Markets in sub-Saharan Africa are likely to follow Nigeria’s lead and introduce a model for securities lending in the near future.
That’s the view of Segun Sanni, Stanbic IBTC Bank’s head of investor services for West Africa.
Speaking at the 5th Building African Financial Markets (BAFM) seminar last month, Sanni said the “time has come” for the rest of Africa to introduce securities lending.
The market practice by which, for a fee, securities are transferred temporarily from one party, the lender, to another party, the borrower, has been “neglected” by most African markets up until now, Sanni claims, apparently due to “lack of information.”
However, in order to unleash the growth potential, depth and liquidity of sub-Saharan Africa’s capital markets, he says the industry has an "urgent responsibility" to fast track the process of putting in place securities lending and removing the regulatory and tax barriers.
"Securities lending has been an indispensable catalyst to the growth and liquidity of the South African market,” Lagos-based Sanni said in a presentation at the BAFM event.
“Its time has come for the rest of Africa. We have enough leads to follow and enough models to replicate.”
South Africa's securities lending market has been functioning for decades and even has its own dedicated trade body, SASLA, the South African Securities Lending Association.
Elsewhere, Nigeria’s stock exchange NSE drafted up rules on securities lending and market making back in 2012.
One year later, domestic regulators licenced four securities lenders - United Bank for Africa Capital, First Bank, Capital BanCorp and Stanbic IBTC.
Liquidity still remains an issue though, meaning Nigeria's securities lending market remains in its infancy.
But Sanni says the country's entry into the market provides a lead and example to other sub-Sahara African markets to follow.
“It is likely that other markets, especially in West Africa, will follow in that lead soon. A new vista of opportunity for growth and liquidity is opening for Africa," he concludes.