Raising Capital in Nigeria: The Legal Difference Between Private Placement and Public Offer

Capital Markets Practice Group

Introduction

For any Nigerian business seeking to raise capital beyond its existing shareholders, two routes dominate the landscape: the private placement and the public offer. These are not merely different fundraising mechanisms, they represent fundamentally different legal regimes, with different disclosure obligations, regulatory requirements, eligible investor pools, and consequences for failure to comply. The choice between them is one of the most important capital structure decisions a Nigerian company can make, and it must be made with full legal advice.

This article examines both routes under Nigeria’s current regulatory framework, with particular attention to the Investments and Securities Act 2025 which now governs the Nigerian capital markets landscape and the SEC’s April 2025 Rules on private company securities issuance, which significantly expanded the options available to private companies for the first time in Nigeria’s corporate history.

I. The Legal Framework: CAMA 2020, the ISA 2025, and the BFA 2022

The starting point in Nigerian capital-raising law is the prohibition in section 22(5)(a) of CAMA 2020: a private company shall not, unless authorised by law, invite the public to subscribe for any share or debenture of the company.[1] This prohibition is foundational. It reflects the structural distinction between public and private companies in Nigerian law: public companies, registered as such with the CAC, may access public capital markets; private companies historically could not.

The Investments and Securities Act 2025 (ISA 2025) which repealed and replaced the ISA 2007 and came into force in 2025 governs the regulation of Nigeria’s capital markets and establishes the SEC as its apex regulatory authority. Section 95 of the ISA 2025 restricts public invitations to a defined class of issuers, including public companies, CBN-licensed deposit-taking institutions, collective investment schemes, and free trade zone entities.[2]

A significant shift occurred with the Business Facilitation (Miscellaneous Provisions) Act 2022 (BFA), which amended section 67(1) of the ISA 2007 to permit private companies to offer securities to the public through means prescribed by the SEC.[3] Building on this, the SEC issued its Rules on the Issuance and Allotment of Private Companies’ Securities, which became effective on 24 April 2025 and for the first time created a regulatory pathway for private companies to issue debt securities to the public or to qualified investors.[4]

II. The Public Offer: What It Is and What It Demands

A public offer is an invitation to members of the general public to subscribe for or purchase securities issued by a company. It is the most heavily regulated capital-raising route in Nigerian law, and for good reason: it exposes retail investors to risk, and the law imposes stringent disclosure and approval requirements to protect them.

A. The Prospectus Requirement

Every public offer of securities by a Nigerian company requires the preparation and registration with the SEC of a prospectus.[5] The prospectus is not a marketing document: it is a legal instrument. Its contents are prescribed by section 101 of the ISA 2025 and must include, among other things: the company’s ownership structure and management; its capital requirements; details of the offer including opening and closing dates and subscription terms; material risk factors; at least three years of audited financial statements; the proposed use of proceeds; and all material information that would enable a reasonable investor to make an informed investment decision.

The prospectus must be registered with the SEC before it is issued or circulated.[6] Directors who authorise the issue of a prospectus containing untrue statements face civil liability to investors for any loss suffered on the faith of those statements[7] and may face criminal prosecution where the misstatement was made knowingly or without reasonable belief in its truth.

B. Who Can Make a Public Offer?

Under the ISA 2025, public offers remain the primary preserve of public companies and the other categories of qualified issuers listed in section 95. A public company is one registered as such with the CAC, with a minimum issued share capital as specified by CAMA 2020, and with no restriction on the transfer of its shares. For private companies, a public offer of equity securities remains prohibited only debt securities may now be publicly offered, and only within the new framework established by the SEC’s 2025 Rules.

