Notable operators kick against call for N200b intervention fund

The call by some operators in the Nigerian capital market for Federal Government intervention fund to save the market from the current volatility and grow the economy have been faulted by notable economic operators.

The Chartered Institute Stockbrokers (CIS), and Association of Issuing Houses of Nigeria (AIHN) made the suggestion recently at a press conference in Lagos.

In doing so, they declared: “As a short-term measure, the CBN should create an intervention window for about N200 billion to be accessed by market makers to shore up the market. Each market maker should be availed of N1billion to N10 billion; SEC should also consider structuring accrued dividend to shore up the market; the government should support the market by buying and warehousing shares as it is done in advanced markets; there should be a policy for banks to operate zero interest rate to stimulate activities in the capital market.”

Kicking against the suggestions, specifically on the N200 billion, the Managing Director/Chief Executive Officer of Asset Management Corporation of Nigeria (AMCON), Ahmed Kuru, said the time is not yet ripe for forbearance package or intervention fund for stockbroking firms, noting that this is the time for businesses to operate with high level of corporate governance to ensure that businesses do not survive on the basis of support but on the basis of the dynamics of the business.

Also, the Managing Director, Trust yield Securities Limited, Imafidon Adonri, who also did not agree with the suggestion, said if the government must intervene or reactivate the capital market, it should do so indirectly.
He argued that the best intervention that could be made for the stock market is for the government to fix the productive sector of the economy, noting that when the sector is vibrant, it would reflect in the market.

“The direct intervention will lead to where? It is not sustainable.  There is very popular adage that by the time you fix the mainstreet, you have fixed the Wall Street. So, if you fix the productive sector of the economy, you have also succeeded in fixing the capital market. Therefore, if the government wants to revive the capital market, it would make more economic sense to pump financial support to the productive sector, especially to the firms that are listed on the Nigerian Stock Exchange. With such intervention, the beneficiary companies would do well and continue to pay good dividends, which would in turn attract investors and thereby boost investing public’s confidence in the market.

“Such would also increase demand for stocks in the market. For example, because Rap Unity Oil paid 20 Kobo dividend per share of 50 kobo each, the shares of the company have become hot cake in the market and one cannot even find them to buy now,” he said.

On his part, the Chief Relationship Officer, Foresight Securities & Investment Limited, Charles Fakrogha, pointed out that what is needed in the market at this time is to ensure that all regulatory issues are addressed with a robust regulatory frame work put