Leadership (Abuja)
23 October 2008
editorial
Why did six banks offer to bail out the capital market by injecting N600bn into it? Thanks to the Central Bank of Nigeria (CBN), the plan has not been approved: the apex bank cited the huge profits declared by banks, their capital adequacy and minimal exposure to the capital market recession.
The panic that greeted the decision of the CBN to impose a uniform financial year on the banking system indicates that banks were telling lies about their financial strengths. What is happening in the market today is an exposure of those lies. It should not be forgotten that the Nigerian capital market was plunged into chaos by an odd combination of fraudulent price manipulation by banks in collaboration with stockbrokers, the exploitative tendencies of a few greedy key players and the passivity of a derelict regulator. Banks constitute 65 per cent of the market capitalisation of the Nigerian Stock Exchange. The persistent bearish posture of the market is therefore a reflection not only of waning investor confidence, but the illiquidity of most of the banks. Many banks are yet to recover from the losses they incurred from excessive exposure to margin trading facilities.
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