SEC Releases Circulars that Impact the Operations of Capital Market Operators in Nigeria

Moving from T+3 to T+2 in the Nigerian Equities Market
The Circular on the Implementation of a New Settlement Cycle for Equities Transactions in the Nigerian Capital Market was issued by the Commission on 3 June 2025. Via this circular, the Commission announced that the Nigerian equities market will transition to a T+2 (i.e. trade date + two days) settlement cycle with effect from 28 November 2025.

For context, the settlement cycle refers to the time it takes for parties to a securities transaction to receive value. At the end of the settlement cycle, all financial obligations of the parties to the trade i.e. the seller and the buyer, must be fulfilled. The seller receives the proceeds of the sale of their securities, and the buyer’s account is debited accordingly.

In Nigeria, equities transactions are currently settled on a T+3 cycle. Under the new T+2 cycle, equities transactions will be settled no later than two business days after the trade date, instead of three business days.

This move aligns operations in the Nigerian capital market with global best practices. Particularly, countries such as the United States, Canada, and Mexico moved from the T+3 settlement cycle to a T+2 settlement cycle in 2017 and have recently transitioned from a T+2 settlement cycle to a T+1 settlement cycle. Nigeria’s move to the T+2 cycle is a key step towards implementing a T+1 cycle and building a more resilient and efficient capital market.

The impending shorter settlement cycle is expected to minimise counterparty risk in the equity capital markets, as investors receive their securities or cash proceeds faster. This is particularly crucial during periods of market volatility, as it helps derisk the market.

A shorter settlement period also requires clearing functions to complete transactions more quickly, promoting faster and more efficient settlements. This enables improved cash management and reinvestment of capital, potentially leading to higher trading volumes and more liquid markets that benefit both institutional and retail investors. With faster settlements, more funds will be available to investors for reinvestment opportunities.

On a cautionary note, investors who purchase stocks on a margin basis will now have shorter periods to provide additional collateral to cover trades that are unfunded for any reason.

The Commission has mandated all market participants — particularly brokers, dealers, and custodians — to upgrade their systems and operational processes to ensure the effective implementation of the new settlement cycle. These upgrades will require investments and customisations of technology and software to properly integrate the T+2 framework before the effective date.

Treatment of Unclaimed Dividends
On 5 June 2025, the Commission also released a Circular to Paying Companies, Capital Market Stakeholders and the General Public on the Treatment of Unclaimed Dividends of Public Companies. The circular clarifies the treatment of unclaimed dividends by registrars and public companies.

The Commission noted that where dividends declared by a public company quoted on Nigerian Exchange Limited (NGX) remain unclaimed for at least six years, such dividends are expected to be transferred to the Unclaimed Funds Trust Fund (the “Fund”) to be held in trust until the shareholder presents a claim for the dividends, as provided in section 60 of the Finance Act 2020 (the Act).

However, pending the operationalisation of the Fund by the Federal Government, the Commission directed public companies and their registrars to honour all requests by shareholders for the payment of unclaimed dividends. The Commission also stated that shareholders are entitled to continue to claim dividends that were not statute-barred (i.e. not unclaimed for twelve years) before 31 December 2020 when the Act came into effect.

This circular gives shareholders a ground to request their dividends that have been unclaimed for more than six years. However, from a public company’s perspective, the treatment of dividends that are unclaimed after twelve years is still unsettled.

Section 60 (2) of the Act provides that dividends that are unclaimed after twelve years should be included in the profits that should be distributed to the other shareholders of the company. On the other hand, sections 60 (3) and (4) of the Act provide that notwithstanding the foregoing provision, unclaimed dividends that have been unclaimed for six years or more shall be immediately transferred to the Fund and shall be a special debt owed by the Federal Government until a claim is received from a shareholder.

This implies that unclaimed dividends that would otherwise have been redistributed to other shareholders after twelve years without a claim will be held by the Fund until the relevant shareholder approaches the Fund to claim the dividends.

Given that the Fund has not been set up yet, it is unclear whether the Fund will transfer unclaimed dividends held by it back to the relevant companies for redistribution to shareholders in compliance with section 60 (2) of the Act after the expiration of twelve years.

Should you have any questions on this legal alert, please do not hesitate to contact Ajibola Asolo. 

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Contributor
Bukola Akinsulere – Senior Associate