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Original Article 

UNIOSUN J.Law, Dev. Hum. 1(1) June 2016 
Available online at www.ujldh.uniosun.edu.ng 

Nigerian Capital Market: Issues, Problems and Prospects 
Oladele, 0.0. 
Abstract 
This article appraises the legal and institutional frameworks of the Nigerian Capital Market and the extent to which the 
market has achieved the purposes of those frameworks. It identifies some core issues and problems faced by the market and 
investors which include ensuring certainty of contract and protection of property rights of investors, efficacy of information 
disclosure by publicly quoted companies in prompting investment and securing the value of investment, protecting 
investors from unfair practices by corporate insiders and professionals, and systemic protection against financial failure of 
market professionals and participating financial institutions. It found the regulatory institutions and law adequate in 
structure and contents. However, it established that information disclosed by securities issuers is to complex for the 
understanding of most retail investors. Added is weak enforcement regime in the face of which regulation failed to prevent 
abuse of securities clearing and settlement procedure, market rigging and other manipulative activitiesof core market 
operators and corporate insiders, including violation of margin regulations through excessive insider borrowings and 
securing of repayment of bank loans with the securities purchased with the loans, with contagious effect resulting in failure 
of the lending institutions. It concludes that the market has prospects, but demands purposeful regulation to ensure fair, 
efficient and transparent dealings for the protection of investors and the economy. 
Keywords: Capital, market, regulation, manipulation, disclosure, investor, protection 
Barrister of the Supreme Court of Nigeria, Professor of Business Law, College of Law, Osun State University, Ifetedo Campus, Osogbo, 
Nigeria 
Oladele,O.O. (Ph.D) 

INTRODUCTION 
The capital market· 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 the money 
market that consists of banks. 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 and 
development of the country. The regulations seek 
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. 
UNIOSUN J. Law, Dev. & Hum. Vol. 1, Iss. 1 

This paper appraises the performance of 
the Nigerian Capital Market and its operators as 
well as the extent to which it has achieved the 
purposes of its institutional and regulatory 
framework. It identifies some core issues and 
problems faced by the market and investors 
which include adequate contents of regulations 
but weak enforcement regime, flow of scarce 
financial resources to properties instead of the 
capital market, concentration of economic power 
in the hands of government, overdependence of 
the economy on the banking sector [and the oil 
sector], unhealthy private sector due to market 
rigging and other manipulative activities of core 
market operators and corporate insiders, and 
paucity of foreign investors, which deprives the 
market of depth. It makes a case for purposeful 
regulation of the market to ensure fair, efficient 
108 

and transparent dealings for the protection of 
investors and the economy. It also projects the 
regulatory future of the market in the national and 
global scheme of events. 
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 
contradistinction to the money market in which 
short-term debt instruments are traded. I The cost 
of capital in the capital market is lower than that 
of the money market.' A capital market is also" ... 
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) transactions.' The capital raiser issues the 
securities that the investors subscribe for their 

Oladele 0.0. 
money. The market provides liquidity, 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. The Nigerian capital market performs 
all of these important functions. 
The Objectives for Establishing 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 

I. Remi 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 may do so now, not only through those subsidiaries, but also directly through 
the designated departments. The Guidelines on Universal Banking have enhanced the definition of , banking business" in 
section 61 of the Banks and Other Financial Institutions Act (BOFIA). It added" ... consultancy and advisory services 
relating to corporate and investment matters; 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 losing 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. This has been on the increase. For instance, most ofthe state governments raise money 
on the market. Recently, the Debt Management Office of the Federal Government issued oversubscribed euro bonds to 
raise foreign currency denominated funds. 
J.	HE. Dougall& J.E. Gaumnitz, Capital Markets and Institutions (Englewood Cliffs, New Jersey: Prentice Hall Inc., (975), 
p.3. 
4.	Allan R. Palmiter, Securities Regulation (New York, NY: Aspen Law and Business, 1998), p. 3. Hedging is a means of 
offsetting investment risk. The manager of a large pool offunds 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). 

UNIOSUN J. Law, Dev. & Hum. Vol. 1, Iss. 1 

109 

capital development, promote solvency, 
efficiency and a competitive financial. 
sector, encourage corporate financial 
discipline and accountability, provide long- 
term financial sector requirements without 
increasing the tax burden on the citizens (of 
Nigeria), promote stockmarket culture. 
Added to the above was the need to 
provide governments an avenue to raise long- 
term capital'. 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 
... 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 and 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, and to facilitate co-operation 
between indigenes and aliens in fostering 
economic development. 
lhe Panel on the Review of the Nigerian 
Capital Market affirmed the validity of these 
objectives, and reported that most ofthe problems 
that the market set out to solve still remain 
unsolved. Scarce financial resources flow to 
properties still; economic power is yet largely in 

Oladele 0.0. 
the hands of Government; the economy still over 
depend on the banking sector [and the oil sector r. 
the private sector is yet unhealthy; there are still 
not enough foreign investors, and the problems of 
distribution and concentration of wealth persist. 7 
When the Lagos Stock Exchange was 
incorporated as a company limited by guarantee, 
its memorandum of association stated the 
objectives of the market,inter alia as to: 
a.	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; 
b.	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; 
and 
c.	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 Investments and Securities 
Act of 2007 ("ISA"). The ISA re-establishes the 
Securities and Exchange Commission ("SEC") as 
the regulatory apex organisation for the capital 
m~rl(p,t Tt ~lsn m~kp,s p,ytp,nsivp, nrnvisinns tn 
regulate dealings in securities and market 
participants. It empowers the SEC to make rules 
and regulations for the capital market, pursuant to 
which the SEC has made extensive rules 
following the pattern of those that regulate the 
major capital markets of the world. 8 

5.	The first Federal Government of Nigeria Loan Stock was floated in London long before the Lagos Stock Exchange was 
established. 
6.	Addition mine 
7.	See the Report a/the Panel on the Review a/the Nigerian Capital Market. 
x.	Securities and Exchange Commission General Rules and Regulations Pursuant to the Investments and Securities Act, 
2007 (2013); The United States Securities Act of 1933 - General Rules and Regulations 17 CFR 230 and Rules and 
Regulations Under the Securities Exchange Act 1934 17 CFR 240. For a compendium the U.S. securities statutes, rules 
and forms, see R. W. Jennings, et aI., Federal Securities Laws - Selected Statutes, Rules and Forms 1999 Edition, New 
York, New York: Foundation Press, 1999. The U.S. rules are wider and more advanced, bearing suitable relevance to the 
age and soph istication of her capital market and legal system. 

