Nigeria’s Securities and Exchange Commission (SEC) is weighing a new rule that would require Credit Enhancement Service Providers to maintain a minimum capital base of ₦10 billion, in a move aimed at strengthening financial stability and boosting investor confidence.
The proposal, contained in the Commission’s draft rules on Credit Enhancement Service Providers and sundry amendments to existing regulations, underscores the regulator’s drive to tighten oversight of institutions that play a critical role in unlocking capital for infrastructure and long-term projects.
According to the draft, any provider that falls short of the ₦10bn threshold will be barred from offering new credit enhancement facilities until recapitalisation plans—approved by the SEC—are put in place.
Credit Enhancement Service Providers, such as InfraCredit, function as financial guarantors, offering instruments that raise the creditworthiness of debt securities. By reducing perceived risks, they make bonds more attractive to institutional investors like pension funds and insurers, ultimately mobilising much-needed domestic capital for infrastructure and development projects.
The SEC’s proposal also restricts these firms from paying dividends until all preliminary expenses are cleared, losses adequately provisioned, and prudential benchmarks fully met. In addition, providers will be required to implement a robust board-approved risk management framework and adhere strictly to IFRS or standards set by the Financial Reporting Council of Nigeria in preparing their accounts.
Commercial banks and insurance companies already supervised by the Central Bank of Nigeria (CBN) and the National Insurance Commission (NAICOM) will be deemed compliant with the capital and liquidity requirements—provided they submit a letter of good standing from their primary regulators. They must, however, renew this certification annually within 45 days of their financial year-end.
The SEC is also proposing new liquidity standards:
- Core market operators must hold at least 60% of assets in liquid form.
- Non-core operators must hold 30% in liquid assets.
- Credit enhancement providers face an even stricter test—85% of assets must be in liquid form.
If approved, the rules could reshape how Nigeria’s credit enhancement firms operate, while providing stronger safeguards for investors and the broader financial market.
