SEC to ease crowdfunding regulations for small firms

Small and medium-sized enterprises (SMEs) in Nigeria may soon have easier access to cheaper financing through crowdfunding as the Securities and Exchange Commission (SEC) is considering relaxing regulations on crowdfunding.

Emomotimi Agama, SEC Director-General, stated in an interview in Lagos that many small and medium-sized enterprises have been unable to benefit from the crowdfunding rules introduced in 2021 due to their perceived restrictiveness.

He suggested that easing these regulations would allow companies to raise debt and equity capital more easily through online platforms.Limits on the amount that can be raised were also seen as a constraint, he said.

“We are actually taking a new look to make it a little bit easier for people to come in,” Agama said, “The new draft rules could be released as early as the first quarter of 2025.”

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Nigeria’s central bank raised its benchmark rate by 850 basis points since this year to a record 27.25 percent in a bid to curb rising inflation that is at two-decades high.

Banks now charge as high as 30 percent on loans to small businesses.

Small businesses have also been crowded out alternative sources of raising capital such as commercial papers and bonds due to the high interest rate environment.

The present regulations only allows firms that have an operating track record of at least two years to raise a maximum of 100 million naira ($61,000) a year through crowdfunding, according to Agama. The ceiling may be raised for firms “on a case by case basis” he said.