Position Paper from the Capital Market Sectoral Group on: SafeguardingMinority Shareholders’ Interest in the Nigerian Capital Market

Chartered Institute of Directors (Nigeria)

Capital Markets Sectoral Group

POSITION PAPER

From: CIoD Nigeria Capital Markets Sectoral Group; Safeguarding Minority Shareholders’ Interest Team
Through: Chair, Advocacy & Stakeholder Engagement Committee
To: Members, Advocacy & Stakeholder Engagement Committee
Subject: Position Paper from the Capital Market Sectoral Group on: Safeguarding Minority Shareholders’ Interest in the Nigerian Capital Market
Date: 15 October 2025

Executive Summary

This Position Paper, issued by the Capital Markets Sectoral Group of the Chartered Institute of Directors Nigeria (CIoD Nigeria), examines the mechanisms for safeguarding minority shareholders in the Nigerian capital market. It emphasises the critical role of robust corporate governance, transparent regulatory enforcement, and inclusive participation in fostering investor confidence.

The paper adds a critical assessment of Nigeria’s current frameworks—including the Companies and Allied Matters Act (CAMA) 2020, the Investments and Securities Act (ISA), Securities and Exchange Commission (SEC) Rules, the Nigerian Code of Corporate Governance (NCCG) 2018, NGX Listing Rules, and the Investment and Securities Tribunal (IST)—to highlight strengths, gaps, and priority reforms. Comparative insights from the UK, South Africa, and India inform context-specific recommendations for regulators, boards, and institutional investors.

1. Background

Minority shareholders are integral to the deepening and sustainability of Nigeria’s capital markets. They contribute to liquidity, governance accountability, and the overall democratization of investment.

However, minority investors often face dilution, exclusion from decision-making, and exposure to insider control—especially where regulatory enforcement and corporate transparency are weak. Safeguarding these interests is essential not only for equity but also for enhancing Nigeria’s attractiveness to long-term capital.

2. Key Issues Affecting Minority Shareholders

Key vulnerabilities in practice include:

• Dilution via private placements or rights issues executed without adequate notice, transparent pricing, or independent fairness opinions.

• Opaque meeting processes (AGMs/EGMs) that marginalise minority participation despite statutory rights to attend, vote, and ask questions.

• Insider dealing and market manipulation that erode trust, coupled with limited visible enforcement actions.

• Weak remedies and lengthy timelines for oppression/unfair-prejudice actions, including procedural delays before the IST and in regular courts.

• Limited real-time access to reliable company and beneficial ownership information, constraining informed participation and activism.

3. Critical Assessment of Current Nigerian Frameworks

A. CAMA 2020 (Corporate Law)

Strengths:

• Codifies directors’ fiduciary duties, pre-emptive rights, derivative actions, and unfair-prejudice remedies.

• Enables electronic meetings and notices.

Gaps:

• Practical enforcement is inconsistent.

• Cumulative voting is not widely adopted.

• Pre-emptive rights are sometimes bypassed via waivers and selective placements.

• Derivative actions remain procedurally complex for retail investors.

B. Investments and Securities Act (ISA) & SEC Rules

Strengths:

• Establishes disclosure obligations, related-party transaction (RPT) oversight, insider trading prohibitions, take-over and mergers rules, and whistleblowing channels.

Gaps:

• Deterrence is weakened by limited frequency and publicity of sanctions.

• RPTs may be approved without rigorous independent scrutiny.

• Beneficial ownership and concert-party disclosures can be opaque in practice.

• Whistleblower protections and incentives require strengthening.

C. Nigerian Code of Corporate Governance (NCCG) 2018 & NGX Listing Rules

Strengths:

• ‘Apply and explain’ encourages board independence, disclosure on deviations, director evaluations, stakeholder engagement, and risk oversight.

Gaps:

• ‘Apply and explain’ can enable superficial compliance.

• Independence criteria may not preclude influence by controlling shareholders.

• Investor stewardship expectations for institutional investors are not explicit or enforceable.

• ESG and remuneration disclosures vary in quality.

D. Investment and Securities Tribunal (IST)

Strengths:

• A specialised forum for capital market disputes.

• Offers technical expertise and potential for speedier resolution versus general courts.

• Has appellate pathway to the Court of Appeal.

Gaps:

• Case management timelines can be protracted.

• Limited publication of reasoned decisions reduces precedent value.

• Enforcement of IST awards can face delays.

• Limited investor awareness of IST access dampens utilisation by minorities.

E. Market Infrastructure & Ecosystem

Strengths:

• Advancing digital meeting tools, e-dividend mandates, and corporate disclosures.

• Presence of shareholder associations (ISAN, PROSAN, NSSA).

Gaps:

• Inconsistent e-voting quality and auditability.

• Patchy adoption of digital AGMs/hybrid meetings.

• Proxy advisory ecosystem is nascent.

