fine in like sum or went to jail for at least three years in 
the olternotive.« Any person with grievances relating to the 
decision of the ClC could appeal not to the courts but to the 
Commissioner (Minister) for Finance whose decision on the matter 
was final.45 The Capital Issues Decree never intended to regulate 
the Stock Exchange, and the CIC never did, but it had statutory 
powers and performed more functions than the Committee it 
replaced. It approved fifteen issues in its lifetime. 46 
The Capital Issues Decree limited the jurisdiction of the ClC to 
public companies only." Because of that many of the companies 
affected by the first phase of indigenisation escaped its regulatory 
oversight. Only 28 of the 430 of the companies were public 
companies. Therefore. to rectify the situation at the second phase 
in 1977, the Federal Government empowered the ClC to 
determine the prices of the shares of all enterprises that were 
indigenised whether public or private.48 
The volume of securities transactions during the second phase of 
indigenisation sensitised the Federal Government to the 
43 ld. 5.1 (2). 
44 ld. 5.4. 
4S ld. 5.6. 
46 See Alile and Anao. supra .. 39. 
47 By section 4( I) these are companies which by their articles of association are "not 
precluded among other things. from issuing invitation to members of the public to 
subscribe for shares or debentures" whether or not such shares were to be dealt in on a 
Stock Exchange. 
48 See the Nigerian Enterprises Promotion Decree Act. NO.3 of 1977 (since repealed). 5.9. 

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157 

inadequacy of the CIC and led to the establishment of the 
Securities and Exchange Commission. 
The Securities and Exchange Commission" 
The Securities and Exchange Commission ("SEC") is the regulatory 
apex organisation of the Nigerian Capital Market. The Federal 
Government established it informally in 1977 following the report of 
the Committee on the Review of the Nigerian Financial System 
(1976).50 That Committee recommended that the SEC be 
established to, inter alia, "register all securities, proposed for offer or 
sale to the Nigerian public or for private offer if they are to be kept 
ultimately by persons other than those to whom the offers were 
made, register stock exchanges and securities dealers and their 
agents .... "51 The Government gave SEC legal status in 1979 through 
the Securities and Exchange Commission (SEC) Act of that year.52 
In 1988, the Government repealed that Act and re-enacted it as 
the Securities Exchange Commission Act of 1988 (later 1990) .53 
The 1988 Act re-established the SEC with following functions: 
determining the amount of, the price and the time at which 
securities of a company are to be sold to the public either 
through offer for sale or subscription; 
registering all securities proposed to be offered for sale to, 
or for subscription by, the public or to be offered privately 
with the intention that the securities shall be held 
ultimately other than by those to whom the offers were 
made; 
maintaining surveillance over the securities market to 
ensure orderly, fair and equitable dealing in securities; 
49 For more reading on the Securities and Exchange Commission up till 1995. see SEe 
Evolution and Functions, (Lagos. Nigeria: Securities and Exchange Commission) 
,0 Otherwise known as the Okigbo Committee. 
,I P.N.C. Okigbo, Nigeria's Financial System. Structure and Growth. (Essex: Longman 
Group, 1981), p.2 1 2. 
'21979. No. 71. 
53 1988. No.29 (re-enacted in 1990 as a chapter of the Laws of the Federation of Nigeria, 
now repealed by the Investment and Securities Act. No 45 of 1999 that has re- 
established the SEC with modified and expanded functions.) 

158 

Nigerian Capital Market Regulation 
registering stock exchanges or their branches, registrars, 
investment advisers, securities dealers and their agents 
and controlling and supervising their activities with a view 
to maintaining proper standards of conduct and 
professionalism in the securities business;" 
protecting the integrity of the securities market against 
any abuses arising from the practice of insider trading; 
acting as regulatory apex organisation for the Nigerian 
capital market including the Nigerian Stock Exchange and 
its branches to which it would be at liberty to delegate 
powers; 
reviewing, approving and regulating mergers, acquisitions 
and all forms of business combination; 
creating the necessary atmosphere for the orderly growth 
and development of the capital market; and 
undertaking such other activities as are necessary or 
expedient for giving full effect to the provisions of this 
Act55 

