Nigeria’s mutual fund industry has surged in popularity, growing assets under management by over 25% in the past two years and attracting retail investors with entry-level investments as low as ₦5,000. With a regulatory framework designed to protect investors and ensure market integrity, understanding the precise steps and requirements to register your own mutual fund is crucial for fund sponsors, asset managers, and trustees alike. Read on to uncover the exhaustive, SEC-verified guide to launching a compliant and competitive mutual fund in Nigeria.
Table of Contents
1. What Is a Mutual Fund (Collective Investment Scheme)?
A Mutual Fund, formally known under Nigerian law as a Collective Investment Scheme (CIS), pools money from multiple investors to invest in a diversified portfolio of securities (equities, bonds, money‐market instruments, etc.). The Investments and Securities Act (ISA) No. 29 of 2007 defines a CIS as “a scheme in whatever form…in pursuance of which members of the public are invited or permitted to invest money or other assets in a portfolio…” .
Key Features:
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Professional Management: Fund managers with specialised expertise handle investments.
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Diversification: Spreads risk across a basket of assets.
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Liquidity: Open-ended funds allow investors to buy/sell units at prevailing Net Asset Value (NAV).
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Regulation: Strict oversight by the Securities and Exchange Commission (SEC) to protect investors.
2. Regulatory Body & Legal Framework
All mutual funds in Nigeria are regulated by the Securities and Exchange Commission (SEC), headquartered in Abuja, with zonal offices in Lagos, Kano, and Port Harcourt. The principal legislation and rules governing CIS include:
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Investments and Securities Act No. 29 of 2007 (ISA 2007), particularly Section 153.
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SEC Rules and Regulations on Collective Investment Schemes, published December 2019.
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Investments and Securities Bill (ISB) 2025, recently assented to by the President, updating ISA 2007 provisions.
These laws mandate strict eligibility, documentation, transparency, and ongoing supervision requirements for fund sponsors, managers, custodians, and trustees.
3. Types of Mutual Funds in Nigeria
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Equity Funds: Invest predominantly in equities.
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Money Market Funds: Focus on short-term, high-liquidity instruments.
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Balanced Funds: Blend of equities and fixed-income instruments.
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Ethical/Socially Responsible Funds: Adhere to ESG principles.
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Real Estate Investment Schemes (REITS): Pooled investment in income-generating real estate assets.
Each type has distinct investment objectives and risk-return profiles, but all follow the same registration pathway with SEC.
4. Requirements for Registration
The SEC checklist for registering a Fund/Portfolio Manager—prerequisite to launching a mutual fund—includes the following core elements:
| Category | Requirement |
|---|---|
| Payment of Fees | 1. Filing/Application Fee: ₦50,000 2. Processing Fee: ₦200,000 3. Registration Fee: ₦500,000 4. Sponsored Individual Fee: ₦50,000 per individual |
| Corporate Documents | • Certified CAC documents (Certificate of Incorporation, M&A of A) • Statement of Share Capital & Allotment • Audited Financials with more than 60% liquid assets ratio • Business Plan & Operational Manuals |
| Minimum Paid-Up Capital | ₦150,000,000 (One Hundred and Fifty Million Naira) in cash/quoted securities |
| Fidelity Insurance | Insurance Bond covering more than 20% of minimum paid-up capital |
| Sponsored Individuals & Directors | • More than 3 sponsored individuals (incl. MD & Compliance Officer) • CVs, credentials, experience proof (more than 4 years post-graduation) • Police clearance, 2 passport photos, valid IDs • Full postal addresses of referees & previous employers |
| Forms | • SEC Form 3 (Company) • SEC Forms 2, 2D (Sponsored Individuals & Directors) |
| Prospectus & Deed | Draft prospectus, trust deed (for unit trust schemes), or scheme particulars in compliance with ISA & CIS Rules |
Note: The unit registration itself (i.e., the fund’s securities) follows after Manager registration, requiring submission of the final prospectus, CIS Deed, trustee appointment letter, and payment of registration fees for the securities.
5. Step-by-Step Registration Process
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Pre-Registration Advisory:
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Engage SEC’s Capital Market Department for guidance.
