Nigeria’s Securities and Exchange Commission says no to Crowdfunding for businesses “for now”

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“We are aware of the growing interests among Nigerians to use Crowdfunding to raise funds. However, that cannot materialise now given the legal challenges as a result of the provisions in CAMA and ISA. But we are looking for ways to go about it so that companies will enjoy the benefits of Crowdfunding in the country as well.”

That right there, is a statement from Mounir Gwarzo, the Director-General of the SEC (Securities and Exchange Commission) as reported by Thisday, this morning. You see, Nigeria is a slow behemoth whose neck is bound by the cords of its own “regulation”. Regulation in this case means the Companies and Allied Matters Act (1990) and Investment and Securities Act (2007).

The premise behind crowdfunding is simple. Brilliance is distributed, but funding/opportunity is not. People who come up with really interesting products but don’t have the money to see them go form concept to product can raise money from a large number of people. Each of those people contributes (likely to be) negligible amounts, but if enough people care about the cause/product, the money begins to add up to something substantial. Crowdfunding in 2016 is mostly performed via online middlemen like Kickstarter, Indiegogo, Gofundme, etc. The contributors can receive a variety of things in exchange for their trouble.

What does this have to do with us? Raising capital for your startup is one of the more difficult things to do as a founder. Asides from Angel investors, and banks who probably consider your business to high risk for their money, you don’t have a lot of options. Crowdfunding is the solution that most of North America, Europe and Asia has turned to, but because the SEC does not have any legal provisions for this kind of fund raising, none of that can happen here. Yet. I hear the Investment and Securities Act is being amended, so any minute now…