Some investors in the Nigerian stock market have expressed readiness for the T+1 settlement cycle transition scheduled for May 29, describing the move as a critical step toward a faster, safer, and more efficient capital market. The transition from the current T+2 settlement cycle represents one of the most significant operational changes in the Nigerian capital market in recent years, aligning the country with global best practices and addressing longstanding investor concerns about fund access and counterparty risk.
Under the T+1 settlement cycle, settlement occurs one business day after the trade date, meaning the buyer receives securities and the seller receives cash just one day after a trade is executed. The current T+2 cycle requires a two business day waiting period. The reduction in settlement time has been a priority for regulators and market operators seeking to enhance liquidity, reduce risk, and improve Nigeria’s competitiveness in attracting portfolio investment.
Mrs Bisi Bakare, the National Coordinator of the Pragmatic Shareholders’ Association, said the market was largely prepared for the transition though with some adjustment phases expected. Bakare noted that preparation for the transition was evident in the gradual technology upgrade by market operators, but acknowledged that smaller brokers and retail participants may need time to fully adjust to the new trade system. “The T+2 cycle has already delivered improved liquidity and faster reinvestment of funds. Other benefits of T+2 are reduced counterparty risk, greater market efficiency and transparency, alignment with global best practices. These benefits set the foundation for a smoother transition to T+1, which will further enhance market speed and competitiveness,” she said.
From an economic perspective, the reduction in settlement cycles has significant implications for capital market efficiency and investor behaviour. In a T+1 environment, sellers receive their cash faster, enabling quicker reinvestment and reducing the opportunity cost of waiting for settlement. This increased velocity of funds can enhance overall market liquidity, as capital is not locked up in the settlement process for extended periods. For retail investors who may need access to their funds for personal use or to capitalise on other investment opportunities, the faster settlement cycle provides greater flexibility.
Prince Ridhwan Hamza, Secretary General of the Liberated Shareholders’ Association, expressed frustration that the transition had taken so long, noting that markets in Western countries had already adopted same day settlement. “Honestly, I do not know why it took us this long to be talking about T+1 in 2026, when markets, especially in the west, have adopted same day settlement. The most important benefit is that it gives you access to your funds in good time thereby affording you the opportunity to further invest such on other ventures or vehicles,” he said. His comments reflect a broader sentiment among market participants that Nigeria’s capital market infrastructure should evolve more rapidly to keep pace with international standards.
The transition to T+1 also carries implications for counterparty risk. In a T+2 environment, the two day gap between trade execution and settlement exposes market participants to the risk that the counterparty may default before settlement occurs. By reducing this window to one day, T+1 reduces the time during which such risk exists, enhancing the overall stability and safety of the market. This is particularly important for institutional investors and foreign portfolio investors who may be subject to internal risk management limits that restrict exposure to unsettled trades.
Mr Moses Igbrude, the National Coordinator of the Independent Shareholders Association of Nigeria, described the settlement cycle as a policy aimed at satisfying and delivering shareholder values. “The value was to ensure timely and effective market,” he said. His concise statement captures the essence of the reform: a more efficient market is one that serves investors better, reducing friction and uncertainty in the trading process.
The success of the T+1 transition will depend on the readiness of market infrastructure, including the Nigerian Exchange, the Central Securities Clearing System, and the settlement banks. All participants in the trade lifecycle must be able to process and settle trades within the compressed timeframe. This requires robust technology systems, adequate funding arrangements, and seamless communication among counterparties. The Securities and Exchange Commission has been working with market operators to ensure that the transition is orderly and that any teething problems are addressed before the May 29 go live date.
The transition also has implications for foreign portfolio investors, who have been significant participants in the Nigerian market. International investors are accustomed to varying settlement cycles across different markets, and Nigeria’s move to T+1 brings it closer to standards in advanced markets, potentially making the market more attractive to global capital. However, foreign investors may need to adjust their internal processes and funding arrangements to accommodate the faster settlement timeline.
As May 29 approaches, market participants will continue their preparations, including system testing, staff training, and investor education. The transition represents a significant operational change, but one that has been widely anticipated and, based on the comments of investor representatives, broadly welcomed. The ultimate test will come in the weeks following the transition, when the market operates under the new settlement cycle for the first time. If successful, Nigeria will join a growing list of markets that have shortened settlement cycles to enhance efficiency, reduce risk, and better serve investors.
