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The Introduction of Social Bonds in the Nigerian Capital Market: Yeh or Nay?


The level of Infrastructural development of any country is one of the criteria used in rating such a country either as a developed or underdeveloped. It, therefore, means that the infrastructural development of a country cannot be overemphasized.

Most countries of the world especially third world countries are short of funds to finance most of their infrastructural projects. Hence, the means of financing these infrastructures become very important and in view of this, the financial systems of countries play a central role in their economies.

In June, the Securities and Exchange Commission (SEC), the apex regulator of the Nigerian Capital Market, published its “Proposed New Rule on Social Bonds – June 4, 2021” (The Rule). Bonds generally are debt instruments for raising long term funds from the Capital Market. Issuing bonds is a way of financing corporate entities including government projects. Although bonds are of different types, social bonds are a relatively new class.

Social bonds are a type of financial security that creates funding for public sector projects primarily aimed at achieving better social outcomes within the society. It was first introduced in the United Kingdom in 2010 as Social Impact Bonds by a social-based finance company. Since then, it has gained more recognition globally.

Definition of the term ‘Social Bonds’

According to the SEC rule, it is a type of debt instrument where the proceeds would be exclusively applied to finance or refinance new and/or existing eligible projects with clear and identifiable social objective(s) and which are dedicated to an identified population. In other words, social bonds are that type of debt finance instruments mainly applied to finance government projects which include social amenities e.g roads, water, street lights, etc.

Eligible projects for social bonds

The SEC proposed rule provides eligible projects to which the bonds may be applied.

To qualify as social bonds: The monies shall be invested in providing and/or promoting one or more of the following social projects: affordable basic infrastructure (e.g. clean drinking water, sewers, sanitation, transport, energy, access to basic services (e.g. health, education and vocational training, healthcare, etc.), affordable housing, job creation including through the potential effect of small and medium-sized enterprises financing and microfinance, food security, socioeconomic advancement and empowerment, any other social project as may be approved by the Commission from time to time.

However, the project must be dedicated to one or more of the following identified target populations: people living below the poverty line, excluded and/or marginalised populations and/or communities, vulnerable groups, people with disabilities, migrants and/or displaced persons, undereducated and underserved populations lacking access to essential goods and service.

Social bonds can also be applied to finance already existing projects.


The proposed introduction of social bonds into the Nigerian Capital Market, no doubt will give the government access to the market for funds to finance most of their projects and build a formidable economy. Social Bonds would also help the government at all levels to implement some of the provisions on the fundamental objectives as contained in Chapter 2 of the 1999 constitution, as amended.


Timothy Olamide, a final year student, writes from the Faculty of Law, ABU Zaria. [email protected]


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