UNIOSUN J. Law, Dev. & Hum. Vol. 1, 155. 1 

110 

The Nigerian 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 SEC. A 
self-regulatory organization is ' ... any registered 
securities exchange, capital trade point, an 
association of securities dealers, clearing house, 
capital market trade association [and] any other 
self regulatory body approved as such, by the 
[Securities and Exchange] Commission. SROs 
perform certain rulemaking, inspection, 
investigative, and disciplinary functions with 
respect to theirmembers and their personnel. 
They also offer alternative and expeditious 
dispute resolution forums for participants in the 
capital market. They stand to perform useful 
regulatory roles because they are more familiar 
with the market and participants than the SEC, the 
government regulatory agency." Importantly, 
however, their actions are subject to review by the 
SEC under the ISA. The ISA and SEC Rules and 
Regulations of 2013 charges the SEC with 
registration, regulation and disciplining of all 
SROs including the Nigerian Stock Exchange, 
the Abuja Stock Exchange, the National 
Association of Securities Dealers, Capital Trade 
Points, Derivatives Exchanges, and Securities 
Clearing and Settlement Ag enc i e s .!" 
Significantly, no securities exchange or capital 
trade point shall operate unless it is registered 
with the SEC in accordance with the ISA and the 
rules and regulations made thereunder.l'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 association. 
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 

Oladele 0.0. 
and cooperates with the SEC to regulate the 
market and the SROs. In 1959, it floated the first 
Federation of Nigeria Development Loan ofN4 
million and worked out the arrangement for its 
marketing. Its representative is on the SEC, and 
was the chairman of the defunct Capital Issues 
Commission of 1973, a progenitor of the current 
SEe. 
Securities Exchange 
The ISA defines a Securities Exchange as " ... and 
exchange or approved trading facility such as a 
commodity exchange, metal exchange, 
petroleum exchange, options, future exchange, 
over the counter market, and other derivatives 
exchanges.':" 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 initiatives towards 
the establishment of the Nigerian Capital Market 
could be traced to the 1940s.13 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 
invested their surplus funds in London. Another 
reason was to give Nigerians the opportunity to 

9, Susan Nash, Robert D. Strahota and Anne H. Sullivan, "Building an Effective Regulatory Structure/or an Emerging 
Securities Market" 7 Securities Market Journal (Nigeria), 37, 50. 
'OSee sections28-37, PartY ofthe ISA. 
"S. 28, ibid. 
"S,315. 
"In 1946, the Colonial Government promulgated the 1 O-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. None of these 
corporations has raised capital from the domestic Capital Market. 

UNIOSUN J. Law, Oev. & Hum. Vol. 1, iss. 1 

111 

participate in their economy. 14 
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 Federal 
Government of Nigeria desired to give it statutory 
protection and exercise some form of control over 
it, it enacted the Lagos Stock Exchange Ad' 
(repealed by the ISA of 1999), granting the Lagos 
Stock Exchange the monopoly to: 
... restrict the practice of stock broking, 
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, a position that is no 
longer so with the establishment of the SEC. 
The Nigerian Stock Exchange 
The Lagos Stock Exchange metamorphosed into 
the Nigerian Stock Exchange ("NSE") on 
December 2, 1977, with branches in some major 
cities of Nigeria. The Exchange has three 
categories of members, namely council members, 

Oladele 0.0. 
ordinary members and dealing members -. The 
members of Council are drawn from dealing and 
ordinary members. 17 The National Council of the 
Exchange is the governing and the highest 
policymaking authority, and it functions through 
committees charged with various responsibilities 
that include listing and deli sting of securities, 
admission of new members and discipline. The 
powers and functions of the Council include: 
(a) Enforcement of the Articles as well as the 
Rules and Regulations ofthe Exchange; 
(b) Investigating complaints from investors 
and members as well as settling disputes 
investors and brokers or members inter 
se; 
(c) Policing the market, and taking 
disciplinary measures against erring 
members; 
(d) Making, amending or revoking 
regulations and prescribing fees for the 
effective operation of the Exchange; 
(e) Granting quotation to companies, and 
dcciumg to deust, SUSpe11l1 or wunuraw 
quotation from a quoted company when it 
deems it necessary; 
(f) Appointing committees suitable to the 
smooth functioning of the Exchange." 
Dealing members combine the functions 
of stockbrokers and dealers. The Exchange 
requires dealers to deposit a sum of money with, 
pay annual dealership fee and maintain an 
effective presence in at least two floors of the 
Exchange. 
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 

"See Research Department ofthe Central Bank of Nigeria, Twenty Years a/Central Banking in Nigeria, (1979). 
ISNo.14 
16Ibid,553-6 
"This followed the White Paper on the report a/the Pius Okigbo's Financial System Review Panel (1976). The Federal 
-Government set up that panel in April of that year to study the structure and operations of the Nigerian financial system 
and make recommendations to it for improvement. 
For further reading on membership and governance of the Exchange, see H.l. Alile and AR. Anao, The Nigerian Stock 
Exchange in Operation, Lagos: Jeromelaiho& Associates for the Nigerian Stock Exchange, 1986, 19-33. 
" For the mode of constituting the Council and its functions, see the Stock Exchange Articles of Association (as amended). 
See alsoAlile and A.R. Anao, ibid, pp.29-30. The branches ofthe 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. 
UNIOSUN J. Law, Oev. & Hum. Vol. 1, Iss. 1 

obligations ofthe listed companies. 19 
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 ... ,,2°The SSM provides "a wider 
and cheaper source of funding for small/medium 
	• 	21 
... enterpnses. 
The Central Securities Clearing System 
In 1992, the NSE incorporated the Central 
Securities Clearing System Limited ("CSCS") as 
a part of its effort to 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 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. Due to 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." 

Oladele 0.0. 
The Ahuja 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, the ISA of 1999 
repealed the Act. 
The repealed CIC Decree and successive 
SEC Acts provided for the licensing of multiple 
stock exchanges but only the NSE was registered 
up till 1998. The Federal Government permitted 
the establishment of the ASE following the 
recommendations of the Odife Panel on the 
Review of the Nigerian Capital Market in 
Octo ber 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 

'" 23 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 offset part of the cost of the Issue. The Council of the Exchange, its policy-making organ may at its discretion 
add to or subtract from the Listing Requirements at anytime. 
2U. Securities Exchange Commission Quarterly Vol. 2, No. I (March 1985), p.l. 
21 Ibid. 
22. 26 Williams Ekanem, "NSE Opens Up CSCS for New Shareholders" Punch, 19 January 2002, p.24. 

UNIOSUN J. Law, Dev. & Hum. Vol. 1,155. 1 

113 

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." Rule 399 of the SEC Rules and 
Regulations permits issuers to list their securities 
on more than one exchange since the listing is a 
business decision ofthe issuer, provided that they 
comply with the listing requirements of the' 
relevant securities exchange. Rule 185 provides 
that"pursuant to the provisions of the 
[Investments and Securities] Act, 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 
recognized securities exchange ... " The exchange 
has the discretion to "impose conditions for 
granting such "permitted trading status" and file 
it with the SEC. 
Once registered with the SEC, a 
broker/dealer may be a licensed dealing member 
of more than one Exchange." "Where the broker 
or dealer effects transactions on any exchange 
and over-the-counter market, the appropriate 
self-regulatory organization shall be the' 
exchange(s) and the association of the relevant 
over-the-counter rnarket.?" In order to preserve 
the sanctity of dual listing, Rule 203 (8)(b) 
prohibits a securities exchange from making rules 
that prohibit or penalize its dealing members 
from trading in listed securities of on other 
recognized exchanges as permitted by the rules of 
those exchanges. The latter is without prejudice 
to the provisions of any memorandum of 
Understanding on the issue between exchanges 
filed with the SEC within five days of execution. 
SEC Rules prohibit 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." 
The Federal Government curiously and' 
unilaterally converted the ASE into a 
Commodities Exchange on 8 August 200 I 
thereby creating another monopoly in share 
trading. This action has raised a number of 
questions - Why should the government sacrifice 

Oladele 0.0. 
cornpetitron 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? One may add, why take so much 
trouble making rules for multiple stock 
exchanges? How do we optimize the gains of the 
facilities on the ASE? How do we truly 
internationalize 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 ofthe 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 of the federation 
established the CBN before the Lagos Stock 
Exchange, the Bank came to regulate the capital 
market. Section 4 of the Central Bank Act, 195827 
charged the CBN "to promote monetary stability 
and sound financial structure in Nigeria.':" 
Sections 39 of the same Act enjoined the CBN to 
cooperate 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 

n. SEe Guidel ines on Dual Listing and Multiple Trading of Securities (2000). 
,. Rule 203(8)(a). 
'5 Rule 25(3) 
'" 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, Vol. 2. 
" Repealed Cap.30, Laws of the Federation of Nigeria and Lagos, 1958. 
ox Under the repealed Central Bank of Nigeria (Amendment) Decree No.3 of 1968, S.2. 
UUNN~/O~S31uJiNVJ.J.~L~a~w~,DD;evv..8&~H~u;mn..'~ko~1.11~,~/s~s.~1r---~""II""""""""""""" 114 

