Nigeria’s securities lending trading market volumes have boomed so far this year and show no sign of slowing as new products and services are introduced, according to the Nigerian Stock Exchange (NSE).
The volume of securities lending transactions has increased from 61,435 units in 2019 to 7.38 million units between January and October 2020, indicating an increase of 11,909 percent.
The value of assets on-loan is up more than 27,000 percent year-on-year (YoY).
Meanwhile, the value of these securities borrowed shot up from NGN 344,000 (US$903) in 2019 to NGN 97.18 million (US$255,065) so far in 2020, a 27,525 percent increase.
Nigeria is understood to be the fourth-largest securities lending market if measured by assets available to lend, but may well have moved up a rung by year’s end.
NSE CEO Oscar Onyema tells SFT that this volume growth is the result of unilateral efforts to increase the operational efficiency and regulatory framework for securities lending and borrowing.
Along with a transaction volume spike, the West African market has seen its first two central counterparties (CCPs) approved and the introduction of exchange-traded derivatives.
The two CCPs, NG Clearing, owned by NSE and CSCS (the central securities depository in Nigeria) along with FMDQ Clear, a subsidiary of a recently-established competitor Securities Exchange, were registered on the same day.
The Nigerian Securities and Exchange Commission (SEC) has additionally decided to develop a derivatives trading market in Nigeria. The regulator issued an amendment to its rules and regulations in December 2019, providing for new rules on the regulation of derivatives trading and CCPs.
This combination of new rules and products is opening up derivatives trading in Nigeria to new investors and participants seeking new risk management products.
Investors in the global capital markets can expect the launch of West Africa’s first ETDs on the NSE in the near term following the registration of its CCP, NG Clearing by the SEC.
Roy Zimmerhansl, NSE equities product advisory committee and lead consultant at Pierpoint, explains: “The approval-in-principle that happened earlier in the year will allow the exchange to launch ETDs supported by a CCP which meets the highest standards of global best practices in delivering clearing and settlement services.”
NSE’S CEO explains that despite the exponential growth the market has witnessed this year, he believes there is still significant headroom for growth in the Nigerian securities lending programme.
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