The functions of the SEC were a remarkable expansion of those of 
the Capital Issues Commission that it replaced. The Act clearly for 
the first time made SEC the apex regulatory organisation of the 
capital market with powers to register Stock Exchanges and 
market participants as well as promote capital market 
development. SEC could with the approval of the Federal 
Executive Council make regulations for the purpose of.giving effect 
,4 Section 12 of the Act stipulated the procedure for the registration of Stock Exchanges 
and National association of Securities Dealers. An appl ication for registration "shall be 
accompanied by the rules of the Stock exchange and such other information and 
documents as the Commission may ... prescribe ... in the public interest or for the 
protection of investors." The SEC must be satisfied that the rules or a proposed Stock 
Exchange "include provisions for the expulsion, suspension or discipline of a member 
for conduct or procedure inconsistent with the just and equitable principles of the trade. 
It was clear then that the Act permitted self-regulation under the oversight of the SEe. 
Section 19 permitted any person aggrieved by any decision of the SEC on any 
application made to it to apply to the Minister or Finance for redress. The Minister's 
decision was final. 
'S S.6 

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159 

.' 

to the provisions of its enabling Act.56 In addition, the act created 
civil liabilities and offences as well as gave the Federal High Court 
jurisdiction not only over them but also over violation of the rules 
and regulations made under that Act.57 
One important function of the SEC that a good number of market 
operators and scholars found inappropriate was its determination 
of issue and offer price of securities, a role that its predecessor the 
CIC also performed. That role contradicted the tenets of free 
market and opposed a healthy development of the capital 
market. The regulatory organisation ought to have ensured an 
orderly and transparent market, and left the market to efficiently 
determine securities prices.v' In response to the observations, the 
SEC ceased in 1993 to determine prices of securities, and 
transferred the function to issuing houses under prescribed 
guidelines. The issuing houses also inherited its allotment functions. 
This initiated the deregulation of the capital market as announced 
in the federal budget speech of that veor.> 
In 1990, the Companies and Allied Matters Act ("CAMA")60 came 
into effect. Part XVII of it covered dealings in the company 
securities and charged the SEC with its administration. Issues 
covered by the Part included public offer of securities, registration 
of securities, prospectuses, allotment, unit trusts, reconstruction, 
mergers and takeovers as well as insider trading. The Investment 
and Securities Act ("ISA")61 has repealed Part XVII of the CAMA 
and the Securities and Exchange Commission Act of 1990. All of 
the repealed part is now Part XVIII of the ISA. 
The SEC has been re-established and recomposed by Part I of the 
ISA. That part also prescribes a Code of Conduct for its members. It 
'6 S.23. The SEC in 1989 made SEC Regulations. 1989 pursuant to its rule-making power. 
laying the foundation for securities regulation in Nigeria. 
'7 See ss.25-27. 
,8 See Alile and Anao. supra .. 43-44. See also Ahmed Abdulai, "History of the Nigerian 
Capital Market: The Legal Perspective" (paper presented at the seminar on The 
Securities Laws and the Capital Market organised by the Securities and Exchange 
Commission. Abuja, Nigeria. 5-6 December 200 I.) 
,9 See SEC Evolution and Functions, supra .. 32. 
60 Cap.59. Laws of the Federation of Nigeria. 1990. 
61 1999. No.45 

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Nigerian Capital Market Regulation 

is expected that the SEC will play a vital role in the making and 
implementation national development and poverty alleviation 
policies. According to a learned solicitor and capital market 
consultant, " ... the new SEC is designed to be pro-active by taking 
the Capital Market to the grassroots with a clearly defined twin 
objective, that is, ensuring nationwide participation in stock market 
activities as well as the mobilisation of savings at the grassroots."62 
In order to enable the SEC to effectively protect investors and 
superintend capital market development, section 8 of the ISA 
charges, inter alia, to: 
regulate investments and securities business in Nigeria; 
register and regulate Securities Exchanges, Capital Trade 
Points, Futures, Options and Derivatives Exchanges and 
any other recognised Investment Exchanges; 
register securities to be offered for subscription or sale to 
the public; 
render assistance in all aspects including funding as may 
be deemed necessary to promoters and investors wishing 
to establish Securities Exchanges and Capital Trade 
Points; 
prepare adequate guidelines and organise training 
programmes and disseminate information necessary for 
the establishment of Securities Exchanges and Capital 
Trade Points; 
register and regulate corporate and individual capital 
market operators as well as well as capital market 
advisers and consultants such as solicitors, accountants 
engineers and surveyors; 
register and regulate the workings of venture capital funds 
and collective investments schemes including mutual 
funds; 
register rotating savings schemes such as esusus and 
adashes for statistical purposes; 
(,2 Ahmed Abdulai. supra .. 27 

