Nigeria’s capital market shifts to T+1 settlement on 29 May 2026 as the SEC transitions from T+2. Trades executed on any day must settle by close of the next working day. This follows the 2025 T+3 to T+2 migration, reducing risk and accelerating capital flow.
Overview
Nigeria's capital market will enter a new operational era on 29 May 2026, when the Securities and Exchange Commission (SEC) implements the transition from T+2 to T+1 settlement cycle for all securities transactions. Under the new framework, trades executed on any given day must be fully settled with securities delivered and cash transferred by the close of business on the next working day.
This follows Nigeria's earlier migration from T+3 to T+2 in November 2025 and represents a significant structural accelerant for the Nigerian securities market. While the operational and systemic benefits are considerable (e.g. reduced counterparty risk, faster capital recycling, and alignment with emerging global standards), the legal and contractual implications for market participants require immediate attention.
This alert summarises the key legal considerations and recommends specific actions for broker-dealers, fund managers, custodian banks, pension fund administrators, and institutional investors active in the Nigerian market.
What Has Changed
Previous position: Under T+2 settlement, a trade executed on Monday settled on Wednesday, allowing two clear business days for the delivery of securities and the transfer of funds between parties.
New position: Under T+1, a trade executed on Monday must settle on Tuesday. This halves the operational window available for confirmation, instruction matching, securities movement, and cash clearance.
SEC confirms that trades executed on 28 May 2026 (the last T+2 trading day) and trades on 29 May 2026 (the first T+1 trading day) will both settle on Monday, 1 June 2026, to allow for a clean system cut-over.
Key Legal and Contractual Implications
1. Brokerage and Custody Agreements
Most existing brokerage agreements and custody arrangements were drafted against a T+2 or T+3 operational backdrop. Standard clauses dealing with settlement timelines, fail provisions, buy-in procedures, and late delivery penalties may now operate differently in practice under T+1.
Parties should review whether their existing agreements contain specific references to settlement cycles. Where they do, those clauses may now be inconsistent with the regulatory position and will require amendment to avoid ambiguity or unintended liability.
Where agreements are silent on the settlement cycle and rely on "applicable market practice," the T+1 transition should be documented by way of a side letter or formal amendment to align expectations between parties.
2. Settlement Failure Risk and Legal Exposure
The compression of the settlement window materially increases the risk of settlement failure - particularly for participants with manual or partially automated back-office systems, or for transactions involving securities held across multiple custodian chains.
Under Nigerian law and applicable SEC regulations, a seller who fails to deliver securities on time may be subject to: automatic buy-in procedures (where the Central Securities Clearing System initiates a purchase on behalf of the buyer at the seller's cost); regulatory sanctions from the SEC for persistent settlement failures; civil liability to the counterparty for losses caused by the delay; and reputational consequences with institutional counterparties.
Market participants should review their operational capacity to meet T+1 obligations and obtain legal advice on their exposure to settlement-fail liability under existing contracts.
3. Fund Managers and Portfolio Managers
Investment fund managers operating in Nigeria face particular challenges. Portfolio rebalancing decisions that were previously executable within a two-day operational window now require same-day or near-instant instruction transmission. Legal implications include:
4. Pension Fund Administrators
The National Pension Commission (PENCOM) regulates investment activity by pension fund administrators (PFAs). PFAs investing pension assets in Nigerian equities and fixed income securities must ensure that their investment management agreements, custodian arrangements, and internal governance frameworks reflect the T+1 settlement environment. Failure to meet settlement obligations with pension fund assets may attract regulatory scrutiny from PENCOM in addition to SEC.
5. Repo and Securities Lending Arrangements
Repurchase agreements (repos) and securities lending contracts frequently reference settlement conventions. A T+1 environment affects the mechanics of repo unwinding and securities recall, particularly where the term of a repo or lending arrangement coincides with a period of high trading volume. Parties to existing repo and securities lending agreements should review the settlement convention references in those agreements and assess whether any amendment is required.
6. Corporate Actions and Rights Issues
Companies listed on the Nigerian Exchange must review their corporate action timelines - particularly ex-dividend dates, rights issue record dates, and allotment procedures - to ensure they are consistent with T+1 settlement. Record date calculations that were previously calibrated to T+2 may now produce unintended results (for example, entitling or disentitling shareholders who traded immediately before a record date).
Companies should also ensure that their registrars and transfer agents have updated their systems accordingly.
Immediate Actions Recommended
For broker-dealers and stockbrokers: Review all client-facing brokerage agreements and standard terms; update settlement fail provisions and buy-in procedures; verify that back-office systems can process and confirm trades within the T+1 window; and brief compliance teams on revised SEC regulatory expectations.
For fund managers and asset managers: Review all discretionary management mandates and fund documentation for settlement cycle references; assess redemption liquidity management under T+1; brief investment committees on the operational changes; and review cross-border portfolio settlement mismatch risks.
For custodian banks: Review custodian agreements with all Nigerian clients; update operational procedures for securities instruction processing and cash positioning; brief institutional clients on the contractual and operational changes; and assess exposure under indemnity provisions in the event of settlement failure.
For institutional investors: Review investment management and custody agreements; engage fund managers to understand how T+1 is being operationally managed; and assess whether portfolio liquidity management strategies require adjustment.
For listed companies: Brief company secretaries and registrars on the implications for corporate action timelines; review ex-dividend date and record date mechanics; and update transfer agent instructions accordingly.
Regulatory Context
The T+1 transition was authorised by the SEC pursuant to its mandate to modernise Nigeria's capital market infrastructure and reduce systemic risk. The change brings Nigeria into closer alignment with the United States (which migrated to T+1 in 2024) and positions the Nigerian Exchange ahead of most other African markets.
The SEC is expected to issue further guidance on the treatment of settlement failures under the T+1 regime and may revise the Securities and Exchange Commission Rules to reflect the new settlement cycle. Market participants should monitor SEC circulars closely over the next 60 days.
How 24 Law Chambers Can Help
24 Law Chambers advises broker-dealers, institutional investors, fund managers, listed companies, and financial institutions on capital market regulation, securities law, transaction documentation, and regulatory compliance in Nigeria. Our team can assist with:
For a confidential discussion, please contact:
Emonye Adekwu SAN, FCIArb, Managing Partner, 24 Law Chambers, www.twentyfour-law.com
