Michael Eboh
18 November 2008
Experts in the Nigerian capital market have expressed their concerns over the ability of the market to sustain its current rally.
Speaking in an interview with Vanguard, the General Manager, Apex Securities Limited, Mr. Amaeze Olisaemeka disclosed that the market rally may not be sustained if adequate measures are not put in place by the relevant authorities to forestall a reoccurrence, especially as majority of the banks were seriously affected by the market downturn.
He said, "I have my fears about the current market rally. This is because of the fact that the exposure of banks to margin facilities in the capital market is enormous. I believe it is in excess of N1 trillion. My fear is that as the market recover gradually, the banks might decide to sell."
He disclosed that the refusal of the Central Bank of Nigeria (CBN) to prevail on banks to restructure their margin facilities to market operators will seriously hamper the growth of the market in the near future.
According to him, "I was with a high-ranking official of one of the banks. I was asking him if they are going to restructure the margin facilities given to stockbrokers and investors, after the advice of the CBN.
What he told I was that, what the CBN said about the issue was merely advisory and is not binding on them. He said if the CBN is serious about the issue, it should issue a circular to that effect. It should send the circular to the banks asking them to restructure the facilities given to stockbrokers and investors. If this issue is not addressed on time, I am afraid, there might be problems in the market, because the banks will soon start foreclosing on the properties of the market operators."
Speaking in the same vein, the Managing Director, Dependable Securities Limited, Mr. Chinenyem Anyanwu confirmed that no agreement has been reached between banks and market operators on the need to restructure the margin facilities granted to market operators.
He agreed that the inability of the regulators, the banks and operators to reach a common agreement on the restructuring of the margin facilities would negatively hamper the market in the medium to long term and called for a decisive action to be taken in this regard to save the market from returning to the alarming declining trend that rocked it in the last couple of months.
He said, "The banks have not agreed to restructure the loans been owed them by market operators in form of margin facilities. They have not restructured the loans, and there is no understanding to that effect. We have only heard that some want to convert it to another instrument, but we don't know how many of them are truly ready to convert it to medium term loans of between three and five years."
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