Lesotho L.J. Vol. 15 No.1 
facilitate the establishment of nationwide system for 
securities trading in the Nigerian capital market in order to 
protest investors and maintain fair and orderly markets; 
facilitate the linking of markets in securities through 
modern communication and data processing facilities in 
order to foster efficiency, enhance competition and 
increase information available to brokers, dealers and 
investors; 
act in the public interest having regard to the protection of 
investors and maintenance of fair and orderly markets, 
and to this end to establish a nationwide trust scheme to 
compensate investors whose losses are not covered 
under the investors protection funds administered by 
Securities Exchanges and Capital Trade Points; 
keep and maintain separate registers of foreign direct 
investments and foreign portfolio investments; 
register and regulate central depository companies, 
clearing and settlement companies, custodians of 
securities, credit rating agencies and such other agencies 
and intermediaries; 
protect the integrity of the securities market against the 
abuses arising from the practice of insider trading; 
act as regulatory apex organization of the Nigerian capital 
market including the promotion and registration of self- 
regulatory organizations and capital market and trade 
associations to which it may delegate its powers; 
review, approve and regulate mergers, acquisition and all 
forms of business combinations; 
conduct research into all, or any aspect of the securities 
industry; 
prevent fraudulent and unfair trade practice relating to the 
securities industry; 

161 

162 

Nigerian Capital Market Regulation 
perform such other functions and exercise such other 
powers not inconsistent with the Act as are necessary or 
expedient for giving full effect to the provisions of the Act: 

Pursuant to its powers under the ISA, the SEC has established four 
specialized departments to regulate securities exchanges, capital 
market operators including investment advisers and consultants, 
collective investment schemes, and business combinations 
respectively. In addition, it has upgraded the Research and Market 
Development Division to a full department and established a 
Compliance and Enforcement Department. It has also created the 
Department of Human Resources out of the Administrative 
Department. 
The Investment and Securities Act 
The Federal Government enacted the Investment and Securities 
Act {"ISA")63 in 1999 following its acceptance of most of the 
recommendations of the Panel on the Review of the Nigerian 
Capital Market of 1996 (Odife Panel). For the first time, Nigeria has 
a comprehensive statute for the regulation of its Capital Market. 
The Act focuses, not only on the market institutions, but also the 
trade in securities. Its overall objective is to ensure a fair, orderly 
and transparent market. Hitherto, Capital Market statutes and rules 
were scattered in several statute books and were outdated. The 
Act has repealed the Lagos Stock Exchange Act, 1961 and the 
Securities and Exchange Commission Act. 1990 as unsuitable to a 
modern market.. In addition, it repealed the provisions of Part XVII 
of the Companies and Allied Matters Act, 1990 one incorporates it 
verbatim as its Part VII1.64 
The ISA has two hundred and sixty-five Sections divided into Sixteen 
Parts as well as Four Schedules. Part I reestablishes the SEC and 
stipulates its membership as well as their code of conduct. Part II 
provides the functions and powers of the SEe. These functions and 
powers are broader than the rather restrictive one under the 
repealed SEC Act. Part IV gives SEC financial autonomy to 
6) 1999. No.45. 
64 Cap. 59. Laws of he Federation of Nigeria. 1990. 

Lesotho L.J. Vol. 15 No. 1 

163 

"charge, retain, and utilise for its purposes fees collected for the 
services rendered by it" under the Act.65 
Part V empowers the SEC to register Securities Exchanges and 
Capital Trade Points. By virtue of this Part and other provisions of 
the Act, the SEC could register and regulate more Stock 
Exchanges in Nigeria. Part VI regulates the registration of capital 
market operators. The latter include securities dealers, stockbrokers, 
sub-brokers, jobbers to issues of trust deeds, registrars to issues 
investment bankers, issuing houses, underwriters, portfolio 
managers, investment advisers, and such other intermediaries as 
the SEC may licence in accordance with the Regulations made 
under the Act. Under this Part, the SEC for the first time in Nigeria 
has been registering solicitors, engineers, surveyors and other 
professionals before they could be consultants in the capital 
morket.s- However, the Federal High court recently decided that 
the SEC has no power to register solicitors whose participation in 
the capital market is merely incidental to their practice of their 
profession. 
In Prof. A.B. Kasunmu SAN v. Securities and Exchange Commission 
& Anor.,61 the plaintiff asked, inter alia, for: 
3.	A declaration that the [SEC] has no rights or powers 
under the provision of the ISA or under any other law to 
demand, direct and/or insist that the plaintiff must be 
accredited and registered with the [SEC] before the 
plaintiff can act or be appointed as a Solicitor to any 
capital market transaction and more particularly before 
it (the Plaintiff) can act as Solicitor to a company in a 
public issue. 
4.	A declaration that any regulation made by the [SEC] 
requiring a Solicitor to be accredited and registered 
with the [SEC] before the Solicitor can act in a capital 
market transaction is illegal and ultra vires and 
inconsistent with the provision of [the ISAj. 
65 ISA s.15 (\). 
66 SEC Rule 39 elaborates on who should register as well as the requirements and method 
of registration. 
67 Suit No. FHC/L/CS/70/2002 (Unreported). 

