Nigeria: Stock Market - Four More Banks Join Bail-Out Plan
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This Day (Lagos)
10 October 2008
Posted to the web 10 October 2008
Efforts by the Nigerian Stock Exchange (NSE) and some banks to bail out the nation's stock market from its lingering slide received a boost yesterday as more banks signified their interest to be part of the package.
President Umaru Musa Yar'Adua has, however, called for close collaboration between the government and private sector in order to tackle the effects of the current global financial crisis, but the Secur-ities and Exchange Comm-ission (SEC) insisted yesterday that the Nigerian capital market is not suffering from any crisis.
The Council of the NSE had last Tuesday approved plans by six banks - namely First Bank of Nigeria Plc, Union Bank of Nigeria Plc, Zenith Bank Plc, Intercontinental Bank Plc, United Bank for Africa Plc and GTBank Plc - to pump N600 billion into the market. Each bank is expected to bring in N100 billion.
While the modalities for the N600 billion bail-out package are being worked out, THISDAY checks revealed that four more banks have joined the discussions.
THISDAY sighted the chief executives of Oceanic International Bank Plc (Mrs. Cecilia Ibru), First City Monument Bank Plc (Mr. Ladi Balogun), Access Bank Plc (Aigboje Aig-Imoukhuede) and Bank PHB Plc (Mr. Francis Atuche) leaving the NSE Building yesterday afternoon.
It was gathered the CEOs met NSE officials over the proposed bail-out package. The package, it was further gathered, may now be increased to N1 trillion following the addition of the four banks.
When contacted, the Principal Manager, Corporate Affairs, NSE, Mr. Sola Oni, did not confirm the names of the new banks that have joined the efforts to bail out the market.
However, he said: "The Exchange has been discussing with banks on how to collaborate and move the market forward. As at now, no market maker has been appointed but the discussions are going on well."
Some market operators explained that the NSE decided to use the bank option given their financial strength. It was learnt after the conclusion of the discussions, the banks would then apply to be market makers under the new guidelines released by SEC last September.
A source had said the thinking is that given the financial muscle of the banks, they would easily meet the minimum capital requirement of N2 billion stipulated by SEC.
The Head of Media, SEC, Mr. Lanre Oloyi, had on Wednesday asked investors not to panic as the fundamentals of the Nigerian stock market remained strong.
However, some market operators have called on the regulators to work together for the stabilisation of the market.
"Whatever efforts that are being made to rescue the market should be supported by the regulators because if the market crashes, the entire economy will be affected. We see what is happening worldwide. Nigerian should not be a different situation. There should be collaborative efforts," a stockbroker said.
The SEC's rules for market making stipulates that a Market Maker shall be a company duly registered with Corporate Affairs Commission and shall have a minimum paid-up capital of N2 billion. A Market Maker is required to at all times maintain sufficient liquid assets to cover its current indebtedness.
Obligations of the Market Maker include: stabilisation of the market by ensuring continuous liquidity by synchronising buy and sell transactions of a security; operate within the established transaction spread (that is bid/offer spread) which shall be a maximum limit of three per cent and subject to review from time to time.
Also, the Market Maker will have the capacity for continuous two-way quotes in the relevant stocks through the trading session in a minimum quote size of 100,000 units of shares and must have the capacity to deliver and settle transactions within the prescribed settlement cycle of T+3.
The Market Maker must equally have the capacity to lend and borrow the designated securities at any time, with a view to ensuring stability in the market among others.
Yesterday, stock market depressed further as the NSE All-Share Index fell to 44,638.26, while the capitalisation closed at N9.505 trillion. This indicates that the market of the NSE has lost over N3 trillion, falling from a peak of N12.6 trillion since the bears set last March.
However, Yar'Adua is canvassing a "close collaboration" between the government and private sector in order to tackle the effect of the global financial meltdown.
Relevant Links
He made the call when he had audience with a delegation of the Board of the Nigerian Economic Summit Group (NESG) in State House yesterday, noting that while the immediate impact of the crisis was yet be felt in the country, the time had come to find solutions to the looming dangers.
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Hello,,
You should know that the world is now a global village.Why do you think the financial catastrophy is extending to other countries & not only experienced in its origin(the U.S?).It is due to the dependence of other economies on that of the U.S.If THE U.S and other affected economies cant eventually purchase the excess crude produced by Nigeria coupled with the present sliding crude prices,what do you think will happen to our:balance of payment, purhasing power of th Naira,foreign reserve? It is Nigeria we are talking about ,a country that is over dependent on petro Naira with no diversified… [Read Full Text]
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American banks and stock market operate in a system that is completely difference from Nigerian Banks and Stock Market. American Banks and Stock market are credit oriented that revolves around credit. The problem America Banks and the Wall Street are having today are as result of collapse of the housing market. In American system most American do not own their cars,homes,even the cloths they wear are mostly purchased on credit. I will try to explain what is happening now as simple as I can considering the limited space available. When credit is extended to those who… [Read Full Text]