Emma Ujah, Ben Agande, Peter Egwuatu and Michael Eboh
10 October 2008
President Umaru Yar'Adua called, yesterday, for partnership between government and the private sector in tackling the current global financial crisis.
He spoke as The Securities and Exchange Commission (SEC) wrote to the Nigerian Stock Exchange (NSE) to explain the alleged N600 million bailout plan with some banks. The NSE has denied any such bailout.
The SEC also stressed yesterday that no bank had been approved to carry on the functions of market makers in the capital market, while news that the Bush administration is considering taking ownership stakes in a number of US banks helped restore a relative calm over global financial markets.
Receiving a delegation of the Board of the Nigerian Economic Summit Group in Abuja yesterday, President Yar'Adua said: "There is no better time than now for the government and private sector drivers to collaborate."
He said he was confident that government and the private sector as "equal partners in the national economy" would rise to the challenge and "chart a path to growth."
He commended the critical role that NESG had been playing by partnering with his government to ensure that key economic policies that would lead to the realization of the Vision 2020 were put in place.
Assuring NESG of government's support on national economic matters, the President expressed confidence that the 14th Nigerian Economic Summit "will come up with policy directions and programmes to critically address major challenges facing Nigeria."
The Chairman of the Board of NESG, Maxi Sam Ohuabunwa, briefed the President on preparations for the14th Nigerian Economic Summit holding this month, while commending President Yar'Adua for involving the private sector in the management of the nation's economy.
Also yesterday, The Securities and Exchange Commission (SEC) confirmed it was dispatching a letter to the Nigerian Stock Exchange (NSE) to explain the alleged N600 billion bail-out plan with some banks.
"We are writing the Nigerian Stock Exchange to explain to us the agreement it reached with the banks, if indeed there was one. We are not party to it as we are very convinced that the Nigerian capital market is robust and doing well," the commission's Head of Legal and Enforcement, Mr. Charles Udora, told journalists in Abuja.
Mr. Udora who represented the commission's Director-General, Mr. Musa Al- Faki, said the nation's capital market was not undergoing any form of crisis to necessitate a bail from any quarter.
"We don't think there is any problem to necessitate any bail-out. There is no problem within the Nigerian capital market. It is a normal thing for capital markets to go up and down.
"Nobody complained when people were reaping wonderful harvest from the investments in stock, until only very recently.
There is no need for anyone to panic. If you observe carefully, you would see that what is happening is the market correcting itself between the pre-consolidation and post-consolidation periods.
"You should know that when someone is selling shares and another one is buying, the one who is buying is not buying in order to throw them into the lagoon. It is all a matter of risk taking. Those who are buying could begin to make great profits within a short when the tide changes. That is the nature of the capital market," he said.
He was specific that none of the six banks earlier reported as putting funds together for the bail-out plan was a market maker and therefore could not play such a role even if they wanted to.
"No bank has applied to the SEC as a market maker. Not any of those listed in the dailies yesterday (Wedenesday). We have a number of applications from market operators who, in accordance with the rules issued recently by the commission, and which was approved by the Minister of Finance, applied to perform the functions of Market Makers and no bank is among them.
"This is in line with the rules. Only a dealing member of the stock exchange can even apply to be market makers because for you to be a market maker, you have to be there on the floor of the exchange or within the framework of the exchange to be able to transact in your own account.
"It is only then that the market maker can take position from his own account to buy when there are much stocks without buyers or sell when there is scarcity and by so doing stabilise the system," he said.
No bank approved as market maker - SEC
And speaking in Lagos, spokesman for the Securities and Exchange Commission (SEC), apex capital market regulator, Mr. Lanre Oloyi said no bank or any company had been approved to carry on the functions of market makers in the capital market.
This runs contrary to speculation that six banks have been appointed as market makers in the nation's capital market.
A 'market maker' is a wholesaler who purchases shares in bulk whenever there is a glut in the market. He holds it for a while and then disposes of them whenever there is demand for them.
Mr. Lanre Oloyi, in an interview with Vanguard said: "SEC has not approved any application from any firm or bank intending to play the role of market makers since it was introduced in the Nigerian capital market on September 11, 2008.
"The Commission has been receiving applications from companies but it has not given approval to any company to carry on such activity in the market. Until approval is given, no company can carry on such function. The news that six banks have been appointed as market makers by the Commission for now is untrue.
This is a new product that the Commission has initiated and it is taking its time to approve applications that meet the requirements. Whenever approval is given to companies, it would be made public," he said.
Meanwhile, there are speculations that four more banks have indicated their interest to help salvage the capital market from the persistent decline that has bedeviled it in the last couple of months.
The NSE, however, denied that it was working with any specific number of banks to arrest the situation. According to a spokesperson for the NSE, Mr. Sola Oni, it is still holding talks with banks and other stakeholders in the market to find a lasting solution to the issue and that it has not appointed any bank as market maker.
He said: "We have not appointed any market makers. What we are doing now is to discuss with banks on how to move the market forward. We are only collaborating with the banks to move the market forward, and we intend to involve the banks and other stakeholders in arresting the situation. We expect that SEC will come up with details of organisations that have been appointed as market makers."
Relative calm in global financial markets
And in the US, news that the Bush administration is considering taking ownership stakes in a number of U.S. banks helped restore a relative calm over global financial markets yesterday.
The aim of such a move would be to thaw the lending freeze that threatens to push the world's economy into recession. It comes after rampant fear about the global economy sent investors scurrying on Tuesday for safety in U.S. government securities despite an orchestrated round of rate cuts by the world's central banks.
Investors also were hoping that selling, which gave the Dow its ninth straight day of losses, was overdone.
An administration official, who spoke late Tuesday on condition of anonymity because no decision has been made, said the $700 billion rescue package passed by Congress last week allows the Treasury Department to inject fresh capital into financial institutions and get ownership shares in return.
Treasury Secretary Henry Paulson told reporters that Treasury was moving quickly to implement the $700 billion rescue effort and he specifically mentioned reviewing ways to bolster the capital of banks.
In an unprecedented coordinated move, central banks in England, China, Canada, Sweden and Switzerland and the European Central Bank also cut rates after a series of high-stakes phone calls over several days between Fed Chairman Ben Bernanke and his counterparts.
The Fed acted in concert with the European Central Bank to make emergency interest rate cuts after the Sept. 11 terror attacks in 2001. But Wednesday's cuts were unique in the number of nations that participated, the Fed said.
Rates in South Korea, Hong Kong and Taiwan were also trimmed and Asian markets appeared to find their feet after a brutal round of selling Wednesday.
In Tokyo, the benchmark Nikkei 225 index ended morning trading up 1.25 percent, a day after it plummeted 9.4 percent in its biggest one-day drop in 21-years. Hong Kong's Hang Seng Index gained 1.2 percent following the interest rate cut, while China's benchmark Shanghai Composite Index had gained 0.8 percent by late morning.
European markets recovered some of Wednesday's hefty losses after Asia's relatively steady performance.
But all eyes are on now on Wall Street, where investors hope markets are getting closer to finding a bottom after the worst five-day rout since 1987. On Wednesday, the Dow gave up 189 points to close at - and is now down about 35 percent from its high of 14,164.53 reached exactly one year ago.
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