Strengthening Investor Protection in Nigeria: The SEC’s Role in Mitigating Ponzi Schemes under the ISA, 2025

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BY ADERONKE ALEX-ADEDIPE EBIKENIYE BEST


Introduction

Nigeria has experienced a significant increase in Ponzi schemes and related investment activities, which often exploit vulnerable segments of the population with promises of extremely high and risk-free returns. These deceptive schemes have led to substantial financial losses, eroded investor confidence, and hindered the development of a strong investment culture in the country. As a result, SEC recently issued warnings to the public against investing in schemes promoted by Property World Africa Network (PWAN) and Crypto Bridge Exchange (CBEX) following substantial loss of huge sums of money by many Nigerians.

In response, the Securities and Exchange Commission (SEC), Nigeria’s apex capital market regulator, has intensified efforts to combat investment fraud and enhance investor protection. The recently enacted Investments and Securities Act, (ISA) 2025 introduces important legal reforms that strengthen SEC’s capacity to address fraudulent investment schemes, particularly Ponzi and pyramid schemes.

This newsletter explores the legal reforms introduced under the ISA, and how the SEC is leveraging its expanded mandate to promote market integrity and protect investors.

What are Ponzi Schemes?

Under the ISA, Ponzi Schemes also known as Pyramid Schemes are described as any arrangement in which returns are paid to existing members from funds contributed by new members, typically with a promise of high returns and little or no risk. It also includes any scheme where participants earn money primarily by recruiting new members.

What are the features of Ponzi Schemes?

The following are notable features of Ponzi Schemes:

  1. Unrealistic promises of high, fixed returns with little or no risk;
  2. Lack of registration with SEC or other relevant authority;
  3. Aggressive marketing tactics often through social media channels or referral networks;
  4. Dependence on a steady flow of new investors to pay existing ones; and
  5. Absence of credible business model or genuine income-generating activity.

Key Provisions under the ISA addressing Ponzi Schemes

a.     Expanded Jurisdiction over Ponzi Schemes: Prior to the amendment of the ISA, Ponzi schemes were not expressly provided for under the law, limiting the SEC’s ability to take effective action and hold perpetrators accountable.  Under the ISA, Ponzi schemes are now expressly prohibited and criminalized, providing SEC with clear legal authority to regulate such prohibited schemes.

b.     Prohibition of Unauthorised Investment Operations: While the ISA prohibits the operations of unregistered collective investment schemes, it now clearly provides penalties for promoters or entities engaged in prohibited schemes including Ponzi Schemes. Thus, upon conviction, the promoter or entity shall be liable to a fine of not less than ₦20,000,000 (Twenty Million Naira), imprisonment for a term of up to ten (10) years, or both.

Additionally, the SEC is entitled to recover all expenses incurred during the investigation of such prohibited schemes, with recovery proceedings initiated through the Office of the Attorney-General of the Federation.

c.     Enforcement and Interim Measures: SEC is empowered to take proactive enforcement actions, including issuing cease-and-desist orders, freezing bank accounts, and collaborating with law enforcement agencies and financial institutions to swiftly shut down Ponzi schemes. In furtherance of its powers, SEC is collaborating with law enforcement agencies in investigating CBEX which claims to operate as a digital asset trading platform offering high returns to investors.

Conclusion

SEC’s strengthened enforcement powers under the ISA are crucial in protecting investors and maintaining market integrity. Potential investors are therefore advised to verify the registration status of investment platforms via SEC’s dedicated portal – www.sec.gov.ng/cmos before transacting with them.

TAX BREAKS & MORE: WHAT THE NIGERIAN STARTUP ACT OFFERS

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BY ADERONKE ALEX-ADEDIPE AND OMODELE FATODU

Introduction

The Nigerian Startup Act 2022 (NSA) is a significant piece of legislation, designed to foster innovation, attract investment, and create a favourable business climate for tech-enabled startups in Nigeria. It aims to position Nigeria as a leading hub for digital entrepreneurship in Africa by removing regulatory barriers and offering targeted incentives.

