NSE, banks work out N600bn bail-out package
By Goddy Egene and Eromosele Abiodun, 10.08.2008
Wednesday, October 8, 2008

Stock Market Crisis

Strong indications emerged yesterday that the Council of the Nigerian Stock Exchange (NSE) may have made a head way in its efforts to bail out the nation’s stock from its lingering slide.




This followed an agreement reached between the Council of the NSE and some banks to inject N600 billion into the market.

The Director-General of the NSE, Prof. Ndi Okereke-Onyiuke, had last Monday said a meeting would be held between the Exchange and the Securities and Exchange Commission (SEC) as part of fresh efforts to find a solution to the falling share prices.

However, SEC officials were not at yesterday’s meeting that was held in Lagos.

A source close to SEC said that while the Commission was in support of efforts to bail out the stock market, it was not aware of the latest arrangement.

But THISDAY gathered that the part of the bail-out package discussed yesterday include an arrangement that would lead to the appointment of six banks to act as major “Market Makers”. The banks would then provide N100 billion each to buy up to 15 per cent of their shares from the market.

Although any company can be licensed under the guidelines issued by SEC for operators to become Market Makers, it was gathered that the NSE may have encouraged banks to take the lead.

A source said that the thinking is that given the financial muscle of the banks, they would easily meet the minimum capital requirement of N2 billion stipulated by SEC.

“The banks, working according to the guidelines issued by SEC, will provide funds to mop up shares from the market and sell the same shares whenever the need arises,” a source said.

Capital market operators said that given the current capitalisation of banks and the urgency to bail out the nation’s stock market, banks are in a good position to play as Market Makers by floating subsidiaries that would do so.

The SEC’s rules define Market Maker as “Any specialist permitted to act as a dealer, any dealer acting in the position of a block positioner, any dealer, who with respect to a security, holds himself out as being ready to buy and sell such securities for his own account on a regular and continuous basis”.

The Market Maker shall be a company duly registered with Corporate Affairs Commission (CAC) and shall have a minimum paid-up capital of N2 billion. A Market Maker is required to at all times maintain sufficient liquid assets to cover its current indebtedness.

Obligations of the Market Maker include: stabilisation of the market by ensuring continuous liquidity by synchronising buy and sell transactions of a security; operate within the established transaction spread (that is bid/offer spread) which shall be a maximum limit of three per cent and subject to review from time to time.

Also, the Market Maker will have the capacity for continuous two-way quotes in the relevant stocks through the trading session in a minimum quote size of 100,000 units of shares and must have the capacity to deliver and settle transactions within the prescribed settlement cycle of T+3. The Market Maker must equally have the capacity to lend and borrow the designated securities at any time, with a view to ensuring stability in the market among others.

Meanwhile, worried by the worsening global financial meltdown, the Senate will today consider a motion on the issue and its impact on Nigeria.

The motion, entitled: “Global Credit Crisis and its impact on Nigeria”, is being sponsored by Senator Anthony Manzo with 18 co-sponsors.

In the motion, listed on yesterday’s notice paper, the sponsor noted that the wave of the global financial crisis sweeping through United States of America and Europe was the first financial crisis of the 21st century.

If the Senate throws its weight behind motion, commendation may come the way of the Central Bank of Nigeria (CBN) for the quick intervention by injecting N1 trillion into the economy.

http://odili.net/news/source/2008/oct/8/224.html

lol.

Monkey see, monkey do.

Somebody don chop money.

The problem in NSE is fraudulent accounting practices. No amount of credit thaw will propel the market forward whilst transparency lies buried in an unmarked grave.

Ndi Okereke can now raise fund legally for saving our stock market and banks.

lol.

Monkey see, monkey do.

So[b]mebody don chop money.

The problem in NSE is fraudulent accounting practices. No amount of credit thaw will propel the market forward whilst transparency lies buried in an unmarked grave[/b]

So true.

chei, see follow follow. the US and europe does it, nigeria must do it. those guys at the NSE need to get their auditing in check.

chei, see follow follow. the US and europe does it, nigeria must do it. Grin those guys at the NSE need to get their auditing in check.

Are you sure it wasn't our initial idea but we were scared to say it because of what people will say. Nigeria needs bail out in every sector. Military, education, agriculture, northern dominance, infrastructure, tribalism,religion,sexism and most importantly leadership.

