Brokers Push for Greater PFA Involvement in Stock Market

The Chartered Institute of Stockbrokers (CIS) has urged Pension Fund Administrators (PFAs) to increase their involvement in the equities market, emphasizing the pivotal role of pension funds in driving liquidity in the local equity market. During a courtesy visit to the Central Bank of Nigeria (CBN) Governor, Mr. Olayemi Cardoso, the CIS leadership highlighted the need for enhanced participation of PFAs in capital market transactions.

Mr. Oluwole Adeosun, the President and Chairman of the CIS Council, emphasized that pension funds serve as a foundational base for sustainable liquidity in the equity market globally. Despite regulations permitting PFAs to invest up to 25 percent of their assets in the equity market, only about 10 percent of funds are currently allocated to equities. Adeosun stressed the importance of increased investment by PFAs in equities, given the regulatory framework, investor protection, and potential returns in the market.

The CIS delegation also commended the appointment of senior stockbrokers to key positions in the economy by the Federal Government. Adeosun expressed confidence in the capacity of stockbrokers to support the proposed recapitalization of banks over the next 24 months, citing the Nigerian capital market’s success in previous recapitalization exercises.

Furthermore, the CIS called for the inclusion of publicly listed bank securities as marginable securities in margin lending. Margin lending, which involves borrowing from financial institutions to purchase stocks using existing investments as security, is seen as a driver of capital market growth in advanced economies. Adeosun proposed that bank stocks should be eligible as marginable securities, subject to certain restrictions to mitigate risks.

In response, Governor Cardoso appreciated the CIS’s visit and assured them that the issues raised would be carefully considered. He pledged to establish an enduring institutionalized structure to address the concerns and promote the development of the capital market.

The engagement between the CIS and the CBN underscores the importance of collaboration between regulatory bodies and industry stakeholders in driving the growth and sustainability of Nigeria’s capital market.