Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala
By Goddy Egene
Fifty-four stockbroking firms have accepted the Federal Government’s forbearance package valued at N8.948 billion, THISDAY learnt Sunday.
The government, through the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, had last December announced a forbearance package of N22.6 billion on the margin loans of 84 stockbrokers as part of efforts to resuscitate the capital market.
While the forbearance was hailed as a positive move, there were indications that some brokers were not willing to accept the offer due to the conditions attached.
This made the Asset Management Corporation of Nigeria (AMCON) to give the 84 stockbroking houses up until the end of January to accept or reject the offer.
THISDAY checks revealed that at the end of January, 54 stockbroking houses with margin loans worth N8.948 billion, had accepted the package with the conditions.
This represents 64 per cent, while 22 stockbroking firms or 26 per cent did not response to the AMCON’s letter. Only six or seven per cent rejected the offer, while two of the stockbroking firms settled their loans.
Sources close to the Association of Stockbroking Houses of Nigeria (ASHON) and AMCON confirmed this development to THISDAY at the weekend.
“As you know, AMCON, in agreement with ASHON, gave the affected stockbroking firms up till January to either accept or reject the offer. At the end of the deadline, some accepted, some rejected while some did not respond. This implies that those who accepted the offer have agreed to the terms and conditions and will be free from the margin loans burden. For those who did not respond or rejected it, they want to carry the burden and bear all the consequences,” one of the sources said.
Shortly after the forbearance package was announced, THISDAY had exclusively reported that AMCON would write the broking houses that would benefit from the package to know those who are ready to accept it and those not favourably disposed to it due to the conditions.
The Managing Director of AMCON, Mr. Mustafa Chike-Obi, had confirmed that the stock broking houses had been given up until the end January to respond.
Also, the Chairman of ASHON, Mr. Emeka Madubuike, had confirmed the development then, saying: “We agreed with AMCON to write the beneficiaries and give them time to respond.”
Announcing the forbearance package, Okonjo-Iweala had said the bail-out would remove the heavy debt burden and allow the brokers to fully re-enter and re-invest in the market and make the market more vibrant.
“In furtherance of AMCON’s clean-up of the banking sector, it is necessary to wipe off the debt overhang in the capital market, as this is dampening market activity.
“But let me state clearly that this forbearance will be accompanied with sanctions to discourage excessive borrowing behaviour by capital market operators in the future,” she had cautioned.
The sanctions included prohibition of brokers benefiting from the forbearance from providing any professional services to AMCON for a period not less than three years.
There will also be greater disclosure, as firms will be required to reveal to the Securities and Exchange Commission (SEC), any dealings in any security valued at a minimum of N25 million executed in a single deal or multiple deals on the same day on behalf of their clients.
Besides, as part of their net capital requirement, no broker that has received forbearance would be permitted an aggregate indebtedness exceeding 100 per cent of net capital.
The brokers will also be prohibited from taking proprietary positions or trade on their own account for one year.
The minister had said that “Details of the firms will also be forwarded to the Credit Bureau Agencies just as a strict requirement that imposes separation of assets and control for brokerage services and/or future margin facilities through the use of custodians will be a necessary part of the new process to enthrone credibility and strict adherence to market rules.”