The Nigeria Securities and Exchange Commission (SEC) issued a circular clarifying that foreign portfolio investors (FPIs) are not required to prefund trading accounts under Nigeria’s new T+1 settlement cycle.
The regulatory update aims to resolve market friction following FTSE Russell’s decision to place Nigeria’s planned return to Frontier Market status under review. FTSE Russell had raised concerns that a shortened 1-day settlement window might impose de facto prefunding requirements on international investors, violating global Delivery-versus-Payment (DvP) standards.
The SEC clarified that equity and commodity transactions processed through the Central Securities Clearing System (CSCS) must settle by 5:00 p.m. on T+1 under standard DvP rules. Capital Market Operators (CMOs), brokers, and custodians retain full responsibility for managing liquidity and settlement mechanisms without forcing international investors to hold idle local cash reserves.
Regulatory Context & Index Impact
-
Preserving Delivery-versus-Payment (DvP): The SEC noted that transactions are considered fully settled at 5:00 p.m. on T+1. If a broker/dealer’s trading account lacks sufficient funding at the cutoff time, the shortfall triggers the CSCS Default Management Procedure rather than stalling foreign investor trades.
-
FTSE Russell Reclassification Stakes: Nigeria was slated for upgrading from “Unclassified” back to “Frontier Market” status in September 2026. FTSE’s pause in June 2026 stemmed from concerns that time zone differences and FX conversion delays would force foreign funds into mandatory prefunding.
-
Custody and Broker Operational Mandate: The SEC’s directive shifts operational pressure onto local stockbroking firms and global custodian banks. To prevent settlement failures under the 5:00 p.m. cutoff, market participants must establish local overdraft facilities, automated trade confirmations, and efficient FX settlement pipelines.
Follow the MoneyCentral Nigeria channel on WhatsApp: Click here!
