The Securities and Exchange Commission (SEC) of Nigeria has announced a significant shift in the settlement cycle for equities transactions within the Nigerian capital market. Effective November 28, 2025, the market will transition from the current T+3 settlement cycle to a T+2 cycle, meaning trades will be settled two business days after the transaction date. This change, which aligns Nigeria with international best practices, comes after a comprehensive review of the existing system and extensive consultations with market stakeholders. The SEC anticipates that this move will significantly enhance market liquidity, reduce counterparty risks, and bolster Nigeria’s attractiveness as an investment destination. By accelerating the settlement process, investors gain quicker access to their funds, further contributing to increased market dynamism.
The rationale behind the transition to T+2 is multifaceted. Primarily, it aims to modernize and strengthen the overall market infrastructure. A shorter settlement cycle reduces the time between trade execution and settlement, minimizing the potential for market volatility to impact transaction finality. This, in turn, reduces counterparty risk, the risk that one party in a transaction will default before settlement. Furthermore, the faster turnaround of funds allows investors to redeploy capital more efficiently, stimulating trading activity and boosting market liquidity. By aligning with global standards, Nigeria signals its commitment to a robust and efficient capital market, making it a more attractive proposition for both domestic and international investors.
The SEC emphasizes that this transition represents a crucial step in repositioning the Nigerian capital market within the global financial landscape. The move is expected to enhance investor confidence and attract greater foreign investment. The reduced settlement time minimizes the duration of market exposure, mitigating the risk of defaults and systemic risks that can arise from extended settlement periods. This increased security and efficiency create a more stable and predictable market environment, conducive to long-term investment and sustainable growth. By adopting this international standard, Nigeria demonstrates its commitment to fostering a transparent and reliable capital market, ultimately contributing to the nation’s economic development.
The implementation of the T+2 settlement cycle necessitates comprehensive adjustments across the entire market ecosystem. All capital market operators, including brokers, dealers, custodians, and other intermediaries, are required to update their systems and internal processes to ensure a seamless transition. This includes adapting trading platforms, back-office operations, and risk management protocols to accommodate the shorter settlement timeframe. Effective communication and collaboration between market participants will be essential to ensure a smooth and efficient transition, minimizing disruption and maximizing the benefits of the new system.
Investors are also encouraged to proactively engage with their brokers and investment advisors to fully understand the implications of the T+2 cycle on their transactions and overall investment strategies. The change may necessitate adjustments to trading practices, particularly for those engaging in frequent trading or short-term investment strategies. Understanding the nuances of the new settlement cycle will allow investors to optimize their trading decisions and effectively manage their portfolios in the evolving market landscape. Open communication between investors and their advisors is crucial for navigating the transition and maximizing the potential benefits of the T+2 system.
The SEC’s announcement of the T+2 transition reinforces the ongoing efforts to strengthen and modernize the Nigerian capital market. This initiative is part of a broader strategy to enhance the market’s efficiency, transparency, and attractiveness to investors. The growth of Collective Investment Schemes to over N3 trillion in 2024, as reported by The PUNCH, further underscores the increasing dynamism and potential of the Nigerian capital market. The move to T+2 settlement is expected to further catalyze this growth, creating a more robust and internationally competitive market environment. The combined effect of these developments positions Nigeria for sustained growth and development within the global financial landscape.
