Emily Johnson
Fri, Aug 11, 2023 7:25 AM

Nigerian Exchange Limited (NGX) Aims to Revive Securities Lending Space

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Nigerian Exchange Limited (NGX) Aims to Revive Securities Lending Space
The Nigerian Exchange Limited (NGX) has expressed its dedication to revitalizing the country's securities lending space, which currently lags behind global standards. With plans to leverage the $1.06 billion global securities lending industry (SLI), NGX aims to boost market liquidity and create new opportunities for institutional investors like Pension Fund Administrators (PFAs). The recent legislative amendments have paved the way for the development of guidelines and regulations, nurturing the growth of Nigeria's capital market.

The Nigerian Exchange Limited (NGX) has emphasized its commitment to breathe new life into the country's securities lending space, which is currently performing well below the global average. At a recent workshop titled "Business Facilitation Act 2023 as a Catalyst for Deepening Securities Lending in Nigeria," held in Lagos, Jude Chiemeka, the Divisional Head of Capital Markets at NGX, highlighted the potential of the $1.06 billion global securities lending industry.

Comparing the revenue generated in May 2023 to that of the previous year, Chiemeka revealed a significant 15% increase, with the global industry reaching $1.06 billion. However, Nigeria's securities lending sector only contributed a meager N513 million.

In 2020, Nigeria's capital market recorded securities lending transactions worth N95.2 million, involving approximately 7.4 million units of securities. In 2021, this figure rose to N513 million, but it represented just 4.95% of the previous year's activity. Unfortunately, the sector has reported no transactions since 2021.

Recognizing the need to resuscitate the securities lending space, Chiemeka disclosed plans for collaborative efforts between the Securities and Exchange Commission (SEC), the National Pension Commission (PENCOM), and NGX. Furthermore, he highlighted the significance of the Business Facilitation (Miscellaneous Provisions) Act, 2022, which was signed into law by ex-President Muhammadu Buhari on February 14, 2023.

This legislation resulted in crucial amendments to Section 89(2) of the Pension Reform Act, allowing pension assets to qualify for securities lending, subject to guidelines issued by PENCOM. Chiemeka stressed that these amendments create new opportunities within Nigeria's securities landscape, particularly for institutional investors like Pension Fund Administrators (PFAs).

Expressing the commitment of NGX, Chiemeka stated, "In light of this, NGX and PENCOM will forge a close collaboration to deepen this space for the benefit of Retirement Savings Account (RSA) holders and the pension industry at large. This collaborative effort aims to foster the growth and development of the capital market in Nigeria and across the African continent."

Abdulkadri Abass, Director of Registration, Exchanges, Market Infrastructure, and Innovation at SEC, echoed these sentiments, emphasizing SEC's dedication to a just, organized, and efficient market that prioritizes investor interests. The provision in the Business Facilitation Act permitting PFAs to participate in securities lending is expected to deepen the market and increase liquidity.

Similarly, Ibrahim Kangiwa, the Head of Investment Supervision at PENCOM, affirmed that the enactment of the Business Facilitation Act empowered PENCOM to develop guidelines facilitating securities lending in collaboration with NGX and other stakeholders. Kangiwa also revealed that the commission is actively working on regulations and processes, with the aim of unveiling guidelines for PFAs by the end of the year.

The collective efforts of NGX, SEC, PENCOM, and other stakeholders will play a pivotal role in reviving Nigeria's securities lending space. By leveraging the global SLI industry, boosting market liquidity, and creating new possibilities for institutional investors, Nigeria's capital market is poised for growth and development.

Source of content: OOO News 2023-08-11 News

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