Nigerian Government won’t publish beneficiaries of N22bn stock largesse

AMCON said publishing the beneficiaries might be detrimental.

The Asset Management Company (AMCON) has said it does not have plans to publish the list of the beneficiaries of the Federal Government’s f package for stockbrokers announced by the Ministry of Finance in December 2012.

In December, the Federal Government announced a N22 billion package for selected stockbrokers. The Minister of Finance, Ngozi Okonjo-Iweala, announced the forbearance package to 84 of Nigeria’s 200 stockbrokers on December 3, 2012.

About six months after Ms. Okonjo-Iweala’s announcement, finance parastatals including the Nigerian Stock Exchange, NSE, and the Securities and Exchange Commission, SEC, passed the baton as to who would list the beneficiaries of the largesse, and the basis or criteria for selection.

Wole Tokede, the spokesperson of the NSE said only AMCON could answer the questions; while Obi Adindu of SEC said he does not have the answers referring PREMIUM TIMES back to the Finance Minister.

Ms. Okonjo-Iweala’s spokesperson, Paul Nwabuikwu, explained that AMCON and SEC are the implementation agencies for the directive and should provide necessary information on their activities.

AMCON takes the baton

The Asset Management Company of Nigeria AMCON said though it has sent out letters to the respective brokers (beneficiaries) and is liaising with them; it does not plan to publish the list of the beneficiaries as it may impact negatively on the nation’s gradually recovering Stock Exchange.

Kayode Lambo, Head, Corporate Communications, AMCON, said publishing the names of the beneficiaries may have a negative effect on the market.

“The list is with the Government. Publishing the beneficiaries can cause unnecessary upheaval in the market and we do not want that to happen. The stock market has bounced back and is doing well. It is one of the top Exchanges in the world. There would be no need to publish this list or do anything that would have a negative effect on the market” he said.

“We are liaising with the stockbrokers concerned with this. There were some conditions to be met. Some accepted and some did not.”

The Procedure

Mr. Lambo said no stock broking firm was given any money.

“We did not give any stock brokers any money. What we did was stand in for them at the banks and help clear their debt. What happened was the stock broking firms borrowed money from the banks and they could not pay back,” he said.

According to him, a number of factors may have led to the stock brokers being that much affected, ranging from unstable oil prices, Exchange rates among others and not all the losses were caused by lack of discipline or foresight on the part of the stock brokers.

“The banks were stuck, the stock broking firms were stuck” he said; a situation which the Federal Government decided to ease. “The government permitted that we buy some of these debts off, from the stock brokers, so we paid the banks on behalf of these firms.”

Nigeria’s capital market suffered a huge set back a few years ago. The NSE All Share Index (ASI) plummeted from a peak of about 66,000 points in March 2008 to less than 22,000 points by January 2009, wiping out over N8 trillion (or around 70 per cent) of the total capitalization of the stock exchange within this period.

Some Nigerian stockbrokers were indicted of manipulating the stock market alongside some banks, thereby contributing to the crisis. Thousands of Nigerians lost their live savings as a result of the activities of the stock brokers and the banks. It is not clear if the finance ministry put this into consideration before selecting the 84 beneficiaries.

“There are two sides to it (the largesse). Shareholders are complaining, especially shareholders of the nationalised banks. They are saying, after all, it is these same stockbrokers that directly or indirectly made us lose our investments, and now, the government is bailing them out,” Kanyidi Onunka of Melborne Capital Limited said while listing the downside of the bailout.

He, however, said the bailout had its upside.

“It’s just like the bank bailout. With this, brokers can have money to trade in the market. Margin loans really affected the Capital Market. Stock brokers really lost lots of money, a case of when you guess and you don’t guess right.

“Instead of having to persistently pay interest on the borrowed funds, AMCON has taken over the debt so now there is capital to continue the business,” he added.

The capital market

Stock brokers are regulated professional individuals or group of people who buy and sell shares and other securities for individuals, retail and corporate or institutional clients, usually through a stock exchange. They also provide valuable service and information of the market and companies to their clients, which can influence their investment decision.

A vibrant capital market is essential to the Nigerian government’s Economic Transformation Agenda, especially in terms of raising much-needed long-term financing for critical infrastructure and the housing sector, according to Ms. Okonjo-Iweala. Research (by the IMF and the World Bank) has shown that solid economic growth in any country is closely linked to the joint development of the banking sector and the capital markets.

Ms. Okonjo-Iweala said as part of the recommendations of a committee she set up, chaired by Kingsley Moghalu, Deputy Governor of the Central Bank of Nigeria, two measures aimed at giving life to the nation’s capital markets were reached.

The first measure was a forbearance of about N22.6 billion on the margin loans of 84 stock brokers, in accordance with Section 6(5) of the AMCON Act. The second measure was the elimination of stamp duties and VAT on stock market transaction fees.

Nigeria’s Stock Exchange has, however, since been recovering from its crash. Last week, it was highlighted that it was among the three Sub-Saharan Africa Stock Exchanges that were in the top 10 best performing equity indices in USD (United States Dollars).

At the end of first quarter 2013, the total value of transactions of listed securities on the Nigerian Stock Exchange stood at N510.1 billion. The amount represents an increase of N152 billion or 42.4 per cent over the N358.16 billion recorded at the end of February 2012.

Industry watchers say there has been an increasing participation by local investors, who fled the market in the past. There has been a large concerted effort, by the regulators and the regulated, aimed at making the market attractive to investors once again.

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