NSE: Securities Lending Hits N34.76bn

The value of securities lending and borrowing on the Nigerian Stock Exchange (NSE) amounted to a total of 4.14bn units valued at N34.76bn as of April 17, 2020.

According to a report released by the NSE on Thursday, the figure is in contrast to 61.44m units valued at N344.56m recorded during the comparable period of 2019.

Securities lending allows investors to borrow shares at an agreed fee, with the borrower agreeing to return the securities to the lender at the end of the loan term.

It usually requires the borrower to collateralise the transaction with cash or other securities of a value equal to or greater than that of the lent securities.

In order to protect the lender against counterparty credit risk, this transaction is done through a securities lending agent who stands as an intermediary between the lender and borrower. The SLA stands as the borrower to the lender and as a lender to the borrower.

Head, Trading Business Division, NSE, Mr Jude Chiemeka, said, “Whether you are a speculative investor looking to make quick gains, or a long-term investor holding stocks, securities lending provides a strong potential to deliver benefits to all market players through capital gains and low-risk incremental income.

“It also plays an important role in capital market by providing liquidity, which in turn reduces the cost of trading and promotes price discovery.”

The recently released securities lending and borrowing report from the NSE shows that a total of 20.8 million shares are available to the investing public for lending.

The securities available are Presco, MTN Nigeria, Okomu Oil, Dangote Cement, United Bank for Africa, Dangote Sugar, Nigerian Breweries, Flour Mills, Chemicals and Allied Products and Guaranty Trust Bank.

“In 2017, the Exchange amended its original securities lending guidelines that were first published in 2012 and the amended guidelines were approved by the Securities and Exchange Commission in 2017.”