164 

Nigerian Capital Market Regulation 

The plaintiff has been, at all material times, the Solicitor to 
Chartered Bank Pic. The bank intended to publicly issue securities 
so as to raise fund on the Nigerian Capital Market, and it informed 
the plaintiff to be the solicitor to the issue. The SEC refused to permit 
the plaintiff to act in that capacity unless the SEC accredited and 
registered it under sections 8(f), 9(b), 29, 30, 258( 1) and 264 of the 
ISA as well as Rule 39 of the SEC Rules and Regulations made 
pursuant to section 258 of the ISA. The SEC contended inter alia 
that the phrase "". and such other intermediaries associated with 
the securities Industry ... " in section 29 (1) of the ISA included 
Auditors, Reporting Accountants, Valuers and Legal Practitioners in 
the Market Operators registrable by the SEe. Consequently, the 
plaintiff sought the above declarations, arguing successfully that 
the phrase excluded Legal Practitioners to the extent that section 
29(1} of the ISA specifically mentions those that the SEC must 
register. The plaintiff persuaded the court further that only such 
other intermediaries that buy, sell or deal in securities on the capital 
market must be registered with the SEe. and the plaintiff does not 
deal in securities within the meaning of section 264 of the ISA. In 
addition, the preparation by the plaintiff of the offer documents, 
confirmation of the facts in the documents and like matters is 
incidental to the profession of a Legal Practitioner. 
The court held that: 
Beside the fact that a Legal Practitioner is not specifically 
mentioned in sections 29(1) and 30 of the [ISA], section 
264 of the same Act goes on to expressly enact that an 
Investment Adviser does not include a Solicitor and 
Advocate or Accountant in practice whose carrying out of 
the business is solely incidental to the practice of his 
profession. It is therefore my view ... that it is not the 
necessary intendment of the Act to include Legal 
Practitioners amongst those to be registered by the 
Securities and Exchange Commtssion." 
If only a Capital Market Operator is required to be registered in 
view of Section 8(f} of the act which confers powers on the [SEC] 
to register and regulate Corporate and Individual Capital Market 
Operators and if by the combined effect of 29 (1 ), 30 and 264 of 
(,8 Id .. p.22. 

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165 

the act, a Legal Practitioner whose carrying out of business is solely 
incidental to the practice of his profession is not a Capital Market 
Operator and is not to be registered, then Rule 39 of the Rules and 
Regulations which provides that Legal Practitioners and other 
professionals whose opinion directly impact on Capital Market 
transactions are also subject to registration by the [SEC], is at 
variance with the necessary intendment of the Act, and is 
inconsistent with the express provisions ... of the principle (sic) Act 
and so it is invalid .... 
Parts VII and VIII of the ISA deal with the duties of SEC to register 
securities»? and to maintain registers of interest in securities as well 
as public offer of securities and invitation to the public to subscribe 
securities respectively. These Parts require extensive disclosure of 
material information, and information is the means by which 
securities regulation is enforced and investors are protected. The 
items of information in filings with the SEC reflect what investors will 
consider material to their decisions. The latter Part contains anti- 
fraud provisions and penal sanctions for the violation those 
provisions. Part X penalises the creation of "false market in 
securities" and "insider trading obuses"."? 
Part IX deals with the conduct of securities business." and 
empowers the SEC to prescribe "margin requirements"72 so as to 
discourage excessive use of credit in securities transactions. Part XI 
regulates mergers, take-overs and ocquisttions.» while Part XII 
(inadvertently numbered Part XI) deals with the regulation of 
collective investments> such as unit trust, investment trust, pension 
	fund, community savings and venture capital. 	• 
(,<) SLC Rules 40 and 107 elaborate on registrable securities. the rcg isiration requirements 
and the method of registration. The registration provisions are ",;r) important because 
it is not always clear what instrument is registrable. and a failure to register a 
registrable instrument has dire legal consequences. including imprisonment. 
70 See also SEe Rules 106-118 (Ss.81-89 of the ISA for Rules 111-118). Rule 110 
prohibits the use by securities traders of manipulative and deceptive devices and 
contrivances to defraud any person. It also defines "insider" 
71 See generally sections 74-80 of the ISA for SEe Rules 98-104. 
72 "Margin" is the amount a customer deposits with the broker when he borrows from the 
broker to buy securities. 
73 See also SEe Rules 228-238 
74 See also SEe Rules 239-284 

