Former Managing Director of Asset Management Corporation of Nigeria (AMCON), Mustapha Chike-Obi, at the weekend charged the leaders of the Chartered Institute of Stockbrokers (CIS) to consider the re-opening of discussions on reintroduction of margin lending in the nation’s capital market for its sustainable growth.
The asset management expert and banker made a strong case for the reintroduction of margin lending, which is a type of loan that allows you to borrow money to invest, by using your existing shares, managed funds and/or cash as security, in his acceptance speech during his investiture as a Fellow of the Institute in Lagos.
While expressing his appreciation to the Board and Council of the Institute on the honour bestowed on him, Chike-Obi expressed his readiness to work with the leadership of the CIS to commence the re-opening of discussions on margin lending in the capital market in view of its immense benefits to the economy.
He explained: “With margin lending, the Nigerian capital market, in addition to all the recent achievements and regulations, can bounce back again. Margin lending will improve the volume of transactions in the market. It will create hedging opportunities and value propositions.
“Until we do that, we are going to be a stone-age capital market. This is not just for equities but debts as well.
“Now that I am a Honorary Fellow, I will devote time and efforts to supporting the market. We shall make sure that margin lending is a reality in Nigeria in the next two years”, Chike-Obi pledged.
Earlier in his address, the CIS President, Mr. Oluwole Adeosun, said the AMCON’s former boss was considered for the honour by the Institute because of his sound academic antecedents as thoroughbred professional and past contributions to the nation’s economic growth drive.
He said: “As we all know, AMCON was established in 2010 to efficiently resolve the non-performing loan assets of banks in Nigeria. It is on record that, during his 5-year tenure in AMCON, Mustapha Chike-Obi performed outstandingly and led the AMCON to meet its mandates to a significant extent.
“It is reputed that Mustapha Chike-Obi created the Treasury Department concept in Nigerian banking and headed the first such department in Nigeria at Chase Merchant Bank, 1980-1982”, the CIS President added.
It would be recalled that margin lending was in the past featuring in the Nigerian capital market until it was abruptly suspended due to what analysts termed controversial deployment by equities market and banking operators then.
To make up for the lost benefits, the Nigerian Exchange Limited (NGX) launched the Securities Lending and Borrowing in the local bourse in year 2015 to boost its investment volume and value.
However, unlike margin lending, the SLB involves the loaning of stocks, bonds and derivative contracts to other investors for liquidity provision and the concept is yet to be fully embraced by many operators in the capital market.