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 market." 
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 regulation. 30 
The repealed Lagos Stock Exchange Act" 
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 
market." The Federal Government policy 
guidelines have revealed that the CBN has been 
able to assist it in the realization of its economic 
objectives." 
The Capital Issues Committee/Commission 
In 1962, the Federal Government set up' 
the Capital Issues Committee as an" ad-hoc 
committee " ... with the basic understanding that if 
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.':" 
This step was consistent with the fact that as a 

Oladele 0.0. 
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 Decree" (now repealed) 
creating the Capital Issues Commission ("CIC") 
that replaced the Capital Issues Committee." 
Under the Second National Development Plan, 
the Government had promulgated the Nigerian 
Enterprises Promotion Decree in 1972 to pursue 
the first phase of indigenization of foreign 
enterprises doing 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." 
The Capital Issues Decree charged the CIC with 
the duty of determining: 
(a) 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; 
(b) the timing and amount of any subsequent 
public issue of shares or debentures by 
that company; and 
(c) such other matters incidental or 

'~The Central Bank of Nigeria Monetary, (Credit, Foreign Trade and Exchange Policy Guidelines/Fiscal 200212003 
(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" of the economy - p.9. 
10.	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 Investments 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. 
31 S. 5 (1). 
31. Ibid. S. 5(2). 
13. See G.A. Olawoyin, The Nigerian Capital Market, University ofIfe, Nigeria, Inaugural Lecture Series 46 
(lle-Ife: University ofIfe Press, 1980), p.8. 
34 J.O. Sanusi, "Capital Market in Nigeria" inAyua, LA. (ed.) Nigerian Commercial Laws: Problems and Perspectives, 
(Kaduna: Layon Security and Colour Printers), p. 136. 
35.	Olawoyin, supra. 
36.	1973, No. 14. 
37.	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 ofthe 
Stock Exchange, and three other persons appointed by the Minister of Finance. The enabling Decree clearly gave the 
leadership role to the CBN. 
,. Olawoyin, supra p.17 

UNIOSUN J. Law, Oev. & Hum. Vol. 1, Iss. 1 

115 

supplementary to the foregoing as the 
Commission may at its discretion 
determine." 
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 
CIC 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 alternative." Any person with' 
grievances relating to the decision of the CIC 
could appeal not to the courts but to the 
Commissioner (Minister) for Finance whose 
decision on the matter was final. 4 I 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 securities issues in its lifetime. 42 
The Capital Issues Decree limited the 
jurisdiction ofthe CIC to public companies only." 
Because of that, many of the companies affected 
by the first phase of indigenization escaped its 
regulatory oversight as 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 CIC to 
determine the prices of the shares of all 
enterprises that were indigenized whether public 
or private." 
The volume of securities transactions 
during the second phase of indigenization 
sensitized the Federal Government to the 
inadequacy of the CIC and led to the 
establishment of the Securities and Exchange 
Commission. 

Oladele O. O. 
TheSecurities and Exchange Commission" 
The Securities and Exchange Commission 
("SEC") is the regulatory apex organization ofthe 
Nigerian Capital Market. The SEC is established 
and recomposed by Part I of the ISA, 2007. That 
part also prescribes a Code of Ethics for its 
members. It is expected that the SEC will playa 
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 mobilization of savings at the grassroots. 
To enable the SEC to effectively protect 
investors and superintend capital market 
development, section 13 of the ISA charges the 
SEC inter alia to 
a.	regulate investments and securities 
business in Nigeria as defined by [the] 
Act; 
b.	register and regulate Securities 
Exchanges, Capital Trade Points, Futures, 
Options and Derivatives Exchanges and 
any other recognized Investment 
Exchanges; 
c.	regulate all offers of securities by public 
companies and entities; 
d.	register securities of public companies; 
e.	render assistance as may be deemed 
necessary to promoters and investors 
wishing to establish Securities Exchanges 
and Capital Trade Points; 
f.	prepare adequate guidelines and organize 
training programmes and disseminate 
information necessary for the 
establishment of Securities Exchanges 
and Capital Trade Points; 
g.	register and regulate corporate and 

39 1973, No. 14,S.1 (2). 
40. Ibid., S.4. 
4/. Ibid.,S.6. 
" SeeAlileandAnao,supra, p.39. 
43.	By section 4(1) 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. 	. 
U See the Nigerian Enterprises Promotion DecreeAct, No.3 of 1977 (since repealed), s.9. 
45 For more reading on the Securities and Exchange Commission up till 1995 seeSEC Evolution and Functions, (Lagos, 
Nigeria: Securities and Exchange Commission) 
46.	See Section I 
UUNNKIO~S~UJrNVJ.J.LL~a;w~,Oo;ev~.8&~H~u~m~.\~lcoT.I.11~,~/ss.S.~1'---~"""""""""""""""" 116 

individual capital market operators as 
defined by this Act; 
h.	register and regulate the workings of 
venture capital funds and collective 
investments schemes in whatever form; 
1.	facilitate the establishment of a 
nationwide system for securities trading 
in the Nigerian capital market in order to 
protect investors and maintain fair and 
orderly markets; 
J.	facilitate the linking of all markets in 
securities with information and 
communication technology facilities; 
k.	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; 
l.	keep and maintain a register of foreign 
portfolio investments; 
m.	register and regulate central depository 
companies, clearing and settlement 
companies, custodians of assets and 
securities, credit rating agencies and such 
other agencies and intermediaries; 
n.	protect the integrity of the securities 
market against the abuses arising from the 
practice of insider trading; 
o.	promote and register self regulatory 
organizations including securities. 
exchanges, capital trade points and 
	r>.,...~_: .•. ,...1 _~_ •...... _.lr,_L L_4~,.J,-.. ~,.....,....,,....-..~,...L:~._,...., L~ __ .,.-1_: 	1_ 
it may delegate powers; 
p.	review, approve and regulate mergers, 
acquisition takeovers and all forms of 
business combinations and affected 
transactions of all companies as defined 
by this Act; 
q.	authorize and regulate cross-border 
securities transactions; 
r.	call for information from and inspect, 
conduct enquiries and audit of securities 
exchanges, capital market operators, 
collective investment schemes and all 
their regulated entities; 
s.	promote investors' education and the. 
training of all categories of intermediaries 
in the securities industry; 
1.	call for, or furnish to any person, such 

Oladele 0.0. 
information as may be considered 
necessary by it for the efficient discharge 
of its functions; 
u.	levy fees, penalties and administrative 
costs of proceedings or other charges on 
any person in relation to investments and 
securities business in Nigeria in 
accordance with the provisions of this 
Act; 
v.	intervene in the management and control 
of capital market operators which it 
considers has failed, is failing or is in 
crisis, including entering into the 
premises and doing whatsoever the 
Commission deems necessary for the 
protection of investors; 
w.	enter and seal up the premises of persons 
illegally carrying out capital market 
operations; 
x.	in furtherance of its role of protecting the 
integrity of the securities market, seek 
judicial order to freeze the assets 
(including bank accounts) of any person 
whose assets were derived from the 
violation of the Act, or any securities law 
or regulatio.n in Nigeria or other 
jurisdictions; 
y.	relate effectively with domestic and 
foreign regulators and supervisors of 
other financial institutions including 
entering into co-operative agreement on 
matters of common interest; 
z.	conduct research into all or any aspect of 
the securities industry; 
(aa) prevent fraudulent and unfair trade 

industry; 
	(bb) 	disqualify persons considered unfit 
from being employed in any arm of 
the securities industry; 
	(cc) 	advise the Minister [of Finance] on 
all matters relating; 
	(dd) 	perform such other functions and 
exercise such other powers not 
inconsistent with this Act as are 
necessary or expedient for giving full 
effect to the provisions of this 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 

