Stakeholders want restrictions on crowdfunding removed
Some stakeholders on Monday, called for amendment of relevant laws to remove restrictions on crowdfunding in Nigeria.
The stakeholders spoke at a webinar organised by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in collaboration with Centre for Trade and Business Environment Advocacy (CTBA) and the European Union.
Mr Leonard Ugbajah, the Executive Director, Centre for CTBA said that the idea behind crowdfunding was putting small amount of money together by many people using an online platform.
He said that the idea was to help farmers or businesses raise money and farmers or business owners in turn will pay back with some interest earlier agreed.
Ugbajah said that a report conducted in 2015 by Crowd Funding Hub and released in 2017, noted that Nigeria accounted for about 8 million dollars out of the 83.8 million dollars raised by African crowd funding market.
According to him, this is very low in comparison with Nigeria’s economy and the position occupied on the continent.
“Section 67 of Investment and Security Act (ISA) says no person shall make invitation to the public to acquire or dispose of any security of a corporate unless it is a public corporate or statutory body empowered to do so.
“Section 22 sub-section 5 of Companies and Allied Matters Act (CAMA) prohibits private companies from inviting the public to deposit money for a fixed period, whether or not bearing interest.
“This legal impediment in section 22 of ISA has not be resolved; though section 313 of ISA empowers SEC to make regulations to exempt any company from the ISA restrictions, we are still left with section 22 of CAMA.
“In view of crowdfunding, we recommend that SEC and other stakeholders should approach the National Assembly for a legislation on crowed funding to move that market further,” he said.
Ugbajah said that until recently, there has been no regulatory framework saying that at some point, SEC issued a statement cautioning Nigerians against crowd funding.
He, however, said that in 2020, SEC came up with some set regulations on how crowdfunding can be done.
He said that the regulation stated that only SMEs that are incorporated as companies in Nigeria with a minimum of two years operation track record or with technical partner with two years track record can engage in crowdfunding.
According to him, amount that can be raised by medium enterprises is N100 million, for small enterprises N70million and for Micro enterprises, N50 million within a 12months period.
Also, Mr Akinropo Omoware, Head of Policy, GIZ/SEDIN Programme said that crowd funding has been a emerging topic not only for agriculture but for all sectors.
He said Nigeria Competitiveness Project (NiCOP) had been supporting value chain development orogrammes in leather, garments, ginger and tomatoes to increase income income of players.
He said that the aim was to meet local demand and to encourage exports of the commodities.
He said that access to finances and policy environments were key and important to achieving the aim.
He said that NICOP was also working with partners and other stakeholders to support the policy environment for cronies funding with a view to enhancing it and ensure investors were protected.
Mrs Folusho Olaniyi, a financial consultant said crowd funding could be adopted to develop Small Scale and Medium Enterprises (SMEs) in the agricultural sector.
She said in spite of regulatory questions on the legality of crowd-funding and the Security and Exchange Commission Act and CAMA, raising capitals through crowd-funding has become increasingly popular.
Olaniyi said SEC has proposed set of rules that will regulate crow-funding and to deepen the capital market is doing.
She said that this is to further reduced the risk and protect investors and financiers also who make investments.
“There is a reward based crowd-funding which offers non monetary reward for donations made towards a particular project.
“Then we have donation based crowd-funding which involves receiving donations for stated projects with rewards in exchange for the funding provided.
“It often comes with a promise of large return on investments most times about 40 per cent to make it attractive,” she said.
