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Margin loans: Stockbrokers seek debt restructuring

By Peter Egwuatu & Michael Eboh
Following their heavy indebtedness to banks in the country through margin facilities, stockbrokers have called on the Central Bank of Nigeria (CBN) to prevail on the banks to abide by the debt restructuring agreement entered with them in the wake of the meltdown in the capital market.

Speaking at an interactive session between the CBN and market operators in Lagos, Wednesday, Mr. Emeka Madubuike, Managing Director, Compass Securities, disclosed that despite the fact that the loans are termed non-performing presently, if situation in the market improves, the status of the facilities will change.

He said, “It is important to note that the capital market is unique, its activities are unique.
As an association, when all of these problems started last year, we engaged all the banks that we are dealing with. We met with their representatives and we had a general understanding that given the nature of these facilities and given the status and posture of the market, that the best bet is to restructure these loans, especially as we are looking at the market that we had serious crisis.

“Almost all the banks that we met with, agreed and has restructured these loans up until on August 14.
It is now after this day that some of these banks are now going round to say that they will not abide by restructuring agreement signed with stockbrokers.
“The appeal we are making, is that you impress on the banks and encourage them to go along with the restructuring that have been put in place. This is because, as stockbrokers, we think that there is still hope for the market. If for any reason, the prices of stocks change today, all of the facilities will become performing.”

He blamed the CBN for the current persistent bearish trend in the market, noting that investors in the capital market have lost over N91 billion since the sacking of the five banks’ executive on August 14, 2009.

“The market has started going up, before August 14. As at that day, we have a market capitalisation of N5.55 trillion, today it is about N4.64 trillion and we have stocks of banks that are doing so well, going down. Take Wema Bank as an example, today, it is selling as N0.96. We are appealing that they abide by the work out arrangement that we already have with the banks.

Also speaking, Mr. Okecukwu Unegbu, former President of the Chartered Institute of Bankers of Nigeria (CIBN) and Managing Director, Maxifund Investment and Securities Limited, called on the CBN to strive towards ensuring liquidity in the capital market and encourage other government agencies to stop the use of force in the collection of debts owed to banks.

He said, “In the capital market, whatever the CBN does or say, is very important.  It is important that the CBN carry along other regulatory authorities and agencies of government to ensure that policies are integrated in the overall good of the economy and the capital market

“The CBN in letting people know that it is very good to buy stocks now, because the price is very good, should note that there is no liquidity in the market, and that one can not buy with empty hands

“We are appealing to the CBN to collaborate with the banks and ourselves, use mediators to solve our problems, rather than the area of using strong arm tactics, this will not help us. When this is done, you will get all the help you need and we will give you all the assistance you need.


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