By Michael Eboh
An expert in the Nigerian capital market, Mr. Babtunde Adeyemi, has called on the authorities in the financial market, to, henceforth, stop banks and insurance firms from owning stockbroking firms, as this will help reduce sharp prices, especially price manipulations and prevent a recurrence of situations that led to the crisis in the capital market.
Adeyemi, who is a research fellow of Davids Business Academy and Managing Director, DHTL Capital Limited, in his report titled â€˜Series on Economic Crisis Managementâ€™, stated that the banks should only be allowed to own
stockbroking firms after the necessary control measures have been put in place to curb sharp practices by operators.
He said, â€œNo banks, insurance companies or related firms should have a brokerage services firm and if there is need to have one, appropriate control measure should be put in place and compliance officer of those institutions need to be read the riot acts to and should not be more than one brokerage firm, instead of the indirect multiple firm owned by these institutions before now.â€
He lamented the absence of modern and relevant laws to meet up with the modern demands of the market. He called for a review of the laws of the Nigerian Stock Exchange (NSE), the corporate tax laws and the introduction of a law guiding the practice of share reconstruction and insolvency.
He called on the authorities to urge banks, insurance firm and other companies with huge number of shares to immediately take necessary actions to ensure a reduction of the shares to reasonable and manageable levels.
â€œThe mandatory and uncontrolled recapitalization exercises of the Nigerian Banks,â€ he said, â€œexposes the markets to some unprecedented growth that the regulators never did anything to control or understand the dynamics of the aftermath of the recapitalization.
â€œThe banks were offering equities at both private placement and public offering at a higher magnitude without any control. Some banks conducted public offers twice or more within three years. â€œThis is not supposed to be; and the magnitudes of equities being introduced into the market were so much and far above the current average and the global or conventional equities being listed.
â€œA single bank is having equities from one billion equities to about 30 billion equities within five years, without any fundamentals and liquidity to back it up.
â€œThis growth rate is unprecedented in a market where the actual investors had not increased by more than 250 per cent in the last five years. The total banking equities had increased from about 40 billion to about 400 billion equities.â€
He added, â€œThe banks and insurance companies holding about 80 per cent of the equities in unit holdings should embark on immediate share reconstruction to reduce their average holdings to two billion units for banks and one billion units for insurance companies and related firms.â€
He advised the Securities and Exchange Commission (SEC) to exercise restraints in its dealing with operators in the capital market.
He called on SEC to go about its probe of activities in the market with utmost secrecy so as to protect the operators and the market in general.
Adeyemi continued, â€œAlso, efforts should be put in place to develop more financial instruments to support the current instrument in the market, especially the development of the corporate fixed income instruments, money market instruments, derivatives instruments and other alternative financial instruments, such as private equities, venture capital, hedge funds, commodities among others.
â€œThe regulators should jeer their effort towards the creation of more depth and breadth in the market with the introduction of more financial instruments to relieve the heavily burdened equities.