Nigeria: Stockbrokers Get N22.6 Billion Write-Off On Margin Loans

Mrs. Ngozi Okonjo, Minister of Finance

Well over four years after the asset bubble created by margin lending and insider abuse burst, the Federal Government yesterday in Abuja unfolded a raft of incentives and measures aimed at resuscitating and checking abuses in the Nigerian capital market.
Announcing the new measures to restore the equities market, the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, said a forbearance of about N22.6 billion on the margin loans of 84 stockbrokers would be granted, in accordance with Section 6(5) of the Asset Management Corporation of Nigeria (AMCON) Act.
Also, stamp duties and value added tax (VAT) on stock market transaction fees are henceforth eliminated.
The minister, who also backed the statement by the Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, on the need to reduce personnel in the public sector in order to cut back on recurrent spending, said there could be no reduction in the cost of governance without a cut in size of the current public workforce.
Besides the incentives, strong sanctions await capital market operators, who indulge in bad behaviour that characterised the past as well as reckless borrowing, which led to the growth in margin loans.
Okonjo-Iweala, who briefed journalists alongside the Director General of the Securities and Exchange Commission (SEC), Ms. Arunma Oteh, recalled that the capital market has been performing far below its potential in recent years.
A major reason for this, the minister pointed out, was the debt overhang made up of margin loans, which many stockbrokers have been grappling with.
"Many of you are aware that activities on the Nigerian capital market, particularly the stock exchange, have been very slow in the aftermath of the global financial meltdown and the Nigerian banking crisis.
"We saw the Nigerian Stock Exchange (NSE) All Share Index (ASI) plummet 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 capitalisation of the stock exchange within this period.