Nigeria takes control of margin lending
14 June 2013 Abuja
Image: Shutterstock
The Nigerian 麻豆传媒 and Exchange Commission (SEC) and the country's central bank have introduced a set of rules to regulate margin lending.
The SEC in the country has released a statement that blames 鈥渆xcessive speculative activities and unsupervised use of margin loans to fund investment in listed equities鈥濃�攁mong other activities鈥攆or causing the country鈥檚 stock market decline in 2008.
As a result, the SEC, and the Central Bank of Nigeria (CBN), have introduced a set of rules to regulate margin lending founded on the principles of risk-based supervision.
鈥淭he margin lending rules and guidelines provide for a Margin List,鈥� said the release鈥攁dding that the list is not an investment recommendation but rather a guide to those who wish to engage in margin activities.
鈥淭he SEC cautions that only persons and entities who are knowledgeable about margin activities should engage in such transactions. Retail investors who do not have the requisite knowledge should consult a knowledgeable financial expert.鈥�
The guidelines cover the type of securities that qualify as marginable securities as well as the profile of investors that may participate in margin trading.
They provide the criteria for determining marginable securities and a list of excluded securities. Also, the guidelines forbid bank stocks from being used as collateral for margin trading transactions.
The approved list of marginable securities is available on the SEC website, and include Trans National Corporation, UNILEVER Nigeria, and Dangote Sugar Refinery, which posted a 32 percent increase in its Q1 pre-tax profit year-on-year in May of 5.44 billion naira ($34.5 million), compared with 4.12 billion naira last year.
The SEC in the country has released a statement that blames 鈥渆xcessive speculative activities and unsupervised use of margin loans to fund investment in listed equities鈥濃�攁mong other activities鈥攆or causing the country鈥檚 stock market decline in 2008.
As a result, the SEC, and the Central Bank of Nigeria (CBN), have introduced a set of rules to regulate margin lending founded on the principles of risk-based supervision.
鈥淭he margin lending rules and guidelines provide for a Margin List,鈥� said the release鈥攁dding that the list is not an investment recommendation but rather a guide to those who wish to engage in margin activities.
鈥淭he SEC cautions that only persons and entities who are knowledgeable about margin activities should engage in such transactions. Retail investors who do not have the requisite knowledge should consult a knowledgeable financial expert.鈥�
The guidelines cover the type of securities that qualify as marginable securities as well as the profile of investors that may participate in margin trading.
They provide the criteria for determining marginable securities and a list of excluded securities. Also, the guidelines forbid bank stocks from being used as collateral for margin trading transactions.
The approved list of marginable securities is available on the SEC website, and include Trans National Corporation, UNILEVER Nigeria, and Dangote Sugar Refinery, which posted a 32 percent increase in its Q1 pre-tax profit year-on-year in May of 5.44 billion naira ($34.5 million), compared with 4.12 billion naira last year.
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