III. The Private Placement: A Different Animal Entirely

A private placement is the offer of securities to a select and identified group of investors typically institutional investors, high-net-worth individuals, or ‘qualified investors’ as defined by the SEC without a public invitation. It does not require a registered prospectus in the conventional sense, and the public disclosure obligations are significantly reduced.[8]

Private placements have historically been the dominant capital-raising tool for Nigerian private companies. They are faster to execute, less expensive, less publicly exposed, and less procedurally burdensome than public offers. But they are not unregulated. The ISA 2025 and the SEC’s Rules make clear that private placements of debt securities by private companies require SEC approval, mandatory use of qualified investors, compliance with the eligibility criteria applicable to private company issuers, and listing on a recognised exchange within 30 days of allotment.

A private placement is not simply a deal conducted in private. It is a regulated capital-raising exercise with defined eligibility criteria, investor qualification requirements, and listing obligations. The error of treating it as informal is an error that attracts regulatory sanction.

IV. The New Framework for Private Companies: SEC Rules 2025

The SEC’s Rules on the Issuance and Allotment of Private Companies’ Securities (effective 24 April 2025) represent the most significant development in Nigerian private capital markets in decades. For the first time, private companies which have historically been confined to shareholder capital, bank loans, and informal private placements now have a regulated pathway to access public debt capital.[9]

The framework imposes rigorous eligibility criteria:

The company must have a minimum track record of three years of operation.
It must not be in default on any prior debt issuance for more than six months.
A credit rating of not less than investment grade is required for public offers.
The maximum amount that may be raised in any 12-month period is N15,000,000,000; and
Securities issued under the Rules must be listed on a registered securities exchange within 30 days of allotment.

One critical restriction bears emphasis: private companies remain absolutely prohibited from offering equity securities to the public. The Rules apply exclusively to debt securities bonds, debentures, sukuk, and similar instruments. A private company that wishes to offer equity to a broad investor base must first re-register as a public company, comply with all applicable public company requirements, and proceed under the ISA 2025’s public offer framework.

V. Enforcement: The SEC’s Expanded Powers Under the ISA 2025

The ISA 2025 significantly strengthens the SEC’s enforcement arsenal. The Commission now has express powers to impose administrative sanctions, issue orders requiring compliance, and refer matters for criminal prosecution. Ponzi and pyramid schemes are expressly prohibited, with promoters facing fines of N20 million and/or imprisonment for up to ten years.[10] Foreign issuers that market to Nigerian investors without SEC approval face penalties of N10 million or 10% of funds raised, and investors are entitled to rescission and compensation.

For any business raising capital in Nigeria whether through a public offer or a private placement, the regulatory risk of proceeding without competent legal advice has never been higher. The framework is new, the Rules are detailed, and the SEC is actively enforcing compliance.

Conclusion: Know Which Route You Are On

The choice between a private placement and a public offer is not a matter of preference or convenience. It is a legal determination that flows from the identity of the issuer, the type of security being offered, the investor pool, and the regulatory obligations the issuer is prepared to assume. Making the wrong call, treating a regulated offering as informal, or attempting a public offer without SEC registration carries consequences that range from civil liability to criminal prosecution.

At Enebeli & Partners Legal, our Capital Markets practice advises issuers, investors, and intermediaries at every stage of the capital-raising process in Nigeria from structuring and route selection through regulatory filings, documentation, and post-issuance compliance. We work within the current ISA 2025 framework and stay ahead of developments at the SEC.

Whether you are a startup exploring your first raise, a mid-market company considering a bond issuance, or an investor evaluating a private placement opportunity, contact us before the offering is structured — not after the question arises.

About Enebeli & Partners Legal

Enebeli & Partners Legal is a full-service Nigerian law firm operating across Lagos and Abuja, with a practice spanning Corporate Commercial, Banking & Finance, Capital Markets, Real Estate, FinTech & Digital Assets, Data Protection, Dispute Resolution, Labour & Employment, and Regulatory Compliance. The firm advises businesses, investors, and institutions at every stage of the commercial lifecycle from incorporation and capital raising through to dispute resolution and restructuring.

To instruct the firm or to request a consultation, contact us at info@goenebeli.com or call +234 802 255 7029.

