Minister of Finance, Dr. Ngozi Okonjo-Iweala
The capital market community led by the Chartered Institute of Stockbrokers (CIS) and leading dealing members of the Nigerian Stock Exchange (NSE) Monday, hailed the N23 billion forbearance granted to 84 stockbroking firms.
Stockbrokers, who spoke to THISDAY expressed joy at the development and unanimously agreed that the move was the necessary step needed to take the capital market to where it was in 2008.
The Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, at a news conference in Abuja yesterday announced the Federal Government decision to grant waiver to 84 hugely-indebted stockroking firms.
Okonjo-Iweala said the move became necessary following the debt hangover in the capital market.
The debt hangover, she claimed, had made the market non-vibrant in the past few years.
She however warned that the waiver would also be accompanied with sanctions to discourage excessive borrowing by capital market operators in the future.
Reacting to the news, President of Chartered Institute of Stockbrokers (CIS), Mr. Ariyo Olushekun, said the forbearance was a welcome development that would help in sustaining the recovering being witnessed in the market.
According to him, this is something the stockbroking community had been asking for; the Federal Government must be commended for acceding to the request, which has demonstrated the government commitment to the development and growth of the market.
“The forbearance is a fantastic development that is highly welcomed by the stockbroking community. The immediate effect it would have on the broking firm is to improve their balance sheet and bring it to positive. After this they can recapitalise and begin proprietary trading and contribute to the flow of activities in the market,” he added.
Olushekun noted that while there were other things needed for the market to attain full recovering, the forbearance was a good move that would sustain the recovery.
"The stockbroking community is grateful to the Federal Government, members of the committee that make this forbearance possible," he said.
Similarly, Managing Director and Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, noted that the debt forbearance granted stockbrokers by the federal government was a critical step towards the resuscitation of the Nigerian capital market.
Chukwu added that the forbearance would no doubt significantly relieve the operators of the huge debt burden which most of them had been subjected to since the capital market crash of 2008.
"Although the forbearance will not necessarily lead to an immediate restoration of their liquidity, it offers the stockbrokers a fresh lease of life to either recapitalise of merge their operations so as to be economically viable.
“The restrictions/sanctions imposed on the beneficiaries of this forbearance further make it imperative for the affected operators to consolidate into bigger and financially stronger companies.”
On his part, Executive Director ESS/Dunn Loren MerrÄ±fÄ±eld Securities Limited, Mr. Idowu Ogedengbe, noted that the forbearance being granted to 84 stockbroking firms should help lead to an increased level of trading activities on the Nigerian bourse considering the fact that the stockbrokers in question were the most prominent in the market before the bubble bust.
"Their absence from trading has left the market at the mercy of the offshore portfolio fund managers who currently trade about 80 to 90 per cent of volumes being done in the market on the most active stocks. While it is obvious that it will take a while for volumes to be driven by the retail end of the market, however, given an access to liquidity by the returning dealing members of the NSE, I expect some respite to the declining share prices & an appropriate valuation of the equities market, which apparently is currently undervalued, "he said.
Also, frontline stockbroker and Managing Director of Emerging Capital Limited, Mr. Chidi Agbapu, said the move was a good one as brokers needed the forbearance to boost liquidity in the market.
This, he added, was a positive development that will take the market close to where it was in 2008.
"It is a positive news for the stock market community. We have been waiting for this news. The federal government has done the right thing. The next step now is to carefully manage the rebound so that we will not repeat the same mistakes again, "he said.
He said that since the global meltdown, some countries had made use of such funds to cushion the effect of the meltdown on the market.
“This fund is very necessary as it would help to mitigate the losses incurred by investors and stockbrokers in the capital market in the last few years. And so, we thank the federal government for looking into this issue as many countries have taken this route to save their market. Nigerian cannot be an exception,” he added.