Stockbrokers Seeks An Improved PFAs Participation In Equity Market

The Chartered Institute of Stockbrokers has strongly demanded that Pension Fund Administrators improve their participation in the equities market.

According to a statement from the institute, this was disclosed during a recent courtesy visit by its leadership to the Central Bank of Nigeria Governor, Mr Olayemi Cardoso, who is also a stockbroker, in his Lagos office.

The President and Chairman of the CIS Council, Mr Oluwole Adeosun, stated that, “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 per cent of their pension assets in the equity arm of the capital market, we have noticed that about 10 per cent 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.”

Also, the CIS delegation commended the appointment of senior stockbrokers in some key positions in the economy by the Federal Government.

The CIS president also expressed the commitment of stockbrokers to support the proposed recapitalisation of banks in the next 24 months.

He said, “The Nigerian capital market can support the recapitalisation exercise. It was amply demonstrated during the indigenisation exercise as 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.

“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."

While speaking on margin lending of banking stocks, Adeosun said, “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 Adeosun, “Margin lending drives the growth of capital markets in 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 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.”

In responding, Cardoso appreciated the visit and assured the institute that all the issues raised would be looked at dispassionately.