We’ll continue to provide efficient market to enhance securities lending – NGX

Nigerian Exchange Ltd. (NGX) says it will continue to collaborate with stakeholders to enhance securities lending transactions and provide an efficient and liquid market for investors.

It also said this was consistent with its commitment to contribute to the growth and development of capital market in Nigeria and Africa.

Its Divisional Head, Capital Markets, Mr Jude Chiemek, said this while speaking during the NGX Securities Lending Forum 2022 in collaboration with Stanbic IBTC on Wednesday in Lagos via Zoom.

According to him, securities lending transactions have become an important element of capital markets all over the globe.

He added that in today’s capital markets, securities seldom lie unutilised, noting that if not bought and sold in outright market transactions, securities are frequently lent to parties wanting to borrow them, or used as collateral to raise short-term finance.

Quoting a 2021 report done by International Securities Lending Association (ISLA), Chiemeka said the total value of securities made available globally by institutional investors within lending programmes stood at 34 trillion dollars with about 2.9 trillion dollars on-loan globally across all asset classes.

Others are 48 per cent government bonds, 39 per cent equities; six per cent, corporate debt securities; four per cent, ETF and three per cent, other fixed income in December 2021.

Also, while quoting DataLend, he said the global securities lending industry generated 9.28 billion dollars in revenue for lenders in 2021, representing a 21.2 per cent increase from 2020.

According to Chiemeka, that shows the huge potential available in securities lending transactions.

“Domestically, Nigerian Exchange Ltd. (NGX), in response to the need for market expansion and development, introduced many products; securities lending being one of them, to give investors, either retail or institutional a wide array of asset classes to choose from.

“Since the Securities Lending and Borrowing (SLB) services was officially launched in the Nigerian market in December 2015, uptake has steadily risen, though not as robust as envisaged.

“According to a report by Nigerian Exchange Ltd., in 2020, the market recorded impressive transactions, with about 7.4 million units worth N95.2 million traded.

“In 2021, while the volume in traded equities fell to about 6.8 million units, the value grew to N513 million,” he said.

The divisional head explained that from the lender’s point of view, the benefits of securities lending included the ability to earn additional income through the fee charged to the borrower to borrow the security.

Chiemeka also said from the borrower’s point of view, it allows them to take position like short selling and gives investors more options to take different views on the market.

“It is vital in the development of the capital market, by providing liquidity, which in turn reduces the cost of trading and promotes price discovery.

“The Exchange no doubt remains keen to provide an efficient and liquid market for investors and businesses in Africa, to save, access capital and investments.

“We promise to continue our collaboration with all market stakeholders, to collectively contribute towards the enhancement of securities lending transactions, and ultimately towards the growth and development of capital market in Nigeria as well as Africa, at large,” he said.

Also, Managing Director, Stanbic IBTC Nominee Ltd., Mr Majiyagbe Babatunde, while giving a breakdown on how securities lending evolved, said the securities lending market, which started over 40 years ago had grown.

Babatunde said it had generated about 9.28 billion dollars (N4.2 trillion) in revenue for lenders in 2021 and went up by 21.20 per cent from 2020, globally.

“With Nigeria reporting N600 million in trade value and N5 billion assets pledged by lenders, only a few trades have been done in the securities lending universe.

“Given the size of the capitalisation of the equities market and how mature we have now become, the market needs to do more,” he said.