By Peter Egwuatu
The Chairman of Nigerian Economic Summit Group (NESG), Mazi Sam Ohuabunwa has advised capital market operators to beef up their capital base in order to meet regulatory requirement.

He also advised capital market regulators to be cautious whenever they want to increase capital base for operators in the market in order not to create problem in the system.

According to him, “ in as much as it is pertinent for operators to beef up their capital base, the regulators should be careful in the level of increase so as not to create bottlenecks for operators. What I mean is that the increase in capital base should be moderate and within the limit that operators can meet and in line with global practice. There is nothing wrong to increase capital base if there is need for that provided it is meant to boost operations, but the increase should be gradual”.

The advice is coming after the Nigerian Stock Exchange (NSE) has asked stockbrokers with negative shareholders’ funds to recapitalise or face outright  ban from operating in the  market.

Recent findings have revealed that some stockbroking firms have  approached the NSE to give them some time so source for funds, while some are saying there was no need to recapitalise since they are just intermediaries between buyers and sellers of shares.
At the moment the capital base for stockbroking firm stood at N70 million

The NSE had revealed that over 50 stockbroking firms out of the over 240 registered in the market have negative capital base.
The NSE Interim Administrator, Mr. Emmanue Ikazoboh had at a recent press briefing said a  special inspection was carried out to ascertain the capital adequacy of the stock broking houses.

According to him, “ the report showed that over 50 stockbroking have been operating with inadequate share capital. In a bid to prevent the market from another major crisis, the Exchange directed that the firms should shore up their capital base to the required level (N70 million).

Reacting to the decision to sanction operators with inadequate share capital, Ikazoboh, said that the action was in the interest of the investors in particular and the market in general.

He said because of the erosion in their share capital, some of the broking firms were tempering with client’s funds, stressing that it is a dangerous signal that must be stopped if the market is to be made attractive.

Ikazoboh explained that a total of 242 stockbroking firms were inspected out of the 254 scheduled by the Regulation and Risk Management director. He said that several of the firms reported trading losses and negative shareholders funds.

In his words, “ most of them attributed this development to the financial crisis that followed the economic downturn. They have been advised to inject fresh funds and return their firms to profitability”.