SEC sets 50 million NGN paid-up capital for warehousing, collateral management in new rules

The Nigerian Securities and Exchange Commission (SEC) has released a new set of rules for warehousing and collateral management, setting 50 million naira as the minimum paid-up capital.

According to the commission, the new move is to ensure that Nigeria has a global standard commodities trading system that would likely translate into foreign exchange earnings for the country.

The News Agency of Nigeria (NAN) reports that this disclosure is contained in a press statement issued by the commission on Sunday, March 28. The statement carried that every warehouse that stores commodities to be traded on a registered Exchange must apply to be registered by the SEC.

“A warehouse applying for registration going by the rule shall submit proof of ownership or registered-lease deed or rent agreement,” the statement read. “They will also come along with a disclaimer from the owner of the warehouse/property, providing a waiver of ownership regarding commodities stored in such warehouse. In the case of leased or rented warehouse; present evidence of construction in compliance with the National Building Code and have facilities appropriate for storage of commodities.”

The Commission also mandates that all Collateral Management Companies (CMCs) must be registered by the SEC, via a filed application alongside relevant documents. Some of the documents required include 2 sets of completed SEC forms filed by the sponsored individuals, and a copy of the company’s Certificate of Incorporation, as certified by the Nigerian Corporate Affairs Commission (CAC), among others. The SEC requires that the principal officers of the CMC, who shall be registered as sponsored officers must have a minimum qualification of a university degree or its equivalent with at least 10 years relevant post-qualification experience.

The rule added that all warehouses are expected to “submit a Standard Operating Procedure (SOP) for weighing, sampling of goods to be deposited in compliance with industry standards, procedure for verification of commodities and communication to depositors, and procedure for maintaining the quality of the goods stored in line with relevant specifications.”

According to the press statement, the rule also requires Fidelity Bond representing 20% of paid-up capital, a sworn undertaking for proper records and render returns, as well as evidence of minimum paid-up capital of 50 million naira. This will accompany an application for registration of two sponsored individuals, of which one shall the chief executive officer.

The new rule also requires warehouses to be located in locations with access to relevant infrastructure to support their operations. They must have sufficient parking and moving spaces for all their large vehicles and an efficient system for loading and unloading commodities.

“Other requirements are that the warehouse should have appropriate security arrangements in place, have adequate trained staff with expertise and knowledge of scientific storage of commodities, have requisite equipment for weighing and quality measures of commodities, as well as have comprehensive insurance cover for the building, equipment, stock and other items as may be necessary,” the statement said.

The SEC added that the list of every warehouse registered on the Exchange and the Commission will be published on its website.