The Securities and Exchange Commission (SEC) of Nigeria has announced a major policy shift in the valuation of fixed-income securities, granting fund managers a two-year transition period beginning September 22, 2025. Under the new directive, asset managers are expected to move from valuing bonds using the amortized cost method—based on purchase price—to the mark-to-market approach, which reflects the prevailing market value of the securities.
This change is intended to improve transparency and ensure that investors have a clearer picture of the real-time value of their investments. By using mark-to-market valuation, portfolios will better reflect fluctuations in market prices, thereby aligning Nigeria’s fund management practices with international standards.
To make the transition smoother, the SEC has provided temporary forbearance on existing asset-allocation rules. Typically, funds are required to maintain a 70:30 ratio between mark-to-market and amortized cost valuation. However, for the next two years, managers will be permitted to adopt a more flexible 50:50 structure. This adjustment is designed to reduce the immediate operational and financial strain on fund managers as they adapt to the new system. Importantly, the SEC has made it clear that all new purchases of fixed-income securities must be marked-to-market immediately, regardless of the transition arrangement for existing holdings.
Fund managers have also been mandated to submit detailed implementation plans to the SEC by October 2, 2025. These plans must outline how each manager intends to achieve full compliance with the directive before the end of the grace period in 2027. This requirement ensures accountability and allows regulators to monitor progress closely.
Beyond compliance, the SEC is prioritizing investor protection and awareness. In collaboration with the Fund Managers Association of Nigeria (FMAN) and other stakeholders, the commission will roll out extensive investor education programs. These campaigns will help retail and institutional investors understand the implications of the valuation changes, particularly how they may impact portfolio performance, risk assessment, and investment decision-making.
Market analysts have noted that while the transition may initially pose challenges for fund managers—particularly in managing portfolio volatility and reporting adjustments—the long-term benefits are expected to strengthen confidence in Nigeria’s capital markets. By embracing real-time valuation practices, the country is taking a significant step toward enhancing credibility, attracting foreign investment, and fostering greater market discipline.
This regulatory reform marks one of the most significant updates to Nigeria’s asset management framework in recent years, signaling the SEC’s commitment to aligning local financial practices with global best standards.
