SEC new rules target benefits for Nigeria, citizens in $85bn global social bonds market 

The Securities and Exchange Commission (SEC) has begun the process of ensuring that Nigeria and Nigerians benefit from the fast-growing global social bonds market which is estimated at $85 billion. The commission, in a proposed new rule, highlighted the guiding framework for issuers of the social bonds in Nigeria.

According to the new rule being proposed by the capital market regulator, projects must promote either affordable basic infrastructure, including clean drinking water, sewers, sanitation, transport, and energy, among others. It further stated that the project should promote access to basic services (health, education and vocational training, healthcare), affordable housing, job creation, including through the potential effect of small and medium-sized enterprises financing and microfinance, as well as food security and socio-economic advancement and empowerment.

“The volume of social bonds issued in 2020 has increased eight times from a year ago, as interest in ethical investment rises and more governments and agencies see them as a key funding tool for specific projects. “Issuance of social bonds has surged to $85 billion this year so far, compared with $10.6 billion in the same period of 2019,” the SEC stated.

As already described, social bonds are types of debt issues which proceeds are exclusively deployed to finance or refinance projects aimed at addressing or mitigating a specific social issue and/or seek to achieve positive social outcomes for a target population, usually people living below the poverty line, the proposed rules also stated that eligible projects should also target people living below the poverty line, excluded and/or marginalised populations and/or communities, vulnerable groups, and those with disabilities.

Meanwhile, the popularity of social bonds has increased as the COVID-19 crisis has led investors to place more emphasis on the “social” component of environmental, social and governance-driven (ESG) investing.

According to the SEC, “Governments, people and businesses have suffered a serious financial crunch as a result of the COVID-19 Pandemic. In Nigeria, funding of social projects was affected as resources were diverted to unexpected areas of expenditure which ordinarily could have been financed by the issuance of social bonds.”

Other beneficiaries, according to the rules include migrants and/or displaced persons, undereducated population and underserved population due to lack of access to essential goods and services.