Lagos — Over N1 trillion loan facilities granted stockbrokers and real estate speculators during the boom period by banks last year are still trapped in the stock market.

The Director General and Chief Executive Officer of the Nigerian stock Exchange (NSE), Ndi Okereke-Onyiuke said during the town hall meeting with the chief executive officers of quoted companies in Lagos yesterday that the banks' facility to stockbrokers amounted to N300 billion while margin loan by banks to real estate speculators hover around N700 billion.

"It should be noted that we at the NSE and the Central Securities Clearing System (CSCS) are in possession of data of margin loans facilities in the economy due to the role played by us in this regard. From the records in our system, from the over N1 trillion margin loans granted by banks, only N300 billion are in the hand of stockbrokers, the remaining N700 billion were advanced to real estate investors and speculators. The global financial meltdown negatively affected the servicing of these loans, as the banks could no longer advance more credit to these speculators to finish their housing projects, leading to the abandonment of these projects.

A case in point is the Banana Island and Lekki Phase One and Two Housing projects. Many of the houses in these locations and other locations are built with funds from the capital market. It now became very difficult for the investors to service the loans collected from the banks, thereby causing serious liquidity crisis for the banks."

She said there have been controversies over the margin loan and that has led to frosty relationship between many banks and their stockbrokers and this, she said posed real danger to market stability.

Okereke-Onyiuke attributed the drop in share prices to sudden withdrawal by foreign fund manager who took away their hot money through massive sale of shares. This, she said rocked investors' confidence with share prices depreciated total market capitalization from N12 trillion in 2008 to N7.14 trillion in March 2009 .

She also disclosed that the exchange council would soon adopt N1.00 per share against N0.50 kobo per share as nominal value in the market, stressing that in order to make it easy for the quoted companies, the exchange is making arrangement with Corporate Affairs Commission (CAC) not to charge extra cost when they are making amendment on their stature .

She said though the market is appreciating and steady path to recovery, the current challenge is an eye opener to listed companies. .

"Our listed companies should consider the option of investment in corporate bonds for increased sourcing of medium and long term fund from the capital market. We have opened a new window to accommodate private placement to make investment in this instrument more credible. The option of share buy-back is there for any company to utilize as a strategy to create market for its share", she said

Okereke-Onyiuke said the exchange is awaiting liquidity provider as the last requirement to license the companies that have been registered as market makers by the Securities and Exchange Commission (SEC), adding that when operational, the market makers are expected to improve market liquidity when they commence operations.