The Nigerian Exchange (NGX) Limited revealed that the value of the securities lending market had increased to reach N 513 million as of August 20, 2021.
According to the most recent report from NGX, there was a slight increase in stakeholder participation as 2.3 million units of MTN Nigeria valued at 395.6 million naira were borrowed.
Securities lending is the market practice of transferring shares for remuneration from one holder (the lender) to another party (the borrower), with the borrower committing to return the securities to the lender on demand or at the end of the agreed loan term. .
Essentially, this means that the owner of a stock can temporarily lend his stock to someone else and earn income that he would not normally have had had the stock been left in his portfolio.
According to NGX data, the unit volume in 2019 was 61,435, valued at 344,555 N. In 2020, the market grew to 7.38 million units valued at 95.2 million naira; and as of 20 August 2021, it stood at 6.8 million units valued at 513.1 million naira.
The report also gave the breakdown of companies that pledged the shares such as Zenith Bank Plc with 77.33 million shares, MTNN with 8.89 million shares, Dangote Sugar with 43 million shares, GTCO with 31, 09 million shares and UBA committing to approximately 45 million shares.
NGX Business Operations Division Head Jude Chiemeka recently said in an interactive session that securities lending has significant benefits for investors in a bull or bear market.
He said, “Whether you are a speculative investor looking for quick wins, or a long-term investor holding stocks, securities lending offers great potential to deliver benefits to all market participants via gains in equity. low-risk capital and additional income. It also plays an important role in the capital market by providing liquidity, which in turn lowers the cost of transactions and promotes price discovery. “
The Nigerian Stock Exchange, with the aim of expanding the pool of securities available for lending and increasing participation, issued guidelines, which went into effect on January 7, 2019.
The guidelines have been prepared to adequately meet the expectations of stakeholders in securities lending operations and to provide appropriate education on the procedures and controls involved in securities lending.