DeepZone:

Are you sure it wasn't our initial idea but we were scared to say it because of what people will say. Nigeria needs bail out in every sector. Military, education, agriculture, northern dominance, infrastructure, tribalism,religion and most importantly, leadership.

people have been crying about the NSE slumping since like july. original or not, there needs to be more regulation

You can trust that every policy of Government or its agency is an opportunity to some. While others are working to fill up the pot holes that have been created by our excesses some are deep inside digging, expanding and consolidating.

Some of us whom greed took to the NSE are aware of the Nigerian problem.But we hoped that somehow peeps will continue to buy shares when we enter that way the party will continue. Now there is a stampede to get out the door because people see dead body for ground (them say na bear kill am) . Party organizers think that by raising the volume of the music people will come and dance. So I guess we will all have to wait and see. By the way, I was a victim too. I lost money.

You can trust that every policy of Government or its agency is an opportunity to some. While others are working to fill up the pot holes that have been created by our excesses some are deep inside digging, expanding and consolidating.

Some of us whom greed took to the NSE are aware of the Nigerian problem.But we hoped that somehow peeps will continue to buy shares when we enter that way the party will continue. Now there is a stampede to get out the door because people see dead body for ground (them say na bear kill am) Grin. Party organizers think that by raising the volume of the music people will come and dance. So I guess we will all have to wait and see. By the way, I was a victim too. I lost money.

At least they have an excuse now because the stock market is falling world wide. Ability to recover is another story.

The market will be back up sooner that people think, but not till after the USA's presidential election.

The market will be back up sooner that people think, but not till after the USA's presidential election.

In Jesus name we pray, Amen.

Fhemmmy:

The market will be back up sooner that people think, but not till after the USA's presidential election.

I doubt it. . . . unless it's driven by more speculation.


Sometime last year, I did some fundamental analysis on Nigerian stocks. I could not believe what I found. The fundamentals were so good, yet many of them had stopped growing at an acceptable level just three months after they launched their IPO's. That was when I concluded that the market was driven by pure speculation, somewhat like a pyramid scheme. Of all the stocks I studied last year, Naija stocks were unbelievable. Too good to be true you might say. For example, look at InterContinental bank's fundamentals last year:




This is as good as anything you would see in the West. . . . Their assets are worth more than their market cap (Book Value/Share) with gearing a little too high (56%), but at least they had the assets to back these loans. . . ,  yet the shareprices were not growing according to the fundamental's. They seemed to be driven more by pure speculation. You can see the 6 month growth of Intercontinental bank was not reflecting the fundamentals at the time:





Look at Access bank: No growth at all after the initial boom from the IPO launch:






What do you notice? After the IPO the shares quickly shot up and then stayed stagnant. Again, that just shows that people buy IPO's and keep them. After that, the shareprice does not grow regardless of the fundamentals. Most of these banks had good fundamentals which seemed shady to me. I asked a friend of mine who does some work with NSE and he told me that a lot of them cook their books.


Same with union Bank:




This despite having decent fundamentals:





This was repeated throughout every sector and almost every company. You see companies with good fundamentals whose prices are not growing as they should from 2 months after they launch their IPO. This means that the Nigerian people are buying the IPO's, but the mutual funds and Investment funds do not trust their them enough to keep investing in them after the initial period. That was when I drew my conclusion that the NSE is like a pyramid scheme. You get in and get out before the pack of cards come falling down.

Are you gonna be the new face of satellite pictures?

lol

DeepZone:

Are you going to be the new face of satellite pictures?

DeepZone:

Are you going to be the new face of satellite pictures?

lmao

Why una dey laugh? when we are still dealing with Nigeria@1, ibime came out from nowhere with images. He may go satellite soon if we don't put him in check.

@Ibime1,

Bikonu dont start this. We directed our prayer and fast towards Nigeria one

lol @ Ibime1

So because of Nigeria1, the use of pictorial evidence for analysis has become a Nairaland faux pas?

This is erosion of our civil internet liberties!

I have much more evidence of peculiar behaviour of NSE stocks. Should I continue?

Pennywise:

But we hoped that somehow peeps will continue to buy shares when we enter that way the party will continue.

Ibime thank you very much. Your presentation is a very elegant way of saying what I had earlier alluded to that the NSE is a pyramid scheme. But the good thing is that at least this one is Government approved . The unapproved ones still resurrect even after set backs. So we have a right to be hopeful.

Copy, Copy people. Before they start applying policies in use by the USA, they should remember that it's not the same thing that caused our problems and that Nigerian business practitioners are more resilient than those in Europe and the USA.

If they like, next time they should let Soludo open his big mouth and say banks should give out loans to idiots to buy shares. Olodo.

Where will the 600BN come from? How will the government recover it? By taxing our poor teachers?