Legal Framework For Crowdfunding In Nigeria

• Published date: 03 April 2024
• Law Firm: Aarndale Solicitors
• Author: Aarndale Solicitors

In January 2021, the Securities Exchange Commission governed by the Investment and Securities Act, 2007 (as amended) released the "Crowdfunding Rules" or the "Rules" for the regulation of unregulated crowdfunding activities in Nigeria. The Crowdfunding Rules, 2021 detail the regulatory framework by which companies can raise debt or equity capital through crowdfunding, as well as the eligibility criteria and obligations of issuers, crowdfunding portals, and crowdfunding intermediaries. The Rules are applicable to investment-related crowdfunding ventures and seek to regulate activities of key market participants within the crowdfunding space (which include intermediaries, fundraisers and investors) by specifying rights, duties and responsibilities that govern their respective conducts.

The Crowdfunding Rules, 2021 have been viewed by stakeholders as a step in the right direction, particularly given its overarching benefit, including driving national economic growth and allowing MSMEs (Micro, Small and Medium enterprises) raise much-needed capital required to finance businesses/projects within a regulated and structured framework. For investors, it opens up a wider pool of investment opportunities, as it provides retail investors with genuine investment options, other than Ponzi Schemes.
The Crowdfunding Rules primarily provide for the regulation of four main players in the investment-based crowdfunding sector: Crowdfunding Intermediary, Crowdfunding...