Securities Lending Times | Nigerian tax reform to stimulate “exponential growth” in SBL

Nigerian securities lending activity will see “exponential growth” thanks to tax reforms laid down as part of the country’s new Finance Bill 2019, says Nigerian Stock Exchange (NSE) CEO Oscar Onyema.

The bill, which came into effect last month, marks a radical overhaul of Nigeria’s capital market taxation framework that removes a major hurdle to the development of the country’s lending markets by bringing it more in line with global standards.

Primarily, it includes tax incentives for public companies and capital market investors, as well as the removal of double taxation on manufactured dividends connected to securities lending transactions, among other areas.

This, Onyema says, will further boost market liquidity.

The comments came as part of yesterday’s Symposium on the Finance Act, hosted by the NSE, where he further described the new legislation as a “landmark achievement for the Nigerian Capital Market”.

“Whilst there have been some improvements with the circa 20 million units of shares currently available for lending, the multiple taxations embedded in securities lending arrangement has slowed down its adoption in the Nigerian Capital Market”, he explained in his opening remarks at the event in Lagos.

The CEO told delegates that the amendment to the tax laws is in line with global best practices for securities lending and called on capital market operators and asset owners to take advantage of the opportunity this presented via short or long positions.

The Finance Bill was presented to a joint session of the Nigerian National Assembly on 8 October 2019 by President Muhammadu Buhari and was subsequently was signed to law by the president on 13 January.

In its newsletter on the bill, Deloitte (Nigeria) commented that, in addition to setting the tone
for Nigeria’s fiscal policy for 2020, the bill seeks to promote fiscal equity, align domestic laws
with global best practices, and support micro, small and medium-sized businesses.

The new bill comes shortly after the exchange revealed it was working with the country’s National Pension Commission and the Asset Management Corporation of Nigeria to bring more liquidity to Nigeria’s lending market.

In its first securities lending report of 2020, the exchange showed it has begun the year with 20.78 million shares on pledge available for lending.

The report also showed that as of October 2019, the securities lending market was valued at NGN1.07 billion (US$2.96 million) and has five licenced lending agents.

Data obtained from the NSE on their historical securities lending and borrowing transactions report showed 61,435 transactions were made throughout 2019.

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