This newsletter explores key incentives available under the NSA and what they mean for startups and investors.

The Startup Label: A Gateway to Incentives

The NSA introduces the Startup Label, issued by the National Information Technology Development Agency (NITDA) which is a prerequisite for enjoying the incentives available under the NSA. To qualify, a startup must:

  • Be registered as a limited liability company with the CAC, and in operation for less than 10 years.
  • Have its objects focused on innovation, development, production, or improvement of a digital product, service or process
  • Have at least 33% of its shares held by a Nigerian founder or co-founder
  • Be certified by NITDA via the Startup Portal

Only Labelled startups may benefit from the incentives discussed below.

  1. TAX AND FISCAL INCENTIVES

One of the most attractive features of the NSA is its suite of tax incentives designed to encourage startup formation and sustainability:

  1. Pioneer Status Incentive (PSI) – The NSA allows for a Labelled startup to apply for PSI which grants an initial three-year tax holiday, extendable for an additional two years. This exemption from Companies Income Tax is a critical incentive for early-stage businesses as it allows them to reinvest significantly in their growth.
  2. Exemption from Capital Gains Tax – To encourage long-term investment, the NSA provides that angel investors, venture capitalists, private equity firms, and other institutional investors who invest in Labelled startups and hold their equity for a minimum of two years are exempted from paying Capital Gains Tax on the disposal of such investments.
  3. Tax deductions for Investments in Research & Development (R&D) – To encourage investment and innovation in R&D, Labelled startups may claim tax deductions for expenses on R&D which are wholly incurred in Nigeria and restrictions placed by the Companies Income Tax Act shall not apply.
  4. Access to the Startup Investment Seed Fund – The NSA establishes the Startup Investment Seed Fund, to be managed by the Nigeria Sovereign Investment Authority (NSIA). The fund is intended to provide early-stage finance to Labelled Startups, support for technology development, and grants for research and innovation.
  1. REGULATORY SUPPORT AND EASE OF DOING BUSINESS

The NSA introduces measures to reduce regulatory friction:

  1. Regulatory Sandboxes – The NSA empowers regulatory authorities (such as the Naional Insurance Commission (NAICOM), CBN or SEC)  to introduce sandbox programs that allow Labelled Startups to test innovative products or services in a controlled environment without the full burden of regulatory compliance.
  2. Fast-Tracked Approvals and Support – Labelled startups may request expedited approvals, waivers, or forbearances from regulators where traditional compliance requirements are unduly burdensome or incompatible with digital innovation. The NSA requires regulators to consider such requests and respond promptly through designated innovation desks.
  3. Single Window Platform – the NSA mandates the creation of a single platform to streamline startup registration, compliance, and access to government programs which help reduce bureaucratic delays.
  1. CAPACITY DEVELOPMENT AND TALENT SUPPORT

The NSA mandates collaboration between the Federal Government, academic institutions, and the private sector to promote digital training programs, tech-focused curriculum, and upskilling in areas like AI, cybersecurity, and blockchain. Labelled startups may benefit from access to trained talent pools at lower cost.

  1. INTELLECTUAL PROPERTY AND COMMERCIALISATION SUPPORT

The NSA encourages simplified processes for IP registration. Labelled Startups are eligible for reduced fees and technical support in registering trademarks, patents, and copyrights with the National Office for Technology Acquisition and Promotion and the Trademarks, Patents and Designs Registry.

Conclusion

The NSA is a forward-thinking legislative framework that provides critical incentives to drive innovation and entrepreneurship. However, these incentives are contingent on obtaining the Startup Label and remaining compliant with the NSA’s requirements. As the implementation of the NSA continues, stakeholders are encouraged to engage actively with the Startup Portal, monitor new guidelines from NITDA and NSIA, and seek legal advice to ensure eligibility and access to full benefits.

Nigerian Immigration Update: Major Reforms in Expatriate Administration and Visa Regime

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SEUN TIMI-KOLEOLU AND PROMISE ITAH

INTRODUCTION

On 1st May 2025, the Federal Government of Nigeria, through the Ministry of Interior and the Nigeria Immigration Service (NIS), launched sweeping reforms to the country’s expatriate administration and visa regime. These measures aim to curb abuse of expatriate quotas (EQ), enforce meaningful knowledge transfer, and streamline immigration processes through digitalization.