UUNN~/O~S51u7JNVJJ~.Llca~wv,,[D~ewv.~&~H~urrm~.~V,~ol{.11,~/~sS.S.~i'·- ----lIlIlIlIlIlIlIlIlIlIlIlIlIlIlIlIlI 117 

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 also created the Department of 
Human Resources out of the Administrative 
Department. 
The Investments and Securities Act 
The Federal Government enacted the 
Investments and Securities Act ("ISA"t 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). The ISA, 1999 has been repealed by the 
Investments and Securities Act, 2007. Nigeria has 
a comprehensive statute for the regulation of its 
Capital Market. The Act focuses not only on the' 
market institutions and operators, but trade in 
securities also. Its overall objective is to ensure a 
fair, orderly and transparent market and protect 
investors. 
Part V of the ISA empowers the SEC to register 
Securities Exchanges and Capital Trade Points. 
By virtue of this Part and other provisions of the 
Act as well as the 2013 General Rules and 
Regulations Pursuant to the Investments and 
Securities Act,2007, 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 license 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 market." 
However, the Federal High Court has decided that 
the SEC has no power to register solicitors whose 
participation in the capital market is merely 
incidental to their practice oftheir profession. 
In Prof A.B. Kasunmu, SAN vSecurities and 
47. 1999, No.25 
'" Suit No. FHC/LJCS 170/2002 (Unreported). 
49. Suit no. FHC/L/CS/70/2002 (Unreported). 

Oladele O. O. 
Exchange Commission &Anor.,49 the plaintiff 
asked inter alia for: 
A declaration that the [SEC] has no rights or 
powers under the provisions 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; 
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 provisions of [the 
ISA]. 
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(t), 9(b), 29, 30, 
258(1) and 264 ofthe ISA, 1999 as well as Rule 39 
of the SEC Rules and Regulations made pursuant 
to section 258 of the ISA, 1999. 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 registerable by the SEC. 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 listed 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 SEC, and the plaintiff 
does not deal in securities within the meaning of 
section 264 of the ISA. In addition, the 

UNIOSUN J. Law, Dev. & Hum. Vol. 1, Iss. 1 

,

118 

preparation by the plaintiff of the offer 
documents, confirmation of the facts in the 
documents, and like matters are incidental to the 
profession of a Legal Practitioner. 
The court held inter alia that beside the 
fact that a Legal Practitioner is not specifically 
mentioned in sections 29(1) and 30 of the [ISA], 
section 264 ofthe same Act expressly enacted 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 the view of the court that it is not the 
necessary intendment of the Act to include Legal 
Practitioners amongst those to be registered by 
the Securities and Exchange Commission. 50 
If only a Capital Market Operator is 
required to be registered in view of Section 
8(t) 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 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." 
The Securities and Exchange Commission· 
General Rules and Regulations Pursuant to 
the Investments and Securities Act, 2007 
In 2013, the SEC made the General Rules and 
Regulations Pursuant to the Investments and 
Securities Act, 2007. Prior to that time, the SEC 
had made SEe Rules and Regulations pursuant to 
the ISA of 1999. These Rules and Regulations 
replaced the SEC Regulations of 1989. The 2013 
General Rules and Regulations have repealed the 
1999 Rules and Regulations. The SEC prescribe 
them to effectively and efficiently carry out the 
5U. Ibid. p. 22. 
5/. Ibid. 

Oladele 0.0. 
objectives of securities regulation as embedded in 
the ISA. The SEC expects also that they would 
provide participants (regulated persons) in the 
capital market with more precise notice of what is 
expected of them, what conduct would be 
sanctioned and as well as promote transparency 
fairness and equality of treatment. 
The SEC Rules are in Parts A to N with 
eleven schedules, all of general and specific 
applications. They cover registration and 
regulation of Capital Market Operators, Public 
Companies, Capital Market Experts or 
Professionals, Self-Regulatory Organizations 
and transactions on Exchanges, Capital Trade 
Points and similar organizations. They have 
extensive provisions on registration of securities, 
issuers and underwriters' processes and 
obligations, prospectus and public offers, rights 
issue, private placement and conduct of securities 
business. Their enhanced provisions respond 
adequately to margin lending, which abuse was 
partly responsible for the capital market 
meltdown of2008-2009 from which the Nigerian 
capital market has not fully recovered. 
The SEC Rules and Regulations address 
copiously regulation of foreign investment and 
cross-border securities transactions. The 
transparency that they have infused is yielding 
significant results as evidenced by euro bonds 
that the Federal Government issued recently to 
raise two billion dollars, which was 
oversubscribed to the tune of seven billion 
dollars. They also sufficiently provide for the 
regulation of mergers, take-overs and 
acquisitions, collective investment schemes, 
Islamic fund, venture capital fund, private equity 
funds as well as fixed income securities that 
facilitate borrowing by governments and their 
agencies as well as corporate bodies. Finally, it 
introduces Sukuk, which is borrowing on the 
terms of Shariah. 
SEC recognizes that rule making is a 
continuous process, and the existing rules would 
be amended, and more would be made, especially 
to regulate areas of the capital market operations 
that would evolve from time to time. 
Consequently, between 2014 and the end of20 16, 
SEC has made Rules on Infrastructure Funds to 
promote infra structural development, including 

UNIOSUN J. Law, Dev. & Hum. Vol. 1, Iss .. --I ••••••••••••••••• 

119 

public housing, Rules on Trading in Unlisted 
Securities, Rules on Investor Protection Fund,. 
and Rules on Securitization. The latter is to 
situate Nigeria in the scheme of asset 
securitization (Asset-Based Securities and 
Mortgage-Based Securities) as well as trade in 
derivatives. The market operations backed by 
these Rules will require diligent monitoring and 
enforcement by regulators, especially the SEC 
and anti-financial fraud Commissions and other 
agencies. 
The Investments and Securities Tribunal 
The defunct SEC, acting ostensibly under section 
24 (1) of the repealed SEC Act of 1988, set up and 
operated an Administrative Hearing Committee 
("AHC") to handle matters of alleged violation of 
The SECAct and Regulations. Ifit 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 SEC. Appeals from it go to 
the US Court of Appeals. The Nigerian AHC 
differed in all these regards. The Odife Panel 
recommended that ajudicial 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 SEC.52 
Section 274 (1) of the ISA established the 
Investments and Securities Tribunal ("1ST") to 
interpret securities regulation and resolve 
disputes that may arise in the capital market." 
Section 284 (2) of the Act empowers the 1ST, to 
the exclusion of any other court of law or body in 
Nigeria, to exercise jurisdiction to hear and 
determine any question of law or dispute 
involving 

Oladele 0.0. 
a)	a decision or determination of the 
[Securities and Exchange] Commission 
in the operation and application of the 
[ISA], and in particular, relating to any 
dispute between: 
(i) capital market operators; 
(ii) capital market operators and their 
clients; 
(iii)an investor and a securities 
exchange or capital trade 
point or clearing and 
settlement agency; 
(iv)capital market operators and self 
regulatory organization; 
b)	the Commission (SEC) and self 
regulatory organization; 
c)	a capital market operator and the 
Commission; 
d)	an investor and the Commission; 
e)	anissuer of securities and the 
Commission; and 
f)	disputes arising from the administration, 
management and operation of collective 
investment schemes. 
The Tribunal shall also exercise 
jurisdiction in any other matter as may be 
prescribed by an Act of the National Assembly. 54 
The 1ST consists often members to be appointed 
by the Minister of Finance. The chairman must 
have been a legal practitioner for not less than 
fifteen years with cognate experience in capital 
market matters. 55 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 permit. The 1ST must dispose of any matter 
before it with finality within three months of the 
date the action commenced. No civil court shall 
have jurisdiction over any matter that the ISA 
empowers the 1ST to determine. If any person, 
including the SEC, is dissatisfied with a decision 

