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The Chartered Institute of Stockbrokers has demanded that Pension Fund Administrators increase their participation in the equities market.
According to a statement from the institute, the call was made during a recent courtesy visit by its leadership to the Central Bank of Nigeria Governor, Mr Olayemi Cardoso, in his Lagos office, who is also a stockbroker.
The institute asked the CBN for assistance in enhancing its members' roles in financial intermediation and increasing capital market transactions in Nigeria.
The President and Chairman of the CIS Council, Mr Oluwole Adeosun, said, “Pension funds are globally the foundational base that drives sustainable liquidity for the local equity market. While the Pension Act permits the pension fund administrators to invest up to 25 percent of their pension assets in the equity arm of the capital market, we have noticed that about 10 percent of the funds are invested in the equity market, despite the enhanced regulation, investor protection, and high return in the market.
“Given the critical role of pension fund investment in galvanising liquidity in the domestic equity market, pension fund administrators should be investing a substantially higher proportion of their funds in equities. We, therefore, seek the support of the CBN to engage with PENCOM in this regard.”
The CIS delegation also applauded the appointment of senior stockbrokers in some key positions in the economy by the Federal Government.
The CIS president also affirmed the capacity and willingness of stockbrokers to support the proposed recapitalisation of banks in the next 24 months.
Speaking on margin lending of banking stocks, Adeosun asked, “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.”
According to the Securities and Exchange Commission, margin lending is borrowing from a financial institution to buy stocks using existing investments as security.
Adeosun further noted, “Margin lending drives the growth of capital markets in advanced countries by enabling investors to acquire securities above 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 should 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.”
Cardoso, while responding, appreciated the visit and assured the institute that all the issues raised would be looked at dispassionately.
