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By Chukwuma Umeorah
Capital market operators have warned that the new minimum capital requirements proposed by the Securities and Exchange Commission (SEC) could increase operating costs for market institutions, with the burden likely to be transferred to investors through higher transaction fees, tighter service conditions and reduced market access. They added that the new capital floors may shrink the number of market operators and further hinder the growth of emerging operators.
These concerns were raised during the Capital Market Academies of Nigeria (CMAN), Q1 2026 roundtable where stakeholders examined the scope, timing and possible consequences of the recapitalisation framework for capital market operators. While these operators broadly supported the need to strengthen the financial base of market institutions, they repeatedly cautioned that poorly calibrated reforms could raise the cost of participation in the market and slow the drive for broader investor inclusion.
Former president of the Chartered Institute of Stockbrokers (CIS), Olatunde Amolegbe, explained that “Capital is not free. If you have the capital of N150 million you collected from shareholders, it already has a cost. If you now ask those same shareholders to bring N2 billion, you are going to have a different set of conversations. That cost does not disappear. It shows up somewhere, and most times it shows up in pricing. Yes, it is appropriate to increase the capital, but should we be increasing our by 2,000 or 3,000 per cent as the case may be. That is the issue that needs to be tackled swiftly by the regulator.”
The SEC’s proposal seeks to raise capital thresholds across several categories of operators, including broker-dealers, issuing houses, asset managers, trustees and registrars, as part of efforts to enhance financial soundness, improve operational resilience and align capital with risk exposure.
Investor impact and pricing pressures
The higher capital requirements would expand the cost base of operators, who may respond by reviewing their pricing structures. First Vice-President of the Chartered Institute of Stockbrokers, Fiona Ahimie, said operators were already operating under tight margins, with regulatory charges fixed and competition driving service fees downward.
“There is a maximum fee you can charge, but there is no effective minimum. We are in a market where people collect five basis points on transactions. And the question is, how do you maintain the minimum operating standard, meet compliance requirements, invest in technology and still carry higher capital on five basis points?”
She warned that if operating costs rise significantly under the new regime, pressure would build to pass those costs to investors. “While we are talking about minimum capital, I think it is critical that the SEC also looks at the structure of fees in the market, so that investors are not indirectly burdened by policies meant to strengthen institutions,” she said.
Supporting that view, Professor Lionel Effiong of the University of Calabar noted that from an economic perspective, higher mandatory capital almost always feeds into pricing decisions. “If the cost of doing business increases and revenues remain constrained, the adjustment mechanism is usually the customer,” he said. “In the capital market, that customer is the investor.”
Risk of consolidation and reduced access
Beyond pricing, these experts cautioned that the scale of the proposed capital increases could accelerate consolidation in the market, with implications for competition, access and investor choice.
Amolegbe warned that excessive capital thresholds could reduce the number of operators, weakening the distribution network needed to grow participation. “We have about five million CSCS accounts in a country of over 250 million people. We are not close to our potential. Anything that reduces the number of operators also reduces the foot soldiers that bring people into this market,” he said.
He argued that smaller and mid-sized firms often play an important role in outreach, niche services and investor education. “If we shrink the ecosystem too aggressively, we may make the market safer on paper but smaller in reality,” he said.
Effiong added that reduced competition could affect investors directly. “Fewer operators mean less competitive pressure on pricing, less product diversity and fewer access points for new entrants into the market,” he said. “All of these ultimately shape investor experience.”
Balancing regulation with market development
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While emphasizing the need to balance regulatory tightening with market development, they warned that overemphasis on capital floors could weaken the expansion objectives of the capital market. Amolegbe said the SEC’s dual mandate of regulation and development must remain central to policy design. “Yes, we need strong institutions. But we also need many institutions to grow this market. Market development requires increasing participation, increasing operators and expanding services, not only strengthening balance sheets.”
Professor Effiong reinforced this position, noting that capital alone does not build markets. “Capital is a necessary condition, but it is not sufficient. Governance, technology, financial literacy and participation are just as important. A reform that strengthens one pillar while weakening another may not deliver the intended outcome.”
Timing risks and macroeconomic context
President of CMAN, Professor Uche Uwaleke, said political and macroeconomic cycles should be factored into the implementation timeline. He argued that the prevailing economic and political environment could affect fundraising costs, with implications for investors. “Election periods are usually characterised by uncertainty and risk aversion. If operators are compelled to raise large amounts of capital in such conditions, the cost of that capital will be higher. That cost will eventually be reflected in the system.”
On his part, Vice President of the Institute of Capital Market Registrars, Dr. Bayo Olugbemi, also supported a longer and more flexible timeline. “We are dealing with a situation where banks, insurance companies and pension institutions are all raising capital. Adding capital market operators to that mix at the same time could create funding pressure, which again feeds into cost.”
Risk-based capital and proportionality concerns
Another core issue was whether the proposed capital thresholds sufficiently reflect the varying risk profiles of market operators. Professor Effiong said a uniform capital jump across categories could misallocate resources and increase costs unnecessarily. “Capital requirements should be more explicitly risk-based. Where capital is misaligned with actual exposure, you force firms to hold buffers they may not need, and that inefficiency eventually affects investors.”
He drew comparisons with other markets where capital standards are tailored to business scope and risk. “In more developed markets, capital is linked to what you do, the instruments you trade and the risks you carry. That approach protects investors without creating excessive barriers.”
Operational strain and service delivery
Market operators further cautioned that large-scale recapitalisation exercises often require extensive restructuring, which could temporarily affect service delivery. They noted that compliance and fundraising efforts consume managerial and financial resources. “When institutions are focused inward on capital raising, mergers and regulatory processes, client-facing operations can be strained.”
They warned that during such periods, investors could experience slower services, reduced advisory capacity or limited product development, adding another layer of indirect cost.
Unintended consequences and investor protection
Operators noted that if not strategically implemented, issues of unintended consequences may arise, stressing that investor protection extends beyond institutional solvency. “The intention is to protect investors by ensuring operators are strong,” Professor Effiong said.
“But if the same policy increases costs, reduces access and limits competition, investors face a different kind of risk.”
They added that reforms must be evaluated not only on prudential grounds but also on market outcomes. “We must ask how this affects the retail investor, the first-time participant and the long-term saver.” This is even as they urged the SEC to accompany the recapitalisation programme with impact assessments covering pricing trends, access indicators and participation data.