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Nigerian Capital Market Regulation 

Part XIII (wrongly numbered Part XII) provides for the setting up of 
Investors Protection Fund (IPF), while Part XIV (also wrongly 
numbered) regulates borrowing by States, Local Governments and 
other Government agencies. The latter Part is an encouragement 
to the Governments and their agencies to raise funds on the 
Capital Market for their capital projects. 
The Securities and Exchange Commission Rules and Regulations 
In 1999 the SEC made extensive Rules and Regulations pursuant to 
the ISA.l5 These Rules and Regulations replaced the SEC 
Regulations of 1989. The SEC prescribed them" ... to effectively and 
efficiently carry out the objectives of securities regulation as 
embedded in the Investment and Securities Act. ... " SEC expects 
also that they will" ... provide participants (regulated persons) in the 
capital market with more precise notice of what is expected of 
them, what conduct will be sanctioned and also [promote] fairness 
and equality of treatment. ... "76 
The SEC Rules are in twelve parts (A to L} with seven schedules, and 
are of "general and specific applications."77 They regulate 
"securities exchanges; capital market operators; securities offered 
for sale or subscription; mergers, acquisitions and combinations, 
collective investment schemes, investors protection fund; 
borrowing by states, local government and other government 
agencies amongst other things."78 SEC recognises that rule making 
is a continuous process, and the existing rules may be amended 
and more made, especially to regulate areas of the capital market 
that are not existent in Nigeria presently." 
Resolution of Disputes in the Capital Market 
The defunct SEC, acting ostensibly under section 24 (1) of the 
repealed SEC Act of 1990, set up and operated an Administrative 
Hearing Committee ("AHC") to handle matters of alleged violation 
75 See note 25 above. 
76 SEe Rules. p.2. 
17/d 
78/d 
79/d. pp.2-3. 

Lesotho L.J. Vol. 15 No.1 

167 

of The SEC Act and Regulations. If it set up the AHC as a model 
after the American SEC Administrative Committee, a quasi-judicial 
-' 	forum for resolving capital market disputes in the United States 
("US"), the former differed from the latter. The American AHC is 
properly integrated into the US judicial system. It follows the due 
process of the law, and is headed by a Federal judge of the High 
Court level who also is a full-time employee of the SEe. Appeals 
from it go ·to the US Court of Appeals. The Nigerian AHC differed in 
all these regard. The Odife Panel recommended that a judicial 
forum be set up with the Nigerian Capital Market in place of the 
AHC to curtail the latter's" ... usurpation of judicial powers ... and 
the pretences at the dispensation of justice by SEe. ... "BO 
Section 224 (1) of the ISA establishes the Investments and Securities 
Tribunal ("1ST") to interpret securities regulation and resolve disputes 
that may arise in the capital rnorket.s' Section 224 (2) empowers 
the Minister of Finance to specify the matters and places in relation 
to which the 1ST may exercise jurisdiction. However, section 234 of 
the Act empowers the 1ST to adjudicate on matters relating to 
the interpretation of any law, enactment or regulations to 
which this Act applies; 
disputes between the Commission (SEC) and a Securities 
Exchange or Capital Trade Point; 
disputes between capital market operators and the 
Securities Exchanges or Capital Trade Point; 
disputes between capital market operators; 
disputes between capital market operators and their 
clients; and 
80 See Ahmed Abdulai, supra, 24 quoting the observation of the Odife Panel. 
81 See also section 234 (I). For more reading on resolution of disputes in the Nigerian 
Capital Market, see .I.T. Agbadu-Fishim. "Dispute Resolution Under the Investment 
and Securities Act of 1999" The Nigerian Stockbroker Vol. I no.4 (October-December 
2000): 19-25: Ahmed Abdulai. supra, 19-24: and Linus O. Okeke, .. One Step 
Forward. Two Steps Backward: An Examination of the Fate of the Investments and 
Securities Tribunal under Nigeria Legal Order" Journal of International Financial 
Markets vol. I. issue 7 (December 1999): 308-318. 

