Allow margin loans for investors to buybanks’ shares, stockbrokers urge CBN

Stockbrokers have urged the Central Bank of Nigeria (CBN) to allow the shares and other securities of publicly listed banks as marginable securities, which enables investors to take loans specifically for purchase of shares.

Stockbrokers, under the auspices of Chartered Institute of Stockbrokers (CIS), said while the capital market has the capacity to support the ongoing recapitalisation of banks as directed by the apex bank, the market will not be able to reach its full potential without modern practices like margin lending.

The stockbrokers spoke during a visit by the leadership of the CIS to the CBN Governor, Dr. Olayemi Cardoso in Lagos.

President, Chartered Institute of Stockbrokers (CIS), Mr Oluwole Adeosun, urged the apex bank to take some strategic initiatives to bolster financial intermediation roles of stockbrokers and boost transactions in the Nigerian securities market.

“The Nigerian capital market, has the capacity to support the recapitalization exercise. It was amply demonstrated during the indigenisation a far back as 1972 and successive banking sector recapitalisation programmes over the years up till the last major banking recapitalisation exercise between 2004 and 2006.

“As we did in the last exercise as issuing houses, financial advisers and stockbrokers to the capital issues amongst others and with technology and new subscription channels like mobile apps, the current exercise should record even greater success and bring in more and younger Nigerians into the investment community.

“We request that securities of publicly listed banks should be allowed as marginable securities as long as these securities pass the “Criteria for Determining Marginable Securities” test. Margin lending drives the growth of capital markets in the advanced countries by enabling investors to acquire securities in excess of their direct savings within a regulated market framework.

“Our market will not be able to match the required growth rate if investors remain restricted to just their own funds for investments. Our perspective is that bank stocks be allowed, but a specific borrower should not invest in the shares of the bank that gave them the margin loan. The banking sector is one of the most active sectors in the Nigerian stock market and the first choice for most investors’ portfolios,” Adeosun said.

He pointed out that pension funds are globally the foundational base that drive sustainable liquidity for the local equity market.

Credit: The Nation