In this newsletter, we highlight the key changes and what they mean for businesses. For general immigration requirements in Nigeria, please see our previous newsletters here.

What are the Key Reforms?

1. Digitalization and Process Automation

i. Mandatory Use of the Expatriate Administration System (EAS)

All new and renewal applications for expatriate quotas (EQ) must now be processed exclusively through the EAS. Employers are required to upload key documents such as certificates of incorporation, tax clearance certificates, and organisational charts. The portal aims to enhance transparency and improve processing timelines.

ii. Automated CERPAC Application Process

Residence permit (CERPAC) applications are now to be submitted online via the Nigeria Immigration Service (NIS) portal. A digital form is to be issued upon successful verification, followed by physical card delivery to the employer’s address.

iii. e-Visa System Replacing Visa-on-Arrival (VOA)

The visa-on-arrival system has been replaced by a fully digital e-Visa platform that accommodates individual, group, and family applications. The e-Visa system removes the requirement for a physical visit to the NIS or a visa counter at the airport, enabling applicants to apply for and receive their visa digitally prior to their journey. VOA approval letters issued prior to 1st of May 2025 remain valid for a limited two-week period.

iv. Online Temporary Work Permits (TWP)

TWP visas—available in 3-month and 6-month durations—must now be applied for through the NIS portal. Fees are set at $600 for the 3-month duration and $1,100 for the 6-month duration. These visas are non-extendable.

v. Centralised Visa Approvals

All visa decisions will now be issued centrally by NIS headquarters in Abuja. While applications may still be lodged at Nigerian embassies or consulates, approval authority resides exclusively with the NIS, ensuring consistency and reducing discretion.

vi. Online Landing and Exit Cards

All travellers entering or leaving Nigeria must now complete digital landing and exit forms. This real-time data collection is designed to improve immigration tracking and reduce incidents of visa overstay.

2. Compliance and Localisation Requirements

i. Stricter Understudy Policy

Employers must assign a minimum of two qualified Nigerian understudies (with Bachelor’s or HND qualification) to each expatriate role. These understudies are expected to be trained to assume these roles within 4 to 7 years, depending on industry. A structured and documented succession plan is strongly advised.

ii. Increased Fees for EQ and Business Permits

The Ministry of Interior intends to revise upward the fees applicable to EQ and business permit applications and renewals. The additional revenue will be used to strengthen compliance oversight, including site visits and audits.

iii. New Repatriation Insurance Requirement

Expatriates will now be required to maintain repatriation insurance to cover the cost of removal in the event of immigration violations. The annual insurance premium is expected to range from $500 to $1,000, depending on the expatriate’s length of stay.

iv. Enforcement of Overstay Penalties

New penalties for overstaying a visa have been introduced and will become effective from 1st August 2025. The penalties range from $15 per day to 5-year and permanent travel bans, depending on the duration and severity of the overstay.

What are the action steps companies doing business in Nigeria should take?

To ensure a smooth transition under the new framework companies doing business in Nigeria should:

  • Conduct a full audit of the expatriate workforce and EQ/CERPAC status.
  • Review and update localisation and succession plans to meet the understudy requirements.
  • Allocate budget for repatriation insurance compliance.
  • Strengthen internal Human Resource (HR), legal, and immigration processes or seek external advisory support.
  • Engage proactively with regulators and industry associations to stay informed on implementation details and further guidance.

Conclusion
The government anticipates that these reforms will curb abuse of the Expatriate Quota policy, enforce effective knowledge transfer to Nigerians, and create efficiency in the immigration process. However, the full impact will only become evident as the reforms are fully implemented. We advise that businesses proactively review their expatriate management processes, update compliance frameworks, and seek legal guidance to ensure a smooth transition.

WHAT IS NEW IN NIGERIA’S MERGERS AND ACQUISITION LANDSCAPE? A REVIEW OF REGULATORY SHIFT.

