In every capital market, it is expedient to have a benchmark for making decisions and a tool for envisaging the risk associated with such decisions. Thus, ratings play an important role in the Nigerian Capital Market and the global financial system at large. It is a tool needed to promote the development and seamless running of the country’s financial market by giving an informed opinion about credit risk.

Nigeria’s Securities and Exchange Commission (SEC) simply described rating agencies as “institutions which, as a business, professionally evaluate the investment qualities of debt issues”. It is a company that evaluates and assesses the financial strength of companies and government entities in line with their debt and equities instruments.


Rating agencies shall have the following functions amongst others:

  1. Provision of credit ratings to governments and other entities;
  2. Provision of ratings to the debt and equities instruments;
  3. Rating of the credit worthiness of collective investment schemes;
  4. Other services ancillary to the function.

Registration requirements

Below are the registration requirements of a rating agency in accordance with Rule 114 of SEC, 2013;

(1) For the purpose of these rules and regulations, a rating agency shall be a private or public limited company, incorporated in Nigeria under the Companies and Allied Matters Act or exempted from registration in accordance with these rules.

(2) The Commission may consider on a case by case basis granting a foreign credit rating agency a registration exemption certificate to enable it participate in any transaction in the capital market, provided such credit rating agency is validly registered in a jurisdiction that has established regulatory and supervisory framework in accordance with the standards set out by IOSCO. Evidence of such registration, including such additional supporting documents as may be specified by the Commission from time to time, shall be filed along with the application for the registration exemption certificate.

(3) A rating agency in Nigeria that is affiliated to a foreign rating company shall supply the following information:-

(a) evidence of registration of such company in the foreign country;

(b) profile of the foreign company and principal officers;

(c) audited accounts of the foreign company;

(d) affiliation agreement between the Nigerian company and the foreign company.

(4) An application for registration as a rating agency shall be filed in Form S.E.C. 3A and shall be accompanied by:-

(a) a minimum of 2 sets of completed Form S.E.C. 2 to be filed by the sponsored individuals;

(b) a copy of the certificate of incorporation certified by the Corporate Affairs Commission;

(c) a copy of the Memorandum and Articles of Association certified by the Corporate Affairs Commission, which shall among others include the power to act as a rating agency;

(d) a copy of CAC Form containing particulars of the directors certified by the Corporate Affairs Commission.;

(e) a copy of latest audited accounts or audited statement of affairs for companies in operation for less than one (1) year;

(f) profile of the company covering among others, brief history of the company, organizational structure, shareholding structure, principal officers and detailed information about the promoters;

(g) application for registration of a minimum of two sponsored individuals one of whom shall be the chief executive officer. The two principal officers of the rating agency who shall be registered as sponsored officers must have a minimum of first degree of professional qualification in accounting, economics, statistics or banking and finance with not less than ten (10) years post-qualification experience;

(h) existing or proposed by-laws or rules, guidelines and code of conduct;

(i) details of rating criteria, methodology and principles;

(j) an undertaking to promptly furnish the Commission with copies of any amendments to its Memorandum and Articles of Association, certified by the Corporate Affairs Commission, code of conduct, guidelines, etc., within fourteen (14) working days of such alteration:

(k) Provided that a certified copy of all relevant resolutions are forwarded to the Commission within two (2) days of the passing of the resolutions;

(l) sworn undertaking to keep such records and render such returns as may be specified by the Commission from time to time. Such returns shall include among others—

  1. name(s) of company/securities/issue(s) rated;
  2. the rating given including any changes in previous rating (if any);

iii. rating methodology (including basic assumptions);

  1. an appropriate application/registration fee as determined by the Commission from time to time; and
  2. sworn undertaking that the rating agency shall comply with the Act, the rules and regulations, the Companies and Allied Matters Act and any other relevant legislation(s).

(5) The code of conduct for management and staff of the agency shall include:-

  1. a) a provision prohibiting key officers of the rating firm from investing in clients’ shares;
  2. b) an undertaking to disclose to the Commission any shareholding interest of 5% and above of its directors and staff and their relatives in any issue to be rated;
  3. c) a provision specifying any relationship with clients;

(d) provision for disclosure of its board of directors’ interest in any of the rated issues;

(e) a sworn undertaking that undue advantage would not be taken of any unpublished price-sensitive information;

(f) a provision on disciplinary measures for any misconduct or noncompliance by management and staff.

(6) Sworn undertaking that every employee of an agency shall display a high standard of professionalism and integrity in the conduct of his business.

(7) Sworn undertaking that no rating would be carried out where adequate, accurate and timely material information had not been obtained.

(8) A declaration that rating is an opinion and not a professional investment advice.

(9) Evidence of minimum paid-up capital of N20 million.

(10) Any other document or information required by the Commission from time to time.

(11) Rule 83(3) and (4) shall, with all necessary modifications, apply in case of denial or suspension of registration of rating agencies.


Rules and regulations have been set up by the Nigerian Government to make the rating agencies subject to regulatory controls in order to reinforce the integrity and independence of the institution. It is, however, noteworthy that there are just three rating agencies approved by the Securities and Exchange Commission, namely; Agustus & Co. Ltd., and Datapro Ltd, Global Credit Ratings Co. Ltd.