NGX and Stanbic IBTC Push for Increased Securities Lending to Boost Market Liquidity

The Nigerian Exchange Limited (NGX) and Stanbic IBTC Stockbrokers Limited have called for increased participation in market making and securities lending as part of efforts to deepen liquidity and improve the efficiency of Nigeria’s equities market.

The call was made on Tuesday at a webinar themed, “Unlocking Liquidity in the Equities Market: The Role of Market Making and Securities Lending,” which brought together market operators and other stakeholders to explore ways of strengthening activity and participation in the secondary market.

Speaking at the event, NGX Chief Executive Officer, Jude Chiemeka, described liquidity as the “lifeblood of a functioning capital market,” stressing that the strength of an exchange should not be judged solely by the number of listed companies or its market capitalisation.

According to him, a healthy market must also enable investors to enter and exit positions efficiently, offer competitive bid-offer spreads and facilitate effective price discovery.

Chiemeka said market making and securities lending should be viewed as essential elements of modern capital-market infrastructure rather than merely technical mechanisms.

“Market making and securities lending are not simply technical market mechanisms; they are critical components of a modern market infrastructure,” he said.

He also commended the Securities and Exchange Commission under the leadership of Dr Emomotimi Agama for establishing a regulatory framework that supports market making and securities lending.

Chiemeka noted that the initiatives could help attract more participants, improve liquidity and price discovery, and contribute to a stronger and more resilient Nigerian capital market.

Nigeria’s capital market currently has a combined capitalisation of about N213 trillion, comprising roughly N156 trillion in equities and N56 trillion in fixed income, while exchange-traded funds account for approximately N61 billion.

With eight designated market makers and an established securities lending framework, stakeholders believe the market is well positioned to expand secondary-market activity if participation in both mechanisms increases.

Also speaking, Head of Equities Sales Trading at Standard Bank Group, Jesse Van Rensburg, described securities lending as an important tool for market makers seeking to maintain two-way quotes and respond to changing market conditions.

Van Rensburg explained that market makers regularly face shifts in supply and demand, including periods when selling pressure significantly outweighs buying interest.

He said access to securities lending enables market makers to manage their inventories more effectively and respond to changing trading conditions while continuing to provide liquidity.

He identified spread management, inventory risk and capital exposure as some of the key factors that market makers must consider in their operations.

According to him, a reliable pool of lendable securities allows market makers to manage positions more efficiently, optimise capital deployment and sustain liquidity across different market cycles.

The discussions highlighted the mutually reinforcing relationship between market making and securities lending. Greater access to securities can strengthen the ability of market makers to provide consistent liquidity, while increased market-making activity can create greater opportunities for securities lending and encourage more dynamic trading.

For brokers, stakeholders said the opportunity goes beyond simply executing trades. Greater involvement in market making and securities lending could position brokers as more active contributors to liquidity formation and secondary-market development.

However, participants stressed that unlocking the full benefits of both mechanisms would require sustained cooperation among brokers, market makers, custodians, asset managers, institutional investors, regulators and the Exchange.

They identified improved access to securities, stronger market infrastructure, greater transparency, effective risk-management frameworks and wider investor participation as key areas requiring continued attention.

Stakeholders maintained that progress in these areas would help create a deeper and more efficient equities market, improve execution for investors and strengthen Nigeria’s capital market as a whole.