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BY ADERONKE ALEX-ADEDIPE AND HILLARY OKOROTIE

The regulatory framework governing mergers and acquisitions in Nigeria has experienced a notable shift with the enactment of the Investments and Securities Act 2025 (the “Act”). While the Federal Competition and Consumer Protection Commission (FCCPC) continues to be the primary regulator overseeing all mergers and acquisitions in Nigeria, the Act was recently amended to streamline the role of the Securities and Exchange Commission (the “Commission”) in overseeing mergers and acquisitions related to public companies and the conduct of stakeholders in such transactions.

This newsletter highlights some of the provisions in the Act as they relate to public companies and what they mean for stakeholders.

  • Approval of Mergers by the Commission

The Act provides specifically that all public companies intending to undertake a scheme, transaction, arrangement, or activity or issue securities or offer for subscription or purchase of securities must first seek the approval of the Commission before undergoing such arrangement. Where a public company proposes a compromise, arrangement, or scheme involving the issuance of securities for the amalgamation of two or more listed companies, the public company is required to make an application to the Commission for its approval and obtain an approval in principle. Upon obtaining the approval in principle, the public company is required  to make an application to the Federal High Court(“Court”) for a meeting of the shareholders for their agreement on the merger.

In considering an application for approval of a merger, the Commission will assess whether shareholders are treated equitably and fairly. Once the merger is approved, the parties must apply to the Court for the merger to be sanctioned. Upon the Court’s sanction, the merger becomes binding on all parties involved.

  • Acquiring Voting Rights

The Act provides that no single person shall acquire more than 30% or more of the voting rights of a public company. It further stipulates that no person acting alone or in concert with other individuals may acquire more than 30% or more of the voting rights or such other threshold as may be prescribed by the Commission.

Where a person intends to acquire more than 30% of a company’s voting rights, the Act stipulates that such person must first make an offer to acquire all or part of the voting rights of the company to the shareholders.  This is referred to as a take-over bid and is subject to the approval of the Commission. During such take-over bid, the Commission shall ensure that (i) the identity of the acquirer is disclosed to the shareholders;(ii) the shareholders have reasonable time to consider the offer;(iii) the shareholders are supplied with necessary information to assess the take-over offer made.

In the acquisition of the rights in the company, both the company and the offeror must ensure that the shareholders, particularly minority shareholders are treated fairly in such a transaction.

Where the take-over bid fails, the offeror cannot proceed with the acquisition of the voting rights. In the event that the Commission approves the take-over bid, the offeror may proceed with the take-over bid and acquire the additional voting rights.

  • Payment for Director’s Loss of Office During a Merger or Takeover

The Act provides that payment to a director for loss of office due to the transfer of shares in a company or its subsidiary in the course of a merger or takeover cannot be made unless such payment is made with the approval of the shareholders of the company- specifically shareholders whose shares are being targeted or purchased during the merger or takeover.

In addition, the Act provides that a resolution approving the payment must be disclosed in a memorandum and made available for inspection by the shareholders at least 15 days before the meeting of the members of the company.

  • Penalties for Non-Compliance

Where an acquirer fails to comply with the provisions of the Act on Mergers and Acquisitions, or the directives of the Commission, the acquirer shall be liable to a penalty of ₦10,000 and an additional ₦25,000 for each day the violation continues. Any other party involved in the transaction who fails to comply with the provisions of the Act shall also be liable to a penalty of not less than ₦10,000 and a further sum of ₦25,000 for every day the violation persists. Furthermore, any person who provides the Commission with false or misleading information in relation to a merger or takeover transaction shall, upon conviction, be liable to a fine of ₦5,000,000 or imprisonment for a term of not less than five years, or both.

Conclusion

As public companies proceed with mergers and acquisitions, they must generally ensure that their transactions strictly comply with the Act. The Act ensures that mergers involving public companies are transparent, equitable, and are investor friendly. For companies, it means stricter obligations around disclosure and fairness. For investors, it offers greater protection and recourse in takeover transactions.