Dipo Olowookere
By Dipo Olowookere
The securities lending market in Nigeria is gradually growing and this is because investors are beginning to embrace the ecosystem.
Business Post gathered that the market has been witnessing an uptick in stakeholders’ participation and data from the Nigerian Exchange (NGX) Limited showed that as at August 20, 2021, the space has 6.8 million units of shares worth N513.1 million
As at 2019, the market had 61,435 stocks valued at N344,555 and in 2020, it expanded to 7.38 million units worth N95.2 million and this is because investors are beginning to see value in the investment tool.
The data also showed that at the moment, 2.3 million equities of MTN Nigeria worth N395.6 million have been borrowed by investors and as at last Friday, there are 77.33 million shares of Zenith Bank Plc, 8.89 million shares of MTN Nigeria, 43 million shares of Dangote Sugar, 31.09 million shares of GTCO and 45 million shares of UBA available for market participants to borrow.
Recall that at an interactive session, the Head of Trading Business Division at the NGX, Mr Jude Chiemeka, had said that securities lending presented significant benefits to investors in a bull or bear market.
“Whether you are a speculative investor looking to make quick gains, or a long-term investor holding stocks, securities lending provides the strong potential to deliver benefits to all market players through capital gains and low-risk incremental income.
“It also plays an important role in the capital market by providing liquidity, which in turn reduces the cost of trading and promotes price discovery,” Mr Chiemeka had stated.
Securities lending is the market practice of transferring shares for a fee from a holder (the lender) to another party (the borrower), with the borrower agreeing to return the securities to the lender either on demand or at the end of the agreed loan term.
It essentially means that the owner of a share can temporarily loan out his shares to someone else and earn an income that they ordinarily would not have enjoyed if the shares were left sitting in his/her portfolio.
In a bid to widen the pool of securities available for lending and increase participation, the NGX issued guidelines that became effective on January 7, 2019.
These guidelines were prepared to adequately address stakeholders’ expectations in securities lending transactions and to provide proper education on the procedures and controls involved in securities lending.
