The Nigerian Stock Exchange (NSE) has released the names of companies that investors can lend and borrow their securities on the NSE starting from April 17, 2020. The twelve companies are MTN Nigeria, Nigerian Breweries, Presco, United Bank for Africa (UBA), Union Bank of Nigeria (UBN) and Zenith Bank.
Others are Okomu Oil, Guaranty Trust Bank (GTB), Dangote Cement, Dangote Sugar, Flour Mills of Nigeria and the Chemical and Allied Products (CAP). The stocks mostly of which are bluechip companies have the total securities offered for lending and borrowing worth N1.02 billion as at April 24, 2020.
According to the NSE, securities lending refers to the lending of securities such as stocks and bonds by one party to another. Direct lenders are pension plans, insurance companies, mutual funds, sovereign wealth funds, investment companies and some high networth individuals. Agent lenders are custodians, broker-dealer firms, and asset managers. On the other hand, borrowers are market makers, broker-dealer firms, investment banks, hedge funds, among others.
“Usually, the borrower will provide acceptable collateral to the lender in the form of cash or other acceptable securities of equal but often greater value than the lent securities in order to protect the lender against any default by the borrower. The borrower is obliged to return the securities at the end of an agreed period.
“Once the security is lent, the legal title of the security passes from the lender to the borrower, but any benefits arising from corporate actions and/or dividend payments are retained by the owner. The lender regains title when the securities are returned by the borrower”, the NSE said.
MTN Nigeria made available 2.547 million shares for lending and borrowing worth N264.88 million. Nigerian Breweries made available 318,000 shares worth N10.97 million. Presco made available 4.015 million shares worth N146.34 million. UBA made available 2.6 million shares worth N15.34 million while Union Bank made available 450,000 shares worth N3.06 million.
Further, Zenith Bank made available 1.66 million shares worth N23.34 million. Okomu’s 2.19 million shares are worth N120.55 million. GTB’s 8.58 million shares are worth N165.59 million. Dangote Cement’s 1,74 million shares are worth N226.2 million. Dangoite Sugar’s 2.35 million shares are worth N28.2 million. Flour Mills’ 600,000 shares are worth N12.6 million while CAP’s 50,000 shares are worth N1.04 million.
“Securities lending plays an important role in capital markets by providing liquidity, which in turn reduces the cost of trading and promotes price discovery. Global Master Securities Lending Agreement (GMSLA) and its Nigerian Addendum is the standard contract document that binds lender and borrower in a Securities Lending arrangement”, NSE stated in its securities lending guidelines for market participants.