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Monday, 10 December 2012 00:00
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Mixed reactions trail N22.6b forebearance to stockbrokers

Operators in the Nigerian capital market, have been expressing mixed reactions over the recent forebearance granted stockbrokers, who operational capital have been eroded by margin loans facilities during the era that led bubble of the market in 2008 by the federal government.

84 Stockbrokers were  granted a N22.6 billion forebearance on margin loans, in the announcement made by Finance and the Coordinating Minister of the economy Dr. Ngozi Okonjo-Eweala last week.

 But against the backdrop of the announcement, some stockbrokers who spoke on condition of annonimity said the move was more political than what the investing public as well as the market community was being made to believe.

A senior stocbroker told the Nigerian Compass that while the affected stockbrokers have been issued letter and certificates to the effect of the forebearance, there is yet to be any fund released to back up the government claim.

He said the public is only being made to believe that the government is doing to boost the market, stating that the measure is not going to have any immediate impct, as it not matched by actions.

Another stockbroker, who said the development was laudable as it appears said people should tarry a bit as the forebearance is only being aimed at the stockbrokers, whose capital base of N70 million was eroded and were forced out of the market.

He explained that the set of operators, who got their fingers burnt by the margin loans are still being compiled for the forebearance gesture, which he said may take a long while due to bureaucracy.

According to him, what has to do with government in the area of gesture would take a long time to be actualised, owing to various processes, which include release of white paper, gazetting and other hurdles. 

 Okonjo-Iweala, at press conference in Abuja last week announced the forebearance package is first out of two measures by a Committee she set up and chaired by Dr. Kingsley Moghalu, Deputy Governor of the Central Bank of Nigeria (CBN), to make recommendations on measures to resuscitate the Capital Market.

She said: “The first measure is a forbearance of about N22.6 billion on the margin loans of 84 stock brokers, in accordance with Section 6(5) of the AMCON Act.  AMCON had purchased these margin loans from Banks for about N42.6 billion, but the value of the underlying assets or collateral is worth only N19.96 billion 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.

But let me state clearly that this forbearance will be accompanied with sanctions to discourage excessive borrowing behaviour by Capital Market Operators in the future” .

The second measure she said is the elimination of stamp duties and VAT on Stock Market transaction fees.

“Taxes on Stock Exchange transactions fees are as high as 12 percent (5 percent in VAT and up to 7 percent in stamp duties) – much higher than in other jurisdictions, and these constitute a major disincentive to invest in the Nigerian Capital Market. I will like to announce that the Federal Government has consented to: waive the 0.075 percent stamp duties payable on Stock Exchange transaction fees; and, exempt from VAT, commissions: (a) earned on traded values of shares, (b) payable to the Securities and Exchange Commission (SEC), and (c) 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” Okonjo Iweala said.

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