[1]Companies and Allied Matters Act 2020 (CAMA 2020), s. 22(5)(a): a private company shall not, unless authorised by law, invite the public to subscribe for any share or debenture of the company. This foundational prohibition has governed Nigerian private company capital-raising since the enactment of the old CAMA 1990 and was carried forward into the 2020 Act.

[2]Investments and Securities Act 2025 (ISA 2025), s. 95: restricts invitations to the public to a defined category of issuers, including public companies, statutory and supranational bodies, entities licensed by the CBN to accept deposits and savings, collective investment schemes, and free trade zone entities. The ISA 2025 repealed and replaced the Investments and Securities Act 2007 (ISA 2007). See: Mondaq, ‘Understanding the Investment and Securities Act 2025: Key Innovations and Implications’ (May 2025).

[3] S. 43(1)(b): the BFA amended s. 67(1) of the ISA 2007 to permit private companies to offer securities to the public through means prescribed by the SEC. This marked a fundamental shift from the historical position under which private company public offers were absolutely prohibited.

[4]SEC Rules on Issuance and Allotment of Private Companies’ Securities (effective 24 April 2025) (the ‘Rules’): enacted pursuant to s. 308 of the ISA 2025 and the authority vested in the SEC by the BFA. The Rules apply to the issuance of debt securities (bonds, debentures, sukuk, and alternative asset classes) by private companies through public offers or private placements. Private companies remain strictly prohibited from offering equity securities to the public.

[5]ISA 2025, s. 99: the issuer of securities by public offer is required to publish a prospectus that conforms with the requirements of the ISA 2025. Section 101 specifies the required contents of a prospectus, including: the company’s proprietorship and management; capital requirements; details of the offer (opening date, amount, subscription period); material risk factors; audited financial statements; use of proceeds; and all information reasonably required to enable an investor to make an informed decision. See: Lexology, ‘In Brief: Filing and Documentary Requirements for Debt Securities Offerings in Nigeria’ (February 2025).

[6]ISA 2025, s. 108: every prospectus must be registered with the SEC before it is issued, circulated, or published. The prospectus must carry a statement on its face confirming SEC registration, the date of registration, and that it was issued in compliance with the ISA 2025. The directors of the issuer accept joint and several responsibility for the accuracy of information contained in the prospectus.

[7]ISA 2025, ss. 113 and 114: civil and criminal liability for misstatements in a prospectus. Under s. 113, any person who authorised the issue of a prospectus containing an untrue statement is liable to compensate every person who subscribed for securities on the faith of the prospectus for any loss or damage suffered. Under s. 114, criminal liability attaches where the misstatement was made knowingly or without belief in its truth.

[8]ISA 2025, s. 97: a private placement is distinguished from a public offer in that it involves the offer of securities to a select group of qualified investors without a public invitation. Under the ISA 2025 and the SEC Rules, private placements of debt securities by private companies are subject to regulatory oversight but not to the full prospectus and public disclosure requirements applicable to public offers. Securities sold through private placement must be sold only to qualified investors.

[9] SEC Rules on Private Companies’ Securities (2025), eligibility criteria: a private company must (a) be duly incorporated under CAMA 2020 or other enabling legislation; (b) have a minimum track record of three years of operation; (c) not be in default of payment of interest or repayment of principal on any previous debt issuance for more than six months; and (d) obtain a credit rating of not less than investment grade from a recognised rating agency (mandatory for public offers). The maximum fundraising limit is N15,000,000,000 within a 12-month period. See: Mondaq, ‘The Securities and Exchange Commission Unveils Stringent Rules for Private Companies Securities Issuance’ (May 2024).

[10]ISA 2025, s. 196 and s. 357: the ISA 2025 explicitly prohibits Ponzi and pyramid schemes. Promoters face fines of N20 million and/or up to 10 years’ imprisonment. The SEC has also significantly expanded its enforcement powers, including the power to impose administrative sanctions, seek court orders, and refer matters for criminal prosecution. See: Mondaq, ‘Nigeria’s Investments and Securities Act 2025: What Is Changing for Private Capital Players’ (June 2025).