5J Odife Panel Report, supra. 
53.	For more reading on resolution of disputes in the Nigerian Capital Market, see IT. Agbadu-Fishim, "Dispute Resolution 
Under the Investments and Securities Act of 1999" The Nigerian Stockbroker, Vol. I no. 4 (October-Decem ber 2000): 19- 
25; and Linus O. Okeke, "One Step Forward, Two Steps Backward: An Examination of the Fate ofthe Investments and 
Securities Tribunal under Nigeria Legal Order" Journal of International Financial Markets, Vol. I, Issue 7 (December 
1999), pp. 308-318. 
54.	Section 284(2). The current provision has rightly eliminated the power of the Minister of Finance to delimit the 
jurisdiction of the 1 ST under the repealed 1999, section 23'4. 
55 See generally, sections 275-276. 

UNIOSUN J. Law, Dev. & Hum. Vol. 1, 188. 1 

120 

of the 1ST, he (it) may appeal to the Court of 
Appeal." 
The decision ofthe 1ST must be in writing 
and its orders or sanctions may include, but are 
not limited to, fines, suspensions, withdrawal of' 
registration or licenses, specific performance or 
restitution. On an appeal to it, it may confirm, 
modify or set aside any order or decision of the 
SEC. 
The 1ST has no jurisdiction over criminal 
matters, as it shall be deemed to be a civil court for 
all purposes. 57 In addition, 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 
regular courts. 58 
Capital Market Issues and Problems 
In an Inaugural Lecture titled How Secure are 
Securities?" this author identified for evaluation' 
four of the core objectives that capital market 
regulation seeks to achieve. These objectives are 
appraised hereunder so as to determine how well 
the Nigerian regulatory system has fared in 
protecting the value of securities: 
1. 	Ensuring Certainty of Contract and 
Protecting Property Rights ofInvestors 
Nigeria has elaborate regulatory and institutional 
framework for ensuring certainty of contract and 
protecting property right of investors in 
securities. In the author's appraisal of the 
regulatory and institutional framework of our 
securities market," it was found that the 
institutional framework for securities regulation 
in Nigeria were adequate and comparable to those 
of the similar emerging and the developed' 
securi ties markets in the Common Law system. 
In research collaboration, this author has 
also appraised the dual system of securities 
regulation in Nigeria by the Government and 
Self-Regulatory Organizations (SROs) in 
comparison with the practice in the advanced 

Oladele 0.0. 
United States jurisdiction so as to establish its 
systemic justification and demerits." At the apex 
of the regulatory structures of both securities 
markets is the SEC. However, the law allows 
market institutions to provide the first layer of 
regulation by regulating themselves. Hence. they 
are called Self-Regulatory Organisations (SROs) 
and are in turn regulated by the SEC. The SROs 
include the Nigerian Stock Exchange ("NSE"), 
an official market for trade in publicly listed 
securities, The Central Securities Clearing 
System Limited ("CSCS"), a subsidiary of the 
NSE as well as its clearing house and depository, 
the Abuja Stock Exchange ("ASE") as well as its 
subsidiary, the Securities Clearing and 
Depository Limited ("SCDL") and the National 
Association of Securities Dealers ("NASD"). 
The justification found for self-regulation is that 
SROs have the expertise to provide detailed 
regulation, deal with ethical and moral issues in 
the market in a more responsive way, eliminate 
regulatory tensions and ensure participation by 
the regulated. Phillip Parker also identified the 
advantages of the self-regulatory model as the 
technical expertise and flexibility of the SROs, 
cost savings to government as well as the 
acceptability of the SROs' rules over those of 
government regulators." Against the advantages, 
however, Parker found as disadvantages conflict 
of interests, antitrust implications, and due 
process concern. He further elaborated as 
follows: 
Because a securities exchange is both a 
business venture and a regulatory body, 
there is always a danger that the rules will 
not the enforced in circumstances where 
the enforcement would be detrimental to 
business .... Because the members of an 
SRO are collectively regulating their own 
behaviour, there is a danger of collusive 
behaviour that ultimately hurts customers. 
A member's right to conduct business can 
be taken away by individuals exercising a 

50 Section 295( I), ISA 
57. Section 290(3), ibid. 
5R Section 304, ibid. 
59 Inaugural Lecture of Osun State University, Series 002, delivered by 0.0. Oladele, Professor of Business Law, on 
Wednesday 16tl'February, 20 II at the University Auditorium, Osogbo, 77pp, also available atwww.uniosun.edu.ng 
60.	Oladele, 0.0., "Nigerian Capital Market Regulations" (2005) 19 (1) Lesotho Law Journal 141-170. 
"Oladele, 0.0. and Ogunleye, T.A., "The Conceptual Basis and Limit of Self-Regulation by Securities Markets in 
Nigeria and United States" (2006) 3 University of Botswana Law Journal, 45-66. 
"'Parker, Phillip, D., "The Concept of Self-Regulation under the Federal Securities Laws", an unpublished paper delivered 
at the SEC International Institute for Securities Market Development, Washington DC (12 March 1999). 

UNIOSUN J. Law, Dev. & Hum. Vol. 1, Iss. 1 

121 

form of governmental power. A member 
may have all of the procedural rights, 
however, that would apply if the 
government were the disciplinary body." 
Sadly but truly however, the framework 
has failed in some important areas that badly' 
impact the advantages and confirm the 
disadvantages. There is clear evidence that 
issuers, insiders and market operators manipulate 
the institutional framework in ways that devalue 
investors' securities and affect their property 
right. Permit me to appraise two of the SROs 
whose procedure could be manipulated to the 
harm of investors. They are the NSE and the 
CSCS. The latter facilitates clearing and 
settlement of trade in securities so that investors 
could realize and pass value of securities easily 
through sale and purchase. The Bank for 
International Settlements (BIS) and the 
International Organization of Securities 
Commissioners of Securities Regulators 
(IOSCO) stipulate the development of an' 
efficient securities trade clearing and settlement 
system within each member jurisdiction. 
Participants in the securities market should set up 
the system with clearing and depository facilities, 
and it must aim at a settlement period of the 
transaction day plus a maximum of three days (T 
+ 3).64 The securities regulators of the Group of 
Thirty (G30) in its reporton securities settlement 
systems, had recommended a clearing and 
settlement period of(T + 3) for the major 
markets", and (T +5) for emerging markets.' It is 
commendable that Nigeria has achieved the T + 3 
period. 
In response to the recommendations 
above, the leading SRO in Nigeria, the NSE, 
established the Central Securities Clearing' 
System Limited (GSCS) in 1992. The CSCS 
facilitates the exchange of stock and bond 
holdings as well as offers custodian services. As a 
clearinghouse, it facilitates the validation, 

