RULES ON SECURITIZATION

Rules govern the securitization of financial assets like mortgages into tradeable securities. They target banks, special purpose vehicles, and investors. This improves liquidity and deepens the capital market.

What Is This Policy?

SEC rules governing the process by which pools of financial assets such as mortgages, receivables, and loans are packaged into securities and sold to investors in the Nigerian capital market.

Who Does It Target?

Banks, mortgage institutions, and other originators of financial assets Special Purpose Vehicles (SPVs) used as securitization vehicles Capital market operators and securities dealers Investors purchasing asset-backed securities

What Does It Aim to Achieve?

Enable financial institutions to convert illiquid assets into tradeable securities, deepen Nigeria's capital market, improve liquidity in the financial system, and diversify investment instruments available to investors.

Key Features

SPV Framework: Requires assets to be transferred to a Special Purpose Vehicle that issues securities backed by the asset pool. True Sale Requirement: Asset transfer to the SPV must constitute a 'true sale' providing bankruptcy remoteness from the originator. Credit Enhancement: Securitization structures must incorporate credit enhancement mechanisms to protect investors. Disclosure Standards: Issuers must provide full disclosure of asset pool composition, performance history, and risk factors.

Current Status

Rollout Stage: Active Coverage: Nigerian capital market Beneficiaries: Financial institutions seeking liquidity; investors seeking asset-backed instruments Funding: Market-based

How to Access

Securitization transactions must be registered with SEC SPV must be separately incorporated and its constitutional documents filed with SEC Rating from a PenCom-approved credit rating agency is required for pension-eligible instruments Application method: Register securitization transactions with SEC at https://www.sec.gov.ng

Important Terms

Commingling of SPV assets with originator assets invalidates the true sale Ongoing reporting of asset pool performance is mandatory Investors in junior tranches bear first-loss risk

Official Resources

Website: https://www.sec.gov.ng Contact: Securities and Exchange Commission (SEC) Nigeria

Legal Framework

Issued under the Investments and Securities Act 2007. Operates alongside the Companies and Allied Matters Act 2020, the Central Bank of Nigeria Act 2007 (for asset-backed securities), the Mortgage Institutions Act, the Asset Management Corporation of Nigeria Act 2010, and international securitisation standards including IOSCO principles.