• Stewardship by pension funds and asset managers is under-disclosed.

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4. Comparative Insights and Global Best Practices

Mature markets demonstrate how minority protection is strengthened through clear stewardship duties, rigorous RPT oversight, transparent enforcement, and accessible dispute resolution:

• United Kingdom: Companies Act 2006 (derivative/unfair-prejudice remedies), Takeover Code, and the UK Stewardship Code requiring institutions to disclose voting and engagement.

• South Africa: King IV’s outcomes-based governance with emphasis on stakeholder inclusivity and integrated reporting; class actions available.

• India: SEBI’s strong RPT regime, e-voting mandates, independent director requirements, and growing investor-association standing.

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5. Policy and Regulatory Recommendations (with Context)

1. IST’s Enforcement Mandate

The Investments and Securities Tribunal (IST), as mandated by its enabling Act, enforces its decisions through the Federal High Court (FHC) system. This statutory arrangement was initially instituted to ensure the IST could operate promptly, given the limited human and physical resources available at the time of its inception.

More than two decades have passed since the establishment of the IST, making it imperative to provide the necessary infrastructure to enable it to function effectively and efficiently. This objective can be achieved through sufficient budgetary allocations and financial support from Capital Market Operators.

2. Strengthening IST Effectiveness

• Introduce statutory case-management timelines (e.g., 90–120 days to hearing; 60 days to decision) for minority-protection matters.

• Mandate publication of anonymised, searchable IST decisions to build precedent and guidance.

3. Dedicated IST Enforcement Unit

• Enhance institutional autonomy.

• Ensure direct compliance by entities such as SEC, NGX, CSCS, and banks.

• Reduce dependency on primary regulatory bodies for execution.

4. Investor Awareness

• Create IST user-guides and clinics with SEC/NGX to raise investor awareness.

5. Enhance RPT and Takeover Safeguards

• Require independent fairness opinions and audit-committee pre-clearance for material RPTs.

• Mandate approval by disinterested shareholders for conflicted transactions.

• Tighten disclosure of beneficial ownership and concert parties; require real-time market announcements for material changes.

6. Cumulative Voting and Board Independence

• Mandate cumulative voting for listed issuers or require a supermajority to opt out.

• Set stricter independence criteria (cooling-off periods, financial/materiality thresholds) and disclose director independence rationale.

• Require minority-nominated directors or observer rights on audit/remuneration committees in widely held companies.

7. Institutional Investor Stewardship

• Adopt a Nigerian Stewardship Code covering PFAs/asset managers, with annual public disclosure of voting and engagement.

• Require publish-and-explain for voting rationales on contentious resolutions (RPTs, remuneration, related-party placements).

8. AGM/EGM Digital Participation and E-Voting Standards

• Issue minimum technical standards for hybrid/digital meetings (identity verification, audit trails, Q&A logs, vote confirmation receipts).

• Mandate independent assurance of e-voting systems for significant meetings; publish participation metrics post-AGM.

9. Whistleblowing and Enforcement Visibility

• Standardise whistleblower protections and consider calibrated incentives; ensure anti-retaliation enforcement.

• Publish quarterly enforcement dashboards (SEC/NGX) with sanctions and case outcomes to enhance deterrence.

10. Investor Education and Proxy Advisory Ecosystem

• Fund market-wide investor education with CIoD/SEC/NGX; develop plain-language guides on rights and IST processes.

• Facilitate licensing/recognition of proxy advisors to improve research/engagement quality for retail investors.

6. Conclusion and Call to Action

Protecting minority shareholders is both a governance and development imperative. CIoD Nigeria calls upon regulators, the IST, boards, and institutional investors to commit to higher standards of transparency, fairness, and accountability.

Priority should be given to operationalising an effective IST process, elevating stewardship expectations, and tightening RPT and voting safeguards. With coordinated action and visible enforcement, Nigeria can build a fairer market that attracts long-term capital and broadens participation.

Appendix – Key Legal and Regulatory References

• Companies and Allied Matters Act (CAMA) 2020, including provisions on derivative actions and unfair-prejudice remedies.

• Investments and Securities Act (ISA) and SEC Rules/Regulations (insider trading, takeovers/mergers, disclosure)

• Nigerian Code of Corporate Governance (NCCG) 2018 (‘apply and explain’)

• NGX Listing Rules (disclosure, corporate actions)

• Investment and Securities Tribunal (IST) Act/Framework and Rules of Procedure

• UK Stewardship Code; Companies Act 2006 (UK)

• King IV Code (South Africa)

• SEBI Regulations (India)

Members of the CIoD Capital Markets Sectoral Group; Safeguarding Minority Shareholders’ Interest Team

1. Kamar Raji

2. Omaka Omaka

3. Oludewa Thorpe

4. Oluwole O. Adeosun

5. Oscar N. Onyema

Admin: Ademola Olatunji