168 

Nigerian Capital Market Regulation 
disputes between quoted companies and the regulators or 
the Securities Exchanges. 

While the Minister of Finance may delimit the territorial jurisdiction of 
the 1ST, I submit that he cannot reduce the matters under section 
234 that the 1ST may adjudicate on but could only add to them. 
The 1ST consists of nine members who are known as Capital Market 
Assessors to be appointed by the Minister of Finance, and one of 
whom shall be the chairman. The chairman must have been a 
legal practitioner for not less than fifteen years with experience in 
capital market matters. An Assessor must be knowledgeable in the 
laws, regulations, norms, practices and operations of the capital 
market. He may hold office for a term of five veors.v The Minister of 
Finance shall appoint a secretary for the 1ST, but it is not clear if the 
secretary shall be one of the Assessors and what his qualification 
should be if he is not an Assessor.e- 
Any person who is aggrieved by any action or decision of the SEC 
under the ISA may institute an action before the 1ST or appeal to it 
within thirty days of the decision or as the 1ST may perrnit.s- The 1ST 
must dispose of any matter before it with finality within three 
months of the date the action cornrnenceo.s- No civil court shall 
have jurisdiction over any matter that the ISA empowered the 1ST 
to deterrnine.se If any person. including the SEe. is dissatisfied with a 
decision of the 1ST. he (it) may appeal to the Court of Appeal on 
points of law, and notify the Secretary to the 1ST. within thirty days 
of the decision." 
The decision of the 1ST must be in writing and its orders or sanctions 
may include, but are not limited to. fines, suspension. withdrawal of 
licences, orders for specific performance and restitution.88 On an 
82 ISA. 55.225-227. 
83 t«. 5.232. 
84 S.236 (I) 
85 S.236 (5). It cannot extend the period. See Falae v. Obasanjo 11999J 6 N.W.L.R. (pt. 
606) 283. 
86 S.242. The 1ST co-exists with civil courts b) virtue of section 315 (I) of the 
Constitution of the Federal Republic of Nigeria. 1999. 
X7 S.243. 
88S.241 (I) 

'. 

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" 

appeal to it, it may confirm, modify or set aside any order or 
decision of the SEC.89 
It appears that the 1ST has no jurisdiction over criminal matters. 
Section 235 provides that where in the course of its investigation of 
any matter, the SEC discovers evidence of possible commission of 
crime, it shall pass the information to the appropriate criminal 
prosecution authority for prosecution in the courts of law. 
Conclusion 
Capital market regulation has evolved with the development of 
the Nigerian Capital Market. From the overview here presented, 
the legislative authority has responded to the developmental 
challenges the market has posed from time to time. As the market 
develops regulation and regulators will have to respond to 
specialised areas of the market, for instance derivative and 
commodities trade. The introduction of universal banking raises 
regulatory concern also. Who of the CBN, the SEC and other 
regulators will regulate what? The Federal Government will have to 
revitalise the Finance System Regulatory Coordinating Committee 
to coordinate the regulators and facilitate the exchange of 
information among them. 
In addition to the above, the Federal Military Government may 
have to reconsider its decision on the ASE so that we can have an 
automated Stock Exchange, and not only Commodity Exchange, 
suitable to the internationalisation of the Nigerian Capital Market. 
One expects that such an Exchange will spur the NSE to-toke up 
the challenges of efficiency suited to the modern day market. 
The current SEC Rules and Regulations are quite elaborate, and 
they ought to give impetus to the growth and sophistication of the 
market. Unlike Rule 39, most of the SEC Rules and Regulations are 
yet to be judicially interpreted. While it is yet unclear which 
professionals the SEC must register in the light of the Decision in 
Kasunmu's case, there is the need for the SEC to, among other 
things, register a national association of securities dealers to enable 
89 S.236 (3). 

170 

Nigerian Capital Market Regulation 

the association ploy self-regulatory role on the capitol market. This 
will enhance coordination in self-regulation.