5 December 2012

Nigeria: Bailout Drags Stock Market Up By N596 Million

Photo: New Times
Stock markets

The stock market yesterday reacted positively to the news of the forbearance and tax relief packages announced for market operators by the federal government as the market capitalisation rose by N596 million to close at N8,428.840 billion while the All Share Index added 1.86 basis point to close at 26,382.54 from 26,380.68.

The federal government on Monday announced a N22.6 billion debt relief for 84 stockbrokers and a 12 per cent tax exemption on stock trading activities.

LEADERSHIP findings reveal that some of the stock broking firms likely to benefit from the debt relief include: Afrinvest West Africa, BGL Securities, Diamond Securities - a subsidiary of Diamond Bank, Intercontinental Securities - a subsidiary of Intercontinental Bank Plc; Nigerian Stockbrokers, Adamawa Securities, Alangrange Securities, Associated Asset Managers, Belfry Investments and Securities, Calyx Investment and Securities, Cardington Securities, Cashville Investment and Securities, Century Securities, Colvia Securities, Consolidated Investment, Cowry Asset Management, Dakal Services, DBSL Securities, De-lords Securities, Dependable Securities, Empire Securities, and Enterprise Stockbrokers Plc.

Other stock broking firms are: ESS Investments and Trust, Eurocomm Securities, Express Discount Asset Management Ltd, FBC Trust and Securities, First Inland Securities and Asset Management Ltd, First Allstate Securities, First Equity Securities, FIS Securities, Genesis Securities and Investment Ltd, Heartbeat Investment Ltd, Hedge Securities and Investment Company, Independent Securities, Lion Stockbrokers Ltd, MBL Financial Services, Midland Capital Markets Ltd, Molten Trust, Peninsula Asset Management and Investment Company, Perfecta Investment Trust Ltd, PIPC Securities Ltd, Pivot Trust and Investment Company, Professional Stockbrokers Ltd, Quantum Securities, Rostrum Investment and Securities, Securities Solutions, Securities Trading and Investment Ltd, Sigma Securities, Sikon Securities and Investment Ltd, Supra Commercial Trust, Support Services Ltd, TFS Securities and Investment Company Ltd, Valmon Securities, Vision Trust and Investment Ltd, Wizetrade Cap and Asset Management Ltd, and Yobe Investment and Securities Limited.

Meanwhile, the news of forbearance package elicited widespread excitement from capital market operators, who unanimously described it as a welcome development that would bring liquidity back to the market and help ginger investor confidence

Reacting to the development, the president of the Chartered Institute of Stockbrokers, Mr Ariyo Olushekun, told LEADERSHIP in a telephone interview, that the package was in the best interest of the market, because stockbrokers had a major role of injecting liquidity to the market.

He said: "It will benefit the market as a whole. By the time stockbrokers clean up their balance sheet, it will now help them to recapitalise and, by so doing, investors will see the reason to come back to the market.

"Another thing, which is bigger, that the media is missing is the issue of tax waiver. That is a major one that will benefit everyone, including shareholders in the equity market. With tax waiver, government has got a lot of kudos. We have been fighting to secure this waiver to help reduce the issue of multiple taxation for a number of years now."

Ariyo noted that the tax waiver meant a drastic reduction in the cost of stock exchange transactions.

On his part, the Managing Director, Crane Securities Limited, Mr. Mike Eze, described the government action as one of the tonics needed to turn the market around.

"Now that the margin facilities have been cleaned up, it will make market activities bounce back. For four years now, because of the high debt burden, they have not been able to operate optimally, but now that the debts have been taken over by the federal government, they now have the capacity to operate because they can buy and sell shares at will. There is no restriction again whereby if they buy and sell, their banks will seize their money to settle the debt they owe," he said.

Eze further noted that with this single action from the federal government, it showed that the authorities were becoming more sensitive to the plight of the operators.

"The next will be direct intervention by the way of bringing in financial intervention to the capital market. Like Oliver Twist, the operators want some more. We are happy that the government is being sensitive to the yearnings of the capital market because it remains the engine room of the economy," he noted.

All efforts to reach the Assets Management Company of Nigeria (AMCON) to confirm the list of the stock broking firms which benefited from the package were futile as the managing director, Mr Mustapha Chike-Obi, did not pick his call or respond to the text messages sent to him before press time.

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