Author Topic: CAPITAL MARKET CRISIS: CIS CALLS FOR RESTRUCTURING OF MARGIN FACILITIES  (Read 746 times)

Offline furtune

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The Chartered Institute of Stockbrokers has said that in order to resolve the illiquidity in the stock market, the Central Bank of Nigeria should, as a matter of urgency, allow banks to restructure all capital market related credits into five-year capital market notes, which would be discountable through a discounting window.

This, it noted, would allow the market to adjust its position within a reasonable time, thereby, resolving the illiquidity problem.

The CIS President, Mr. Oladipo Williams, who disclosed this in Lagos on Tuesday, stated that the institute had, during its 12th Stockbrokers annual conference in Kwara, last month, made a case for the development of an autonomous and functional currency market, which would drive the capital and commodity markets.

According to him, the implication of not having a currency market has affected the performances of the capital and commodity markets.

He pointed out that over-speculation by market participants led to the overpricing of stocks, adding that there was a knowledge gap among operators and regulators in the area of best practices in capital market operations.

While pointing out that government’s intervention in the capital market downturn was limited, the CIS President said, “There is the need for more direct intervention by the Federal Government and the CBN in the problem of the financial sector; the visible response by the government, so far, to the current capital market situation is principally the share buy-back option.”

He explained that the current meltdown in the capital market had opened up the need to deepen and diversify it, adding that new varieties of products were required in the capital market to accommodate inflow of funds, both locally and internationally as trading was predominantly done in the equity market.

While admitting that there was considerable loss of confidence in the capital market by investors, the CIS President said, “The fundamental problem of the capital market is the credit- induced illiquidity in the banking system and all stakeholders are the primary contributors to the capital market meltdown.”

He pointed out that the problem in the capital market had three components loss of confidence, liquidity issues and over-hanging sale of equity orders.

On the way forward, he said that efforts should be made by policy makers to harmonise all policies that affected the operations of the capital market.

He said that in order to cushion the effects of the global financial meltdown on the Nigerian economy, the economic base of the country should be diversified and made less dependent on oil.

He pointed out that since supply exceeded demand, the over-hang offers in the market should be swept into a temporary purchase account to be managed by the Central Securities Clearing System.

This, he said, would be funded by selected fund providers, mainly banks.

While urging the Securities and Exchange Commission to sort out the legal technicalities involved in the share buy-back process, he added that the time lag for granting approval for the entire process should be reduced.

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