Michael Eboh
12 November 2008
The Chartered Institute of Stockbrokers (CIS) has called on the Central Bank of Nigeria (CBN) to allow banks in the country to restructure the debts owed it by operators in the capital market.
This was contained in the communique released on Tuesday in Lagos by the President of the CIS, Mr. Oladipo Williams after the stockbrokers conference held in Ilorin recently.
The CIS called for the introduction of a discount window and an intervention account that will be funded by banks who will appoint trustee managers to manage the accounts.
According to the communique, signed by Williams, "To resolve the illiquidity in the stock market, CBN should as a matter urgency allow banks to restructure all capital market related credits into a five-year capital market notes which are discountable through the discounting window.
This will allow them a reasonable time to adjust their position and resolve the illiquidity problem; and the over-hang offers in the market should be swept into a temporary purchase account to be managed by the Central Securities Clearing System (CSCS).
The purchases would be funded by some selected fund providers, mostly banks." The stockbrokers called for a speedy implementation of the proposed share buy-back policy, urging the Securities and Exchange Commission (SEC) to address the legal issues delaying its takeoff.
"The share buy back policy is not a quick fix but a medium to long term panacea to the problem the capital market is currently facing.
SEC should as a matter of urgency sort out the legal technicalities involved in the share buy-back issue and reduce the time lag in granting approval for the entire process."
The CIS blamed all the stakeholders in the capital market for the current market meltdown, adding that over speculation on the part of some of the operators and lack of harmonisation and inconsistencies in the policies of the regulators contributed further in worsening the situation. It said, "It was discovered that all the stakeholders of the capital market are primary contributors to the capital market meltdown.
There is over speculation by market participants thereby leading to overpricing of some stocks. The fundamental problem of the capital market is the credit induced illiquidity in the banking system, having three major components, loss of confidence, liquidity issues and over-hanging sale of equity orders. There are inconsistencies and lack of harmonisation in government monetary, fiscal and financial systems policies."
It continued, "Efforts should be made by policy makers to harmonise all policies that relate to and affect the operations of the capital market. The regulatory agencies should close ranks and adopt a holistic approach in tackling all issues pertaining to the practice and conduct of the capital market. This will provide the needed collective effort aimed at restoring the market.
The institute called for a strict application and enforcement of corporate governance principles by the operators and regulators and also advised the operators to engage in intensive research activities so as to continuously churn out new products in the market.
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