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 Portal, Fundraiser, and Investor.

  • Crowdfunding Intermediary: An entity organized and registered as a corporation to facilitate transactions involving the offer or sale of securities or investment instruments through a Crowdfunding Portal.
  • Crowdfunding Portal: A website, platform, portal, intermediary portal, application, or other similar module that facilitates interaction between Fundraisers and the investing public;
  • Fundraiser: refers to the originator, maker or obligor of the investment instrument to be issued pursuant to the Crowdfunding Rules.

Key provisions of the Crowdfunding Rules include:

Registration Requirements: The Crowdfunding rules establish registration requirements for crowdfunding intermediaries, including crowdfunding portals and funding portals. Crowdfunding intermediaries are required to register with the Securities and Exchange Commission and comply with specified criteria to operate legally in Nigeria. Under the crowdfunding rules issued by the Securities and Exchange Commission (SEC) in Nigeria, crowdfunding intermediaries must ensure that they have the by-laws or rules and such other documents governing the conduct of fundraisers and investors on the crowdfunding portal and must ensure that they implement written policies and procedures relating to the operations of their portals to achieve compliance with the provisions of the Investment and Securities Act, 2007. Prospective intermediaries seeking registration with the Securities and Exchange Commission (SEC) are to have a paid-up share capital of =N=100 Million, with at least 3 (three) of principal officers registered as sponsored individuals. Rule 6 of the Crowdfunding Rules provides a comprehensive list of supporting documentation required for an application for registration of a crowdfunding intermediary.

Eligibility Requirements of Fundraisers: Pursuant to Rule 3 of the Crowdfunding Rules, A fundraiser is an entity seeking to raise capital through the issuance of investment instruments (either equity or debt securities) to members through a crowdfunding portal. By the provision of the Rules, eligible fundraisers include:

  • MSMEs incorporated as a company in Nigeria with a minimum of two years operating track record;
  • MSMEs incorporated as a company in Nigeria with less than 2 years operating track record but which has a strong technical partner that possesses a minimum of 2 years operating track record or has a core investor.

Rule 4 of the Crowdfunding Rules allows Fundraisers to offer or sell investment instruments with the Securities Exchange Commission, provided they meet the required criteria stated in the Rule.
The following entities are prohibited from raising funds through a crowdfunding portal:
Complex Structures; (b) Public listed companies and their subsidiaries; c) Companies with no specific business plan; (d) Companies that propose to use funds raised to provide loans or invest in other entities; (e) such other entity as may be specified by Securities Exchange Commission.

Due Diligence Obligations of the Crowdfunding intermediaries: Rule 12 of the Crowdfunding Rules imposes an obligation on the intermediaries to carry out due diligence on prospective fundraisers intending to use their portal, and also ensure that fundraisers intending to use their portal, and also ensure that fundraisers comply with the requirements of the Crowdfunding Rules. Intermediaries are also empowered to ensure that the fundraising limits imposed by the Rules on fundraisers are not breached. Where a fundraiser defaults in complying with the applicable laws, the Rules empower intermediaries to take action against the misconduct of such fundraiser.

Investor Protection: The Crowdfunding Rules aim to protect the interests of investors participating in crowdfunding campaigns by imposing disclosure requirements on issuers and intermediaries. Crowdfunding platforms are required to provide investors with access to relevant information about offerings, including risks, terms, and financial statements.

Investment Limits: The Crowdfunding Rules establish investment limits for retail investors participating in crowdfunding campaigns to mitigate the risk of overexposure and potential losses. These limits vary depending on the investor’s income, net worth, and investment experience.Compliance and

Enforcement: The Securities Exchange Commission is empowered to enforce compliance with the Crowdfunding Rules and take enforcement actions against entities and individuals that violate the regulations. Penalties for non-compliance may include fines, suspension, or revocation of registration.


The Crowdfunding Rules in Nigeria offer a comprehensive legal framework for crowdfunding activities. The primary objective of these rules is to strike a balance between investor protection and fundraising and investment opportunities. The overall aim of these regulations is to create an enabling environment for crowdfunding activities in Nigeria while ensuring the interests of investors are safeguarded, and market integrity is maintained.
As the crowdfunding industry continues to expand, regulatory oversight will become increasingly important in ensuring market integrity and promoting investor confidence.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.