The Regulatory Reset for Nigerian Private Capital | Beyond CGT

While much of the public policy conversation in 2025 focused on revisions to the capital gains tax, more structurally significant developments across the wider legal and regulatory landscape were arguably more consequential for Nigeria’s private equity and venture capital ecosystem. The year delivered a recalibration of the core regulatory pillars that shape private capital activity, namely, the pension investment regime under the Pensions Commission (PenCom), the supervisory framework of the Securities and Exchange Commission (SEC), and the statutory foundations set by the new Investments and Securities Act 2025 (ISA 2025).

These regulatory reforms also altered the operating parameters for industry participants, shaping how private capital may be mobilised and deployed. The adjustments across PenCom, SEC and ISA 2025 introduced additional obligations for fund managers and allocators, clarifying some aspects of governance, valuation and fund-structuring expectations. As a result, regulatory considerations became a more prominent factor in assessing transaction feasibility.

2026 priorities will centre on supporting the effective implementation of these regulatory developments and addressing areas where alignment is required to enhance market participation. Clarifying the treatment of venture capital under PenCom, refining capital and registration requirements under the SEC framework, and strengthening regulatory pathways for infrastructure and private-debt vehicles will be important.

PenCom: Refinement, Not Reinvention

The 2025 Revised Investment Guidelines represent less a change of direction than a tightening of structure. The updated guidelines refine exposure limits for pension fund investments into private equity vehicles and, importantly, introduce an explicit framework for co-investment, permitting PFAs to invest alongside PE funds in portfolio companies. For Fund II, for example, while the overall 10% global allocation limit to private equity is maintained, the maximum exposure to any one issuer has been increased from 5% to 7.5%, and the cap on any single private equity fund, from 20% to 25%. This creates more room for PFAs to write meaningful tickets even where only a small number of schemes participate in a fundraise.

A key omission persists: the PenCom regulations continue to speak only to “private equity funds” without expressly recognising venture capital as a distinct eligible category. This lack of alignment with SEC practice, which now clearly differentiates VC funds, continues to create uncertainty for PFAs assessing early-stage strategies.

In practice, managers raising domestic capital also encounter requests for credit-style ratings, despite there being no direct requirement within the PE provisions of the PenCom Guidelines. This reflects a cautious extension of fixed-income assessment practices into private equity allocation, where global norms instead emphasise manager track record, governance frameworks and independent valuation. While AVCA’s Q2 2025 Report notes that African pension and sovereign investors increased their share of private capital fundraising from 18% to 25%, with nearly US$100 million committed by each group, the consequence has been slower pension participation in PE/VC allocations than the intent of the Guidelines suggests.

SEC: Structure with Growing Pains

Substantively, the rules increased allowable portfolio-concentration limits to 70% and introduced GP-commitment requirements for funds targeting pension capital, enhancing sponsor–investor alignment. The same package also introduced fee caps limiting management fees and fund expenses to 2% and performance fees to 20% of the capital raised in Nigeria for a fund. Subsequent guidance confirmed that these caps apply only to the Nigeria-sourced portion of capital in SEC-registered funds, rather than to global fund commitments, and in setting out a clearer pathway for registering PE, VC, and infrastructure vehicles. These adjustments have narrowed the practical impact of the fee caps for many cross-border managers, but it has not fully resolved concerns around commercial flexibility.

ISA 2025: Statutory Support for Alternatives

ISA 2025 strengthens the legal underpinnings of private capital by expressly recognising venture capital and private-equity funding within Nigeria’s regulated investment framework and empowering the SEC to supervise “specialised or alternative investment schemes”. While not prescriptive, the Act provides statutory support for the evolution of alternative investment vehicles, including private debt structures. It also strengthens the foundation for regulated infrastructure investment schemes, aligning with Nigeria’s significant share of West Africa’s infrastructure transaction volume.

Sector shifts and market trends shaped by the 2025 regulatory reset

Private capital deployment in 2025 reflected the combined influence of broader regulatory reforms and sector-specific supervisory dynamics across the Nigerian market. Fintech remained the largest destination for venture capital investment, accounting for roughly 60% of Nigeria’s VC transactions, although activity moderated in line with wider West African trends. AVCA data recorded a 46% decline in fintech deal volume and a 53% fall in deal value across the region, reflecting increased investor selectivity and heightened attention to prudential, FX-related and compliance considerations.

Digital infrastructure growth supported technology-driven investment themes, with Nigeria reporting approximately 107 million internet users and more than 101 million broadband subscriptions in early 2025. This expanding digital base underpinned continued interest in data-centric platforms and enterprise-technology businesses.

Infrastructure and energy continued to attract significant private-equity participation, consistent with Nigeria’s position as the leading market for infrastructure transactions in West Africa. AVCA reported the strongest half-year on record globally for infrastructure investment in 2025, driven largely by renewable energy and essential services assets. Established sectoral approval processes and licensing pathways in regulated energy and infrastructure segments supported transaction progression, particularly in renewables, power-sector assets and healthcare-facility developments.

Other sectors showing rising investor interest included healthtech - where Nigerian companies have previously raised more than US$200 million[1] - as well as agritech and edtech. Across these sectors, regulatory certainty, FX considerations and supervisory requirements interacted with statutory reforms under PenCom, the SEC and ISA 2025 to shape diligence priorities, valuation discipline, and the general pace of deal execution during the year.

Outlook for 2026

Looking ahead, industry engagement will focus on shaping the SEC’s anticipated review of capital requirements for fund managers, advocating for a proportionate regime that distinguishes private alternative managers from public mutual fund operators. Parallel advocacy will continue toward aligning PenCom and SEC frameworks to recognise venture capital formally and to establish more appropriate institutional due diligence standards for private equity and venture capital allocations. At the same time, tax policy engagement will broaden beyond CGT reforms to address other fiscal considerations affecting fund structures and returns.

The regulatory reset of 2025 has established stronger foundations for Nigeria’s private capital markets. The next phase must ensure these frameworks are calibrated to foster, rather than inadvertently constrain, sustainable growth across the industry.

Folake Elias Adebowale & Dipo Okuribidio

For: PEVCA Nigeria Legal & Regulatory Committee