In an effort to boost the countries liquidity buoyancy, the Security Exchange Commission (SEC) has rolled out modalities to engage the National Pension Commission (PENCOM) and the Asset Management Corporation of Nigeria (AMCON) on security lending.
This was disclosed by, Ms. Mary Uduk, the SEC acting Director-General at its third-quarter post-Capital Market Committee (CMC) news conference held in Lagos today.
Uduk revealed that the commission was engaging PENCOM on strategies that will facilitate the Pension Fund Administrations (PFAs) to partake in security lending, (an act of loaning out a stock, derivative or other security to an investor).
According to Uduk, there is a need to deepen the market and that has necessitated her office to push frontiers not only in the regular market but also in local institutional investors. Although, the security lending requires that the borrower should give up collateral in form of cash or a letter of credit.
The acting Director-General revealed that the current practice by the PFAs is not yielding any dividend to the contributors of the PFAs. Although all Nigerians workers are subscribers to the pension account, she disclosed that currently what the PFAs do is they buy equities and withhold them without selling it, noting that the essence of such dealings is to make more money for the PFAs contributors.
Henceforth she revealed, her office has obtained an approval of a framework that will encourage the market to go into self lending through reaching out to these institutional investors.
In her statement, “Pension is the highest institutional investor currently in our market, they will now lend out these securities, and afterward, it will be credited back to the pension fund account. This means at the end of the contract, they will get their securities back. Therefore, Instead of holding the securities, they are making money out of it.
Uduk added that at their level, they will be engaging stakeholders to get the information across to them, saying “Items like BVN has been added to help in identity management which the capital market is also taking advantage of.
