MSME’s in Nigeria experience difficulties when raising capital from conventional models. As a result, more businesses are beginning to explore emerging financial alternatives like crowdfunding and this has created a corresponding need for more scrutiny and oversight by the government. In response to these concerns, the Securities and Exchange Commission (SEC) announced on January 25, 2021, its new rules and amendments to certain financial instruments and products (the “Guidelines”). As expected, one of the activities significantly affected by the Guidelines is crowd funding in Nigeria.
To properly appreciate the implication of the Guidelines on crowdfunding, it is important to first understand what crowdfunding means.