Olade/e o. o. 
delivery and settlement of securities transactions. 
The NSE holds 51 per cent of its shares while 
stockbrokers, stock registrars, investment 
bankers and other market participants hold the 
remaining 49 per cent. 
To achieve its statutory objectives, the 
CSCS employs the procedure of 
dematerialisation of securities. Sadly, that 
procedure is susceptible to easy manipulation that 
could devalue outstanding securities. This 
dematerialisation procedure requires a 
shareholder who had been issued share 
certificates before the establishment of the CSCS 
to open an account with broker/dealers who are 
members of the CSCS and obtain an account 
number. The shares evidenced by all his share 
certificates are credited into that account, and the 
shareholder no longer requires the certificates for 
transactions. Such a shareholder then provides his 
account number to issuers of securities that he 
subsequently purchases for direct crediting of his 
account with the shares. That way, issuers should 
no longer have to issue certificates to investors. 
The shares are dematerialised as they appear as 
figures only in his account. The advantage is that 
the investor could easily get value for his shares 
by instructing his broker to sell shares from his 
account and credit his bank account within T +3 
days. 
This author opened a CSCS account 
though his stockbroker, applied for the shares of a 
leading commercial bank and indicated on the 
application form his CSCS account number to 
which the shares should be promptly credited. 
Curiously, the issuer bank issued the author a 
share certificate which reached him late through 
the postal system. The value of the shares 
increased remarkably, recording an appreciation 
ofN7.00 per unit within weeks. This author made 
to dematerialise the shares so that he could sell 
them off through the CSCS. The Registrar of the 
issuer queried his signature as irregular. Thus the 
value of his shares was locked in through the 

"Lbid. 
<>4 Bank for International Settlements (200 I), Report ofthe Committee on Payment and Settlement.Systems (CP PSS- IOSCO 
Joint Task Force on Securities Settlement Systems, Consultative Report, Basel (January 200 I). 
6; The Group of Thirty (G30) is a 'think-tank' of 30 high-level individuals drawn from central banks, commercial banks, 
economists and finance ministries of countries, which include Australia. Austria Belgium, Canada, France, Germany, 
Italy, Japan, Singapore, Spain, Switzerland, United Kingdom and United States. The group made nine core proposals on 
securities trade clearing and settlement systems, which the member-countries of lOSCO, including Nigeria, have been 
complying with since the 1990s. See Hal S. Scott and PhillipA. Wellons, International Securities 
Regulation, New York, Foundation Press (2002), pp. 416-418. 
UUNN~/O~S~UJtNVJ.~lL~a;w~,Do;ev.v..8&~H~uHmn..\~lcoJ./.11~,~/s~s.~1'---~"""""""""""""""" 122 

K.	
i
inconvertibility of the certificate which the issuer 
had no business issuing him in the first instance. 
We were at it during the weeks that followed, 
during which many institutional and other' 
investors as well as market professionals were 
selling off their stock in a frenzy that drove the 
price lower that the N33.00 that this author 
bought each unit at the issuer's public offering. It 
was only when the price had dropped to N28.00 
that the Registrar unilaterally accepted this 
author's signature as regular and credited his 
CSCS account. He had been deprived of the 
opportunity to sell the shares at a considerable 
profit and had lost NS.OO per unit of his 
investment. Whither the security of his 
securities? 
Importantly, to ensure that the SROs do 
not become law unto themselves, government 
regulatory oversight in major and emerging 
markets have to adequately respond to the· 
perceived and potential disadvantages of self- 
regulation. The SEC may, suomoto, enforce the 
regulations of the SROs that they fail to enforce 
on their own because of their perception that they 
may thereby suffer adverse economic or financial 
detriment. 
2. Requiring Disclosure by Publicly 
Quoted Companies of Material Information 
that affects the Value oftheir Securities 
The Nigerian securities regulatory system has 
failed partially to keep' numerous corporate 
investors informed of the material securities 
information and the rights that attach to the 
corporate securities that they have invested in 
against the backdrop of the propensity of. 
securities issuers to conceal and mystify material 
information. It has not solved the problem of 
informing retail investors who, more often than 
not, lack the means and technical ability to have, 
understand and utilize material securities 

Oladele 0.0. 
information. The contents and complexity of the 
required information have addressed the problem 
of a disclosure system that best protects 
institutional investors who are sophisticated and 
have the means to obtain as well as verify 
information. Like the major securities markets 
such as the United States and United Kingdom, it 
makes disclosure mandatory and also prescribes 
the information that securities issuers must 
disclose. In addition, it increases the content and 
quality of the required information in response to 
real and anticipated market crashes as well as 
fraud on investors from time to time." The 
contents and complexity of the information 
disclosed as well as incidences of fraud on the 
investors show clearly that the unsophisticated 
targets of the disclosure have not benefited from 
the protection it offers. The assumption that all 
investors could evaluate securities disclosure 
concentrates on the functioning of the Nigerian 
securities market as a capital raising forum 
without adequately addressing the protection of 
all investors, informed and uninformed. 
The registration statement in securities 
offering is in public .dornain once the issuer has 
filed it with the SEC and the latter has registered 
it. Of this statement, the prospectus is the material 
part that every investor is entitled to. It usually is a 
document of about forty pages in glossy and 
expensive print. According to a former Director at 
the SEC and the head of its Lagos Zonal Officer" 
as well as a former senior officer of the Nigerian 
Stock Exchange who has served for some years as 
Principal Manager in the Listing and Quotation 
Department", although every prospective 
investor is entitled to a copy ofthe prospectus, the 
cost of making it available to all of them is so 
prohibitive that it could not be available to all of 
them. In addition, even if the issuer made it 
available to all prospective investors, the ones 
who would end up investing in the issuer's 

66.	The Investments and Securities Act, 2007 and the Sarbanes-Oxley Act, Public Law 107-204, July 30, 2002 - 116 Stat, 745 
ofthe United States are representatives ofthose trends. 
(,7. Okereke, Chris, 0, Unstructured interview conducted by me in Lagos on October 3.2006. Okereke was a highly placed 
official of the SEC who served on the joint Committee (of the SEC and CAC) on Corporate Governance of Public 
Companies in Nigeria. The report of the committee formed the basis and substance of the Code of Corporate Governance 
in Nigeria (October, 2003). The findings from that interview of over a decade ago remain valid from the experience ofthe 
author as a solicitor researcher that has engaged capital market issues over the period. 
6" Momoh, Mohammed, Unstructured Interview conducted at an examination session of the Chartered Institute of 
Stockbrokers (CIS), held in Lafia Hotel Ibadan on October 20-21, 2006. Again, the findings from that interview of 
over a decade ago remain valid from the experience of the author as a solicitor researcher that has engaged 
capital market issues over the period. 
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OladeleO. O. 

securities would be a relatively small percentage 
of the recipients. Either way, there is a 
disincentive to the circulation of a prospectus to 
all prospective investors. 
The field interviews that I conducted and 
the advisory services that I have rendered on. 
capital market issues over the past three decades 
up to date confirmed that the prospectus is a 
highly technical document containing legal and 
accounting information that could not be 
understood by a person who is well educated but 
not in finance, accounting and law at the same 
time. As such, even for persons with requisite 
technical expertise, it does not make light reading 
and understanding. In the United States, an 
attempt to make the prospectus intelligible to the 
average investor through plain English has failed. 
It cannot succeed in Nigeria because English 
language is not only a second language to as many 
as three hundred and sixty local languages, but 
many are uneducated. It is mythical to hold that 
an average investor could understand and. 
effectively use prospectus and other securities 
disclosures to make 'an intelligent investment 
decision."?' He lacks the ability to understand 
complex financial information supplied in a 
typical registration statement. Only professionals 
could make an effective use of it." 
In addition, the complexity of securities 
transactions renders impossible the telling of the 
'whole truth" to an average investor in an 
intelligible way." A simplification of disclosure 
for the benefit of the layman often leaves out the 
information that is valuable to securities 
professionals. Consequently, Kripke, submitted 
that the prospectus then becomes "a routine, 
meaningless document which does not serve its 
72 
purpose. 
It is submitted that the impossibility of 
reducing securities information disclosure into 
plain, understandable and valuable language 
rightly justifies the application of jilt ration theory 
in Nigeria. By this theory, the average investors 

