SEC fixes T+1 settlement deadline
SEC has fixed 5:00 p.m. on the first business day after trading as the settlement deadline for eligible equities and commodities under the T+1 settlement cycle.
The Securities and Exchange Commission (SEC) has fixed 5:00 p.m. on the first business day after trading as the settlement deadline for eligible equities and commodities. The Commission confirmed the directive in a circular issued on Wednesday to capital market operators and other market participants nationwide.
SEC said the measure formed part of the implementation of the T+1 settlement cycle in Nigeria’s capital market. Under the T+1 framework, eligible securities transactions are settled one business day after the trade date, shortening the settlement period. According to the Commission, all affected transactions must be fully funded by 5:00 p.m. on T+1. The requirement would ensure compliance with the standard Delivery versus Payment (DvP) settlement procedure used in the market.
SEC warned that any broker or dealer whose trading account lacked sufficient funds to meet settlement obligations would face default procedures. The Commission also clarified that foreign portfolio investors would not be required to prefund accounts before executing trades in Nigeria’s capital market.
The T+1 settlement cycle is a significant reform for Nigeria’s capital market. The shorter settlement period will reduce counterparty risk and improve efficiency. The deadline of 5:00 p.m. on T+1 provides clarity for market participants. The exclusion of foreign portfolio investors from prefunding requirements is a concession to attract foreign investment.
This echoes the 2020 introduction of T+1 settlement in other markets, which also sought to improve efficiency. The mechanism then was different, but the result was the same: a move towards international standards.
The winners: investors, who benefit from reduced risk; and the capital market, which gains efficiency. The losers: brokers who fail to meet the deadline; and the Nigerian government, which must ensure the transition is smooth.
Bottom Line: SEC has set the T+1 settlement deadline. The capital market is becoming more efficient. The question is whether the transition will be smooth or disruptive.