Nigeria Plans to Start Securities Lending to Increase Trading

LAGOS (Capital Markets in Africa) – The Nigerian Securities and Exchange Commission is in talks with institutional investors and other regulators to allow securities lending in an effort to reignite flagging trading volumes.

The SEC wants to start “trading activities such as short-selling, hedging, and arbitrage,” acting Director-General Mary Uduk said in an email. The measures are required for Nigeria’s capital markets to better attract inflows “and be more liquid.”

Daily volumes on the Nigerian Stock Exchange’s benchmark index are down 27% in 2019 compared with the same period a year earlier, according to data compiled by Bloomberg, as the gauge heads for its second annual decline. The exchange said last month it plans to introduce trading in financial derivatives to boost liquidity.

The SEC is engaging with the National Pension Commission to enact standards that will enable funds to lend their equities, Uduk said.

“There are many institutional and even some individual investors that sit on large pools of stocks which they do not trade actively,” she said. “A vibrant securities-lending market will provide liquidity to such stocks and earn some returns for both the lender and the borrower.”