could benefit from securities disclosure only after 
they have filtered it through professionals. 
Findings from interviewees in the course of my 
research confirmed the findings of Homer 
Kjipke, an emeritus professor of securities 
regulation, who studied the response of the 
American public to securities disclosures in the 
period between 1933 and 1970. He came to the 
conclusion that the public did not make securities 
decisions based on the SEC prospectus disclosure 
requirements." Therefore, he has described the 
informational function of the United States 
securities regulation as creating "the myth of the 
informed layman." He consequently submitted, 
employing the 'filtration theory' that a layperson 
could only benefit from mandated disclosure 
"after a process of filtration through 
professionals, directly in the form of investment 
advice or management and indirectly through 
their effect on the market. 75 This line of thought 
has established that the value of widely traded 
securities is best estimated as the market price 
determined through the interplay of sellers and 
	. 	76 
buyers. 
My interviewees added that because of 
the constraints of limited 'circulation and 
understanding of the full prospectus, the SEC 
allows the circulation of an abridged prospectus 
to all prospective investors. In addition to the 
disclosure in it, the abridged prospectus advises 
every recipient to consult his broker and solicitor 
before investing in the securities being offered. 
However, the interviewees noted that majority of 
prospective investors in Nigeria are unwilling to 
pay for information, therefore they hardly filter 
the content of the full or abridged prospectus 
through professionals. This observation, from 
personal experience as a solicitor of almost thirty- 
three years in Nigeria, is true, because the legal 
advice that friends, associates and acquaintances 
obtain from the writer is more than what they pay 
or are willing to pay for. 
The investors who do not understand the 

69.	Kripke, Homer, "The SEC the Accountants, some Myths and some Realities" 45 N. Y. U'L. Rev. 1151 at 1164 (1970). 
70.	Ibid. 
7L Douglas, W. & Bates."The Federal Securities Act of 1933" 43 Yale L.J. 171(1933). 
n Kripke. Homer "The Myth ofthe Informed Layman" 28 Bus. Lawyer 631 and 633 (1973). 
73.	Kripke, Homer, "The SEC, The Accountants, some Myths and some Realities", supra. 
74.	Kripke, Homer, "The Myth ofthe Informed Layman", supra. 
7; Kripke, Homer, "Fifty Years of Securities Regulation in search ofa purpose" 1984 -1985 CorpPracComm 547 at 561. 
76 SEC Securities Act Release No. 6176 (January 15, 1980) reprinted in [1979-1980Transfer Binder] Fed. Sec. L. Rep. 
(CCH). 

UNIOSUN J. Law, Dev. & Hum. Vol. 1, Iss. 1 

124 

prospectus buy shares whose prices indicate that 
the issuers are _ trading profitably, paying 
dividends and allotting bonus shares to the 
shareholders. To such investors, securities are as 
good as their prices. In this attitude, they easily 
find allies in investors who buy securities on 
impulse, the noise traders who buy because 
buying is the perceived trend, and the "dart 
throwers' who simply gamble through' 
investment. It is significant that of all the retail 
investors in securities in the seventeen years that I 
interviewed purposively, none of them invested 
due to the information that the issuers disclosed. 
Motivated by increased income, they followed 
the fad to invest in securities whose prices were 
rising. 
The average investor requires education 
and reorientation. Significantly, the ISA charges 
the SEC to promote investors' education and the 
training of all categories of intermediaries in the 
securities industry." The IOSCO, of which 
Nigeria is a member, also has objectives and 
principles of investor education, compliance with 
which it monitors in member countries on regular 
basis." It is significant that the SEC has held' 
regular public enlightenment campaigns around 
the states of the Federation on the opportunities in 
the Nigerian securities market. It has also 
launched a television network programme to 
educate investors and other stakeholders in the 
securities market." The SEC should collaborate 
intensely with SROs for an elaborate and 
sustained education f investors not only to 
engender their interest in the market and promote 
the growth of the economy, but a so ensure that 
they are adequately informed and protected. 
Regulators in the SEC and Nigerian Stock 
Exchange recommend that retail investors who 
are not knowledgeable enough to understand the 
disclosure should invest in mutual funds 
managed by securities professionals who would' 
have analyzed and filtered the disclosure before 
making informed investment decisions for and on 
behalf of the uninformed and unsophisticated. If 
they utilize this option, they do not have to take 
the trouble of information gathering and analysis, 

Oladele O. O. 
and they pay little for quality investment since 
each of them is a minute part of a pool of many 
benefiting investors, It is submitted that the SEC 
should remain vigilant and be more proactive in 
regulating and monitoring mutual funds 
managers. With the introduction of the 
contributory pension scheme, there has been a 
tremendous increase in mutual funds. The 
vigilance of the SEC will go a long way in 
ensuring that investors in this pool of mutual 
funds do not suffer from the overreaching of the 
fund managers of the kind that led to the United 
States securities market crash of 1929 and the 
resultant Great Depression. 
3.	Protecting Investors from Unfair Practices 
by Corporate Insiders and Securities 
Professionals 
Between 2008 and 2009, genuine investors on the 
one side and naive ones driven by fad suffered 
damaging impact of gross devaluation of their 
securities through violation of two core 
provisions of the ISA on investor and systemic 
protection. The first was the violation of section 
105 ofthe ISA. That section prohibits the creation 
or doing of something" that may create a false or 
misleading appearance of active trading in any 
securities on a securities exchange or capital trade 
point or with respect to the market price of such 
securities. It also prohibits the straddling of the 
sale and purchase ends of the same security as 
well as devices meant to maintain, inflate, 
depress, or cause fluctuations in the market price 
of any securities. 
Conversely, findings subsequent to the 
market crash of the past three years revealed that 
market professionals employed the prohibited 
devices in ingenious ways that appeared legal. 
Those devises ended up driving the prices of 
some securities excessively up and depressing 
them by as much as 92 per cent when the bubble 
burst. They abused and violated the margin 
requirement provision of section 104 of the ISA, 
which seeks to prevent excessive use of credit for 
the purchase of securities by dealers and member 
companies. Broker-dealers did not only borrow 

77. ISA, Section 13(s). 
'" IOSCO held a seminar/training programme on "Methodology for assessing implementation of the objectives and 
principles of securities regulation and investor education' in Madrid. Spain from November 17-21 2003. It is significant 
that two members of staff of the Nigerian SEC attended the seminar/training programme - See Securities and Exchange 
Commission Annual Report andAccounts, 2003. 
7._ Ibid. See also Securities and Exchange Annua' Reports andAccounts ofthe past fifteen tears 

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125 

massively but they also encouraged investors to 
borrow from the margin accounts maintained by 
the broker-dealers and from commercial banks. 
Much of the loans were secured with the existing 
shares of the investors and those purchased with 
the loan fund. Investigations by regulators, 
especially the Central Bank of Nigeria, revealed 
that substantial borrowing and lending were done 
by the insiders of banks and securities firms. The 
loan funds increased the sale tempo on the stock 
market. The repayment drove down the prices 
because there was a huge sale of securities that' 
served as collateral for the loans. The systemic 
impact affected a number of banks that could not 
recover much of the loans. The negative impact 
which also caused loss of confidence in those 
institutions propelled the devaluation of the 
shares of the - banks. The value of the shares of 
Oceanic Bank International PIc and 
Intercontinental Bank PIc, among many others, 
fell from the region ofN33.00 to less than N2.00. 
Panic sale by investors who were losing 
confidence in the stock market caused the 
downward spiraling of stock prices. 
My findings and recommendation of 
2003 on the failed banks crisis of the 1990s are 
relevant." Undue influence by bank controlling 
shareholders, management and other insiders' 
abuse of the loan granting process was one of the 
reasons that accounted for loan default. Many 
directors of the failed banks granted loans to 
themselves, associates and corporate bodies in 
which they had pecuniary and proprietary 
interest. Records available at the office of the 
Nigerian Deposit Insurance Company revealed 
that 80 per cent of the non-performing and bad 
debts of the failed banks were granted to the 
directors of those banks. The fact that most of the 
loan defaulters were incompetent ab initio 
compounded the problem. Had a proper credit 
rating been done, the fact would have been 
revealed." However, in cases ofthis nature, there 
is no incentive for credit rating. On the face ofthe 
transactions, the parties appear to have 'complied" 
with the regulatory requirements of 
securitization, but behind the facade of 
compliance' lies harmful fraud. Cases of this 
nature reveal that the erring bank officials either 
have economic self-interest in the loan or the 

