Forbearance for stockbrokers: 84 firms get N22.6bn reprieve

The forbearance is for huge debts arising from margin loans that went bad due to the crash of the nation’s stock market following the 2008 global economic meltdown. The debt reprieve was one of the major recommendations of the Capital Market Committee chaired by the Deputy Governor of the Central Bank of Nigeria, Dr. Kingsley Moghalu, recently set up by the Federal Government with a mandate to chart an appropriate course for fast-tracking efforts to transform the market into a major source of attracting investment and long term investible funds for the economy.
 
Speaking on the capital market revival measure at a news conference in Abuja, the Coordinating Minister of the Economy, Dr Ngozi Okonjo-Iweala, said the Federal Government was concerned about the operational lull in the market and the negative implications for the health of the economy hence the establishment of the committee to arrest the trend.
 
Apart from the forbearance for the affected stock broking companies the minister said the committee recommended and the government had also approved that Stamp Duties and Value Add Tax waivers should be introduced into the market as a fiscal measure to boost activities.
 
Expatiating further on the recommendations of the committee Okonjo-Iweala said the N22.6bn relief package is to make up the shortfall of the margins loans purchased by the Asset Management Corporation of Nigeria (AMCON) which value have fallen from N42.6bn to N19.96bn currently AMCON had purchased these margin loans from banks for about N42.6bn, but the value of the underlying assets or collateral is worth only N19.96bn today.
 
In furtherance of AMCON’s cleanup of the banking sector, it is necessary to wipe off the debt overhang in the capital market, as this is dampening market activity,” she said. She stressed that the forbearance would be accompanied with sanctions to discourage excessive borrowing behaviour by capital market operators in the future.
 
“Brokers benefiting from forbearance will not be allowed to provide any professional services to AMCON for a period not less than three years; the firms will be required to reveal to the Securities Exchange Commission (SEC), any dealings in any security valued at a minimum of N25m executed in a single deal or multiple deals on the same day on behalf of their clients; also as part of their net capital requirement, no broker that has received forbearance shall permit his aggregate indebtedness to exceed 100 per cent of his net capital,” she explained.
 
Other measures include forwarding details of the firms to the Credit Bureau Agencies, a strict requirement that imposes separation of assets and control for brokerage services and/ or future margin facilities through the use of custodians, as well as trading restrictions, which prohibits benefitting stockbrokers from taking proprietary positions or trade on their own account for one year.
 
She said: “I will like to announce that the Federal Government has consented to waive the 0.075 per cent stamp duties payable on stock exchange transaction fees; and exempt from VAT, commissions earned on traded values of shares, payable to the Securities and Exchange Commission (SEC), and payable to the Nigerian Stock Exchange (NSE) and the Central Securities Clearing System (CSCS); by including these commissions in the list of VAT-exempt goods and services.”