This Day (Lagos)

Nigeria: Securities Lending - CBN Reviews Capital Importation Guidelines

Following the introduction of Securities Lending (SL) in the Nigerian capital market, the Central Bank of Nigeria (CBN) has reviewed its guidelines on the issuance of Certificate of Capital Importation (CCI).

The apex bank disclosed this in a circular titled: "certificate of capital importation (CCI) issuing process for inflow in respect of securities lending," addressed to authorised dealers, custodians, stockbrokers and the general public, a copy of which was obtained on its website.

The circular with reference number: "TED/FEM/FPC/GEN/01/014," dated June 22, 2012, was signed by N.T. Igba, on behalf of the CBN's Director, Trade and Exchange Department, and posted on the regulator's website at the weekend.

It explained that the CCI shall continue to be issued in respect of forex inflow for loans, investment and capital subject to existing guidelines as specified in the forex manual.

However, for SL purposes, CCI processes shall be considered under the following scenario- "a foreign investor (foreign lender) lends to a foreign investor (foreign borrower; when a foreign investor (foreign lender) lends to a local investor (local borrower); when a local investor (local lender) lends to a foreign investor (foreign borrower) or when a local investor (local lender) lends to a local investor (local borrower)."

Specifically, when a foreign investor lends to a foreign borrower, the new circular prescribes that the foreign lender shall be issued a CCI upon importation of capital to purchase securities to be lent.

"The foreign borrower shall be issued a CCI upon importation of capital for the purchase of collateral securities. The foreign borrower reserves the discretion to keep the cash collateral in Nigeria in foreign currency. In this situation, no CCI shall be issued for the collateral. At the lending stage, appropriate notes shall be made on the back of the foreign lenders' CCI to indicate the SL transaction."

But it stated that in a situation where a foreign investor lends to a local borrower, "the foreign lender shall be issued CCI upon importation of capital to purchase securities to be lent. At the lending stage, the foreign lender's CCI shall be marked down to indicate the value of the securities lending transactions.

"On repayment, the foreign lender's CCI shall be marked up as the collateral earlier received from the local borrower is returned. If the local borrower defaults, the collateral earlier deposited with the foreign lender shall be disposed of or reposed by the foreign lender and his CCI shall be marked accordingly," the circular added.

On the other hand, when a local investor lends to a foreign investor, the CBN circular recommended that the foreign borrower shall be issued a CCI upon importation of capital for the purchase of collateral securities.

"The foreign borrower reserves the discretion to keep the cash collateral in Nigeria in foreign currency. In this situation, no CCI shall be issued for the collateral," it added.

Ads by Google

Copyright © 2012 This Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.