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Attend pre-application training (if required by SEC circulars).
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Dossier Preparation:
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Compile corporate documents, forms, prospectus draft, trustee agreement, paid-up capital proof, fidelity bond, and fee evidence.
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Submission to ODG:
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File at SEC’s Office of the Director-General (ODG), Abuja or any zonal office.
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Pay all requisite fees and obtain official acknowledgment.
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Initial Review & Deficiency Notice:
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SEC reviews dossier within 30 days.
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If deficiencies arise, SEC issues a notice; timeline resets upon resubmission.
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Inspection & Interviews:
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SEC may conduct on-site inspection of sponsor’s premises.
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Sponsored individuals and key officers attend interviews to demonstrate compliance knowledge.
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Final Approval & Issuance of Registration Certificate:
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Upon satisfactory review, SEC grants compliance approval.
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Payment of unit/securities registration fee follows to register fund units with SEC registry.
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Publication & Launch:
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Publish approved prospectus in national newspapers and SEC website.
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Open subscription period, issue units, and commence fund operations.
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6. Cost Breakdown
| Fee Type | Amount (₦) | Payable To | |
|---|---|---|---|
| Filing/Application Fee | 50,000 | SEC | |
| Processing Fee | 200,000 | SEC | |
| Registration Fee (Manager) | 500,000 | SEC | |
| Sponsored Individual Fee | 50,000 × n individuals | SEC | |
| Minimum Paid-Up Capital Requirement | 150,000,000 | N/A | |
| Fidelity Insurance Bond | 30,000,000 | Insurance Co. | |
| Unit/Securities Registration Fee (CIS) | 0.005% of Total NAV | SEC |
Note: Annual supervision fees on CIS net asset value apply at 0.005%, payable quarterly post-registration.
7. Typical Timeline for Registration
| Milestone | Duration |
|---|---|
| Pre-application Advisory & Training | 1–2 weeks |
| Dossier Compilation | 4–6 weeks (varies) |
| SEC Initial Review | Up to 30 days |
| Deficiency Resolution (if any) | 2–4 weeks |
| Inspection & Interviews | 1–2 weeks |
| Final Approval & Certificate Issuance | 1 week |
| Total Estimated Time | 8–12 weeks |
8. Post-Registration Obligations
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Compliance Reporting: Quarterly and annual compliance returns to SEC.
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Annual Audits: Submit audited financial statements within 90 days of financial year-end.
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NAV Publication: Publish NAV daily on SEC website and fund website.
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Trustee Oversight: Trustees must submit quarterly reports on compliance and fund performance.
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Renewal of Insurance Bond: Maintain fidelity bond coverage greater than 20% of paid-up capital.
9. Common Misconceptions
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“Only banks can sponsor mutual funds.”
– False. Any incorporated entity meeting SEC’s capital, governance, and experience criteria may sponsor a CIS. -
“You can launch a fund immediately after SEC approval.”
– Approval covers manager registration; fund units/securities still require separate registration and prospectus publication. -
“Once registered, no ongoing fees apply.”
– Ongoing supervision fees (0.005% NAV) and compliance reporting are mandatory annually. -
“Investors can redeem anytime without restrictions.”
– Some CIS types (e.g., closed-end, specialised funds) impose lock-in or exit windows. Always consult the fund’s deed.
10. Frequently Asked Questions (FAQs)
Q1: What is the minimum initial subscription for a mutual fund?
A1: SEC does not prescribe a minimum retail subscription; however, fund houses often set ₦5,000–₦10,000 to encourage retail participation.
Q2: Can foreign investors subscribe to Nigerian mutual funds?
A2: Yes, subject to Nigerian foreign exchange regulations. Foreign investors must provide valid passport and CBN-approved form.
Q3: How long does SEC approval take?
A3: Typically 8–12 weeks, depending on dossier completeness and deficiency resolution.
Q4: Are there tax incentives for investing in mutual funds?
A4: Dividend income from unit trusts is exempt from withholding tax; capital gains follow standard CGT rules.
Q5: Can I switch between different mutual funds under the same manager?
A5: Yes—many fund families offer switch options, often with minimal charges, subject to each fund’s deed provisions.
