By Peter Egwuatu
The Chartered Institute of StockbrokersÂ (CIS) and Association of Stockbrok ing Houses of Nigeria (ASHON), yesterday called on the Central Bank of Nigeria (CBN) to allow its members toÂ restructure the N412.7 billion margin facilities indebted to banks since the share certificates that was used as collateral on the loan are still been warehoused by the banks.
The bodies said that the margin loan was not a bad debt per se, as the shares can still be sold and the money recovered to off set the debts.
The CIS and ASHON alsoÂ faulted the action of the Economic and Financial Crimes Commission (EFCC) in the arrest and detention of its members who have not been criminally found guilty following alleged misuse of margin facilities granted to them by the five banks whose managing directors were sacked by the Central Bank of Nigeria (CBN) for reckless use of shareholdersâ€™ funds.
While providing remedy to the debt recovery, the bodies called on the CBN to allow the stockbroking firms to have a restructuring agreement with the banks on how the repayment of the loan would be effected since it was a transaction loan as done globally.
Consequently, the bodies have appealed to the CBN and EFCCÂ to follow due process in prosecuting its members involved in margin loans facilities with the affected five banks.
At a world press conference held in Lagos, the President of CIS, Mr.Williams Dipo said, â€œ The CBN should note that the margin loan the stockbrokers had with their banks was commercial in nature and should be treated in that regard. It is not criminal to take margin facilities as done in other advanced economies. The only thing that is bad in taking such facilities is when the fund is diverted to other purposes other than it was meant for. Therefore, our stand is that the regulatory bodies should
follow due process in the prosecution of the stockbrokers because they are not criminal in nature, as with other debtors whose debts are criminal in nature.â€
Continuing, he said, â€œ We are in support of the CBN to sanitise the banking sector, but it should have carried due diligence and investigation in all the banks and come out with its position so that our capital market and the general public can absorb the shock once and for all rather than in piecemeal. Therefore, we advise that the remaining banks should be investigated and position taken on them so that the market can absorb it once while the new managing directors of the affected banks continues to dialogue with the debtors on the recovering pattern.
â€œ All the same, we have been dialoguing with the regulatory authorities on ways of restructuring the margin loans taken by our members. However, if any of our member is found wanting in the course of the prosecution, based on criminal offenceÂ we would also impose our own sanction because we have rules and regulation that every member has to abide.
Similarly, the Chairman of ASHON, Alhaji Rasheed .O . Yussuff, reassured the investing public and banksâ€™ depositors that the fundamentals of the banks are still strong and that they should not panic.
According to him, â€œ The action of the CBN is to make sure that no bank collapse in Nigeria, that is why it has injected funds into these banks. What the CBN did was to return confidence in the banking sector
Continuing, he said, â€œ We are appealing to the CBN to allow the new managing directors of these five banks to settle down and begin to have dialogue with its members on the repayment strategies of the margin loans. It is not criminal to take margin facilities. This is done in the developed economies. No economy can survive without this kind of margin loans to trade with.
Why the Nigeria case is becoming a problem is because it is new. Again, our dependance on oil also accounted for the depression in our capital market. Our market were doing well because most of the quoted companies had good fundamentals, but suddenly when the oil price crashed, foreign investorsÂ who had initially invested in the market during the boom had to take away their funds from the market and these led to dumping of the shares in the market at the same time , which eventually led to fall in their pricesâ€
Continuing, he said â€œ If the capital market is up and doing, the other sectors would follow in that direction. Margin loan is a global thing. All over the world the banks give credit for businesses to thrive. It is a technical facilities and we urge the new managing directors of these five affected banks to sit with our members and re-negotiate on the repayment pattern of this loan.
There should be a cleansing of the banking sector once and for all , so that investorâ€™s confidence will not be eroded by continuous actions of the CBN. If the cleansing is done once, people will absorb the shock once and for all ,as remedies have already been taken. At the moment, our market in the last two trading days have started picking up and it is our hope that it is sustained.â€