In a bid to fortify Nigeria’s financial infrastructure, the Securities and Exchange Commission (SEC) is proposing a ₦10 billion minimum capital requirement for Credit Enhancement Service Providers.
Minimum Capital Requirement
The Commission outlined the move in its new rules and amendments to existing regulations, aiming to ensure these institutions operate on a secure and resilient footing.
Boosting Investor Confidence
Credit Enhancement Service Providers, such as InfraCredit, play a crucial role in bridging the gap between long-term project financing and the risk appetite of domestic investors.
By offering financial guarantees and other mechanisms, they actively enhance the creditworthiness of debt instruments, which makes them more attractive to investors like pension funds and insurance companies.
Consequently, these providers unlock capital for critical infrastructure and development projects.
Read Also: CORAN Summit Pushes Africa’s Oil Refining, Energy Security
Prudential Rules And Liquidity
Under the proposed rules, the SEC will bar any provider that fails to meet the minimum capital requirement from offering additional credit enhancement facilities.
The regulator will also require providers to submit an approved recapitalisation plan.
Furthermore, the SEC will prevent providers from paying dividends until they cover initial expenses, make provisions for losses, and satisfy all prudential requirements.
The SEC emphasises that providers must implement board-approved risk frameworks and follow IFRS or other standards prescribed by the Financial Reporting Council of Nigeria.
Additionally, the Commission requires core operators to maintain at least 60% of their assets in liquid form, non-core operators 30%, and credit enhancement providers 85%.
By enforcing these measures, the SEC aims to boost investor confidence and ensure that Nigeria’s credit enhancement sector reliably supports major projects and long-term financing.
