Following the current crisis in the capital market, experts in the nation's financial industry have faulted the Central Bank's (CBN) directive on banks, asking them to restructure their margin facilities, stating that such action will haunt the banks in then near future.

Speaking in Lagos during the roundtable on global financial crisis and Nigeria organised by the Nigerian Institute of International Affairs (NIIA), experts revealed that the crisis in the Nigerian capital market had impacted negatively on banks in the country and if not addressed on time will lead to the distress of some of the banks.

Mr. Lawson Omokhodion, in his paper, 'The Nigerian banking sector and the global financial crisis', blamed the problems in the capital market on defaults arising from margin facilities, adding that such defaults have created a liquidity problem for most of the banks in the country.

According to him, "the Nigerian stock market is not linked to the global financial crisis because the structure of the problems is different. But the inability of borrowers to pay back their loans to banks for margin trading/stock purchase has created a problem of unimaginable illiquidity for the generality of the banks, even for those banks that appear impregnable.

The decision by CBN for the banks to restructure their margin holdings up to 2009 will only postpone the evil day. There is a problem and until the banks open their books for proper scrutiny everyone will continue to live in a fool's paradise and play the Ostrich. Sub-prime crisis is here, but it is in the form of margin finance."

He disclosed that a proper check on the books of the stockbrokers will reveal that the banks have lost lots of money, running into hundreds of billions of naira. "Any attempt to ask stockbrokers to mark the value of shares they hold to market value today will unleash instant crisis and banks will discover that they are holding nothing as collaterals in the form of billions of naira worth of shares in their value.

It is rumoured that one of the banks has N101 billion in margin finance and another a paltry N15 billion. But the banks continue to claim that they have no problems and yet ask for bailout, maybe not for themselves, but for those monies have been lent to. Meanwhile the banks continue to take the profit in all of these loans," he added.

Speaking in the same vein, Mr. Peter Egom, in his paper, "Global financial meltdown: Causes and consequences," disclosed that majority of the banks in the country were not sound, and had contributed negatively to the growth and development of the country.

He blamed the banks for the present crisis rocking the nation's capital and money market. "The banks in Nigeria are not contributing to the growth of the economy. They are only concerned with providing benefit for the owners.

The present structure of banks should go, what Nigeria need is equity-based banks, that willing to contribute to national development. Any Nigerian stockbroker will readily tell you today that the sharp practices of the new-baked Nigerian universal banks constitute the problems of the Nigerian money and capital markets. In fact, most of these universal banks are all walking corpses."