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Nigeria’s SEC in-talks with Institutional Investors To Boost Securities Lending to Increase Trading

By Emele Onu

Regulator targeting short-selling in effort to boost volumes
Nigeria’s SEC in talks with pension funds on framework

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.”

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