Oladele O. O. 
borrowers are friends or relatives ofthe officials. 
Deceptive contrivances of that nature accounted 
for the recent crises in the Nigerian financial 
sector and the meltdown of securities value. 
Securitization of loans with securities 
also accounted for loan default. Due to the 
volatility of the value of securities, lenders could 
not recover enough from their sale the moment 
they began to depreciate in value, driven by the 
pressure of sale by the debtors whose loans have 
been called in by the lenders. 
The funds that have been invested in 
securities on the Nigerian securities market are in 
hundreds of trillions of naira. Of this sum are the 
life-savings and pensions of the investors. 
Therefore, the need for a more efficacious system 
of investor protection is paramount. With 
increased earnings by many Nigerians in the last 
decade, much has been invested in securities. In 
"The Legal Nature and Limit of Employee 
Benefits under Nigerian Contributory Pension 
"82 
Scheme appraised the legal, social and 
economic implication ofthe contributory pension 
scheme. With the introduction ofthat scheme and 
its enabling law permitting pension fund 
managers to invest a sizable percentage of the 
contributed pension in publicly quoted securities, 
a significant portion of the retirement benefits of 
employees in Nigeria is out there in the domain of 
the securities market. The quantum of pension 
funds invested in securities has grown 
tremendously over the past thirteen years 
pursuant to investment of the funds under the 
Trustee Investment Act, the ISA and the General 
Rules and Regulations Pursuant to the ISA. OW' 
expectation of good life in retirement must not be 
cut short by speculative frenzy not driven by 
market fundamentals. The American securities 
market, the most regulated in the world, 
experienced that during the last decade. Nigeria 
has had a dose of mismanagement and 
embezzlement of pension funds over the past few 
years, Our regulatory system must be proactive 
and anticipatory. 
Historically, our securities market grew 
too slowly to reach the present modest level at 
which the regulators must strike a healthy balance 
between capital mobilization and investor 
protection. Nigerians of the 21st Century have 

.0 Oladele, 0.0., "Towards an Efficacious Legal Framework for Debt Recovery in Developing Countries' (2003) 2(1) 
Journal of Commonwealth Law and Legal Education 47-67 
SJ Ibid at p.50 . 
s , Oladele,O.O., "The Legal Nature and Limit of Employee Benefits under Nigerian Contributory Pension Scheme" (2006) 
1 (2) Capital Market Law and Economic Development Journal 13-30. 
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cultivated the culture of investment. The sustenance 
of that culture as well as the internationalization of 
our securities market depends on transparency and 
candour in transactions and regulation as well as the 
ability of our regulatory system to curtail destructive 
manipulation presented as creativity. 
4. Systemic Protection against Financial Failure 
of Market Professionals and Institutions 
Not too long ago, public hearing by the National 
Assembly has revealed the employment by 
corporate insiders of shell company artifice to 
secure loans from some commercial banks to 
purchase the shares of those banks and other 
commercial banks, which they gave as collateral for 
the loans. The grave consequences that attended 
those illegal transactions included the inability of 
the borrowers to repay the loans at the time the value 
of the underlying securities had fallen drastically. 
The distress of those banks caused fear ripples of 
contagion in the Nigerian financial system. While 
the transaction rigged the securities market, the 
Central Bank of Nigeria, the apex regulator of the 
money market, had the difficult task of intervention 
that resulted in huge bail-outs at significant cost to 
the public that made viable banks to acquire the 
ailing ones. In the scheme, the SEC became a 
contextual 'lame duck'. 
Oladele 0.0. 
genuine retail investors are devised by market 
professionals in unusual manifestation that our 
regulators have not been able to track timeously. We 
must have a system that is able to track unusual price 
movement and intervene in securities trade on real 
time basis. 
The issue of conflict of interest and insider dealings 
in the financial system must be addressed. It is 
amazing that the number of persons prosecuted and 
penalized for the violations that led to the stock 
prices crash of the past decade is disproportionate to 
the magnitude ofthe loss to investors and the entire 
financial system. I have argued that our system lacks 
the courage to penalize offenders in the financial 
system. In 2007, 1 anticipated the damaging 
eventuality of2008-20 1 O. 1 recommended rigorous 
law enforcement and stiff penalties for rule violation 
in the capital market. What has been done is 
comparable to ad-hoc fire-fighting that does not 
appear to have plumed the depth. It is significant that 
the SEC General Rules and Regulations of 2013 
pursuant to the ISA has made extensive rules on the 
troubling practices that cause damaging system 
impact, but the enforcement of those rules must be 
as purposeful as in advanced markets that spare no 
villains. 
There is the need for the SEC to increase the 
tempo of investor education. It began it but the 
impact is widely felt. Even ifthere are uninformed 
investors who make wrong choices and fools of 
themselves, the regulatory authorities have a duty 
not to allow other persons to make fools of them. It is 
submitted that disclosure could be mandated in the 
major Nigerian languages. The mandatory 
information disclosure system is a sound pedestal 
and tool for investor protection. However, it must be 
made to ensure free flow of information to all 
investors in the form that they could use it for 
informed investment decisions. 
Just as SEC did with the enactment of the 
2013 Rules and Regulations have d-one, Nigeria 
must continually position herself for global 
competitiveness in investment attraction by 
reviewing her laws from time to time to cope with 
the current challenges to the security of securities. 
The ingenious zealousness of some securities 
issuers to conceal information and their outright 
falsification of financial statements has potential 
and· real systemic impact. The impact could 
transcend national limit as our securities market 
goes international. In the era of cross-border 
promotion of investment, the soundness of the 
domestic market would continually cease to be 
measured by the domestic regulatory paradigm, but 
by regulations and best practices that meet 
international standards. 
CONCLUSION 
The Nigerian Capital Market has prospects. 
Nigeria is in the process of increasing corporate 
financing through the securities market. More than 
before there is an increase in capital market 
activities and market capitalization, which is in 
trillions currently. The introduction of the 
contributory pension scheme will continually 
increase the volume of investment and money in the 
securities market. As money management gains _ 
impetus; the need for enhanced investor protection 
arises as the potential risk of the investors staking 
their savings increases. 
Our securities regulatory system must address the 
problem of market rigging - speculation. The 
securities market plays a vital role of matching 
lenders with investors. However, the experience of 
the past two years has revealed that the market was, 
driven not by market fundamentals, but by 
speculative frenzy. The startling free-fall of 
securities prices dealt a debilitating systemic impact 
on the on the entire financial system and economy. 
Our regulatory system responded, largely belatedly. 
But it is clear that the system, while succeeding 
largely in issuers' transaction has failed in regulating 
financial intermediaries who are the leading players 
in the transactions on the securities rn: irket. The 
artifices for fraud not only on the marret.but on 
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