Nigerian Exchange Limited (NGX) says it will continue to collaborate with market stakeholders to enhance securities lending transactions and provide an efficient and liquid market for investors.
The Exchange noted that securities lending presents significant benefits to investors in a bull or bear market – either as lenders or borrowers.
Speaking during the NGX Securities Lending Forum 2022 in collaboration with Stanbic IBTC which held in Lagos via Zoom, Divisional Head, Capital Markets at the NGX, Jude Chiemeka, stated that 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 unutilized, noting that if not being 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 by International Securities Lending Association (ISLA), Chiemeka said the total value of securities made available globally by institutional investors within lending programmes stood at $34trillion with about $2.9 trillion on-loan globally across all asset classes; 48 per cent Government Bonds, 39 per cent Equities, 6 per cent, Corporate Debt Securities, 4 per cent, ETFs 3 per cent, Other Fixed Income in December 2021.
He also noted that the global securities lending industry generated $9.28 billion in revenue for lenders in 2021, according to DataLend – a 21.2 per cent increase from 2020, adding that this shows the huge potential available in securities lending transactions.
“Domestically, Nigerian Exchange Limited (NGX), in response to the need for market expansion and development, introduced many products – securities lending being one of them – to give investors (retail and 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 Limited, 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.
Managing Director, Stanbic IBTC Nominee Limited, Majiyagbe Babatunde while giving a historical breakdown on how securities lending has evolved said the securities lending market which started over 40 years ago has grown, generating about $9.28 billion (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 N5billion assets pledged by lenders, only a few trades have been done in the securities lending universe. Given the size of the capitalization of the equities market and how mature we have now become, the market needs to do more.
“There also needs to be liquidity of the Securities Lending market. Unfortunately, there has been so much reliance on the period when the market goes long without proper planning for when the market goes short. Securities lending will create value for both situations so that even when the market goes short, you borrow and sell off and buy back when the securities have become low. In the end, there are equal benefits for all players in the market with the Securities Lending market,” he added.