As the capital market community awaits the federal government’s promise of forbearance package to stockbrokers as part of measures to stimulate confidence in the Nigerian capital market and increase liquidity, some finance experts have expressed divergent views on the intervention.
The finance minister, Dr. Ngozi Okonjo-Iweala, had said recently at the Annual General Meeting (AGM) of the African Development Bank (ADB) in Arusha, Tanzania, that the federal government would release a forbearance package to stockbrokers.
The Nigerian capital market has, since the onset of the global financial depression in 2008, lost N4.6 trillion to mainly the effects of banking consolidation and investors’ loss of confidence.
Estimated debt overhang, arising from margin loans incurred by stockbrokers, also stood at about N300 billion.
Okonjo-Iweala said that while government, through the Assets Management Corporation of Nigeria (AMCON), had intervened successfully and safeguarded the banks, the request for forbearance package by the stockbrokers would also be granted.
“We are working on the forbearance; we have now agreed on it, and we are going to implement it. We are having discussions about how to do it.
Since the second coming of Okonjo-Iweala as the minister for finance, the issue of debt forbearance has been on the front burner, principally because the suspended DG of SEC, Arunma Oteh, struck a gender rhythm with her after stockbrokers repeatedly harped on the issue of debt forgiveness as one amongst the many plausible ways of injecting liquidity into the local bourse.
Oteh championed debt forbearance for capital market operators as a way of bringing back liquidity to the local bourse until she was sent on compulsory leave.
The executive chairman of the Society for Analytical Economics, Nigeria, and an expert in finance, Dr. Godwin Owoh, told LEADERSHIP exclusively that the idea of bailout is generally wrong without approval from Parliament and a holistic diagnosis of the sources and reasons for the deficits.
Owoh noted that it would be a dangerous precedence for government to bailout private businesses that have acted irresponsibly.
“If this must happen, then, it requires parliamentary approval, and not just the minister of finance. It must also come within the framework of a master plan for the entire financial system. Forget the interventions by the CBN in banks, which is shrouded in controversies,” he said.
The managing director, Crane Securities Limited, Mr. Mike Eze, reacting to the development, said government has been generating a lot of energy in the direction of debt forbearance without actually going anywhere.
“There has been a lot of noise on government’s part without us the market operators seeing any resultant action. The N300 billion debt overhang is still dangling and begging for government to take positive action,” he said.
On the reason government decided to intervene, Eze said it was because market operators have been harping on it repeatedly at every fora that the opportunity arose.
He noted that mainly because government intervened in other sectors such as aviation, agriculture and textile, they had no option other than to start factoring a way of intervening, hence the debt forbearance alternative.
“You know we are dealing with politicians and they will want to play politics with the smallest issue not to talk of an issue like intervention in the capital market. So we will keep disturbing them until they answer us as it were,” he said.
According to the managing director, Lambeth Trust & Investment Company Limited, Mr. David Adonri, “The proposed forbearance is a welcome development. However, for several badly damaged Stock broking firms to be rescued, outright debt cancellation may be necessary, AMCON has already taken over the stocks upon which most of the margin facilities were granted. Therefore, the means of repayment no longer exists. Forbearance can only assist those with means of repayment. The debt crisis can only be resolved on case-by-case basis.”