The Nigerian Exchange Limited (NGX) and Stanbic IBTC Stockbrokers Limited have called for increased participation in market making and securities lending to deepen liquidity, improve price discovery and strengthen the efficiency of Nigeria’s equities market.

The call was made on Tuesday at a webinar themed “Unlocking Liquidity in the Equities Market: The Role of Market Making and Securities Lending,” which brought together market operators and other stakeholders to examine how both mechanisms can boost trading activity and broaden participation in the secondary market.

Chief Executive Officer of NGX, Jude Chiemeka, described liquidity as the “lifeblood of a functioning capital market,” stressing that the strength of a market should not be measured solely by its number of listed companies or market capitalisation.

According to him, the ability of investors to enter and exit positions efficiently, competitive bid-offer spreads and effective price discovery are equally critical measures of market strength.

“Market making and securities lending are not simply technical market mechanisms; they are critical components of a modern market infrastructure,” Chiemeka said.

He commended the Securities and Exchange Commission (SEC), under the leadership of its Director-General, Dr Emomotimi Agama, for creating an enabling regulatory framework for market making and securities lending.

Chiemeka said the initiatives provide a strong foundation for increased market participation, deeper liquidity, improved price discovery and a more efficient and resilient Nigerian capital market.

ALSO READ: NGX sheds N544bn as banking stocks drag market lower

Nigeria’s capital market currently has a combined capitalisation of about ₦213 trillion, comprising approximately ₦156 trillion in equities and ₦56 trillion in fixed income, while exchange-traded funds account for about ₦61 billion.

With eight designated market makers and an established securities lending framework already in place, stakeholders said the market has the foundation to expand secondary-market activity if participation in both mechanisms increases.

Jesse Van Rensburg, Head of Equities Sales Trading at Standard Bank Group, explained that securities lending is particularly important to market makers because it enables them to provide two-way quotes while managing changing liquidity conditions.

He said market makers regularly face shifts in demand and supply, including situations where trading activity becomes heavily weighted towards offers rather than bids.

Access to securities lending, he noted, provides market makers with greater flexibility to manage inventories and respond to changing market conditions while continuing to provide liquidity to investors.

Van Rensburg identified spread management, inventory risk and capital exposure as major considerations in market making, stressing that access to a pool of lendable securities could enable market makers to manage positions more efficiently and deploy capital more effectively.

The webinar also highlighted the complementary relationship between market making and securities lending.

Stakeholders noted that greater access to securities could strengthen the capacity of market makers to provide continuous liquidity, while increased market-making activity could create a more active environment for securities lending.

For stockbrokers, the opportunity extends beyond trade execution to a broader role in liquidity formation, with increased participation in market making and securities lending capable of supporting more efficient execution and deeper trading activity.

However, stakeholders stressed that unlocking the full potential of both mechanisms would require sustained collaboration among brokers, market makers, custodians, asset managers, institutional investors, regulators and the Exchange.

They identified improved securities availability, stronger market infrastructure, greater transparency, enhanced risk management and broader investor participation as key priorities for developing a deeper and more liquid equities market.

The push comes as the Nigerian equities market continues to attract significant investor interest, with market capitalisation around N156 trillion, underscoring the need for deeper liquidity to support efficient trading and facilitate greater participation by domestic and foreign investors.