The National Pension Commission (PenCom) says it is working on regulations that will enable pension fund administrators (PFAs) to participate in securities lending as an investment option in the capital market.
The commission made this known during a workshop held on Wednesday in collaboration with Central Securities Clearing System Plc (CSCS), Cardinalstone Partners, Stanbic IBTC Nominees, and the Pension Fund Operators Association of Nigeria (PenOp).
The virtual workshop was themed ‘Business Facilitation Act 2023 as a catalyst for deepening securities lending in Nigeria’.
Securities lending is the market practice of temporarily transferring securities, for a fee, from their holder (the lender) to another party (the borrower), with the borrower agreeing to return the securities to the lender either on-demand or at the end of the agreed loan term.
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The practice usually requires the borrower to collateralize 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.
Speaking at the event, Ibrahim Kangiwa, head, investment supervision at PenCom, Ibrahim Kangiwa, said the enactment of the Business Facilitation Act 2023 empowered the commission to advance guidelines aimed at facilitating securities lending, working with the Nigerian Exchange Group (NGX) and other stakeholders.
Kangiwa disclosed that the commission is actively working on developing these regulations and processes, with the intention of unveiling guidelines for PFAs by the end of the year.
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On his part, Abdulkadri Abass, director of registration, exchanges, market infrastructure and innovation, SEC, said the agency remained resolute in upholding a market that is just, organised, and efficient, prioritising the safeguarding of investor interests.
He was represented at the event by Franca Ebube, senior manager, SEC.
He said that the recent provision within the Business Facilitation Act, which permits PFAs to partake in securities lending, will undoubtedly deepen the market and increase liquidity.
Panel discussants at the event attributed the limited participation in securities lending to lack of awareness and inadequate securities supply.
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They spoke on the need for increased collaboration among stakeholders to boost growth and activity in the securities lending space.
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