By Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE)-The Central Bank of Nigeria (CBN) on Monday released an Exposure Draft guideline on Securities Settlement in the Nigeria.

According to Nigeria’s Central Bank, the Exposure Draft guideline is in exercise of the powers conferred on the Bank by Section 47 (2) of the CBN Act 2007 to promote and facilitate the development of efficient and effective systems for the settlement of transactions.

“Pursuant to its powers, the Central Bank of Nigeria (CBN) hereby issue the following guidelines for the settlement of all types of Securities in Nigeria without prejudice to the powers of Securities & Exchange Commission (SEC) conferred on it by section 13 of the Investments and Securities Act 2007” the CBN said.

The guidelines set out the procedures for the settlement of Securities in Nigeria, including the rights and obligations of the parties. It also covers the settlement procedures and settlement cycle for the Nigerian Stock Exchange (NSE) Traded Securities, Over The Counter (OTC) Securities, Government Securities (T/bills, bonds, etc), Commodity Exchange traded securities and Dividend and interest payments.

The CBN affirmed that on the Securities Settlement Rules and Procedures, the NSE’s traded Securities (Equities & Corporate Bonds), after each day’s transaction (Day T), the Central Securities Clearing System (CSCS) or the clearing/settlement agent shall generate the financial obligations of each Stockbroking Firm.

“The CSCS shall sort the financial positions of the Stockbroking Firms based on their respective Settlement Banks to arrive at net position per Bank” the CBN said.

CBN affirmed that following this process, the CSCS shall alert both the Settlement Banks and the Stockbroking Firms of their day T net positions.

On Day T+2, The CSCS shall send final advice to both the Settlement Banks and the Stockbroking Firms of their day T net positions for settlement on Day T+3.

Also, on Day T+3, the CSCS shall forward the net settlement positions of all the Settlement Banks through a Settlement Agent (where CSCS has no direct access to the CBN Settlement System).

“Where the CSCS has direct access to the CBN Settlement System, on Day T+3, the CSCS shall transmit the net settlement positions of all the Banks to the CBN Settlement System at the same time when the stock records are updated; so as to achieve simultaneous DVP” the guideline said.

The Exposure Draft Guidelines further said on Day T+3, the Settlement Banks shall update the accounts of their respective Stockbrokers with the value received from CSCS.

On Day T+3, the Stockbroking Firm shall update the Stockbroking Accounts of their respective investors/customers with the proceeds from the trade less charges/commission.

“The Stockbroking Firm shall credit the customer account not later than the next working day” the CBN said.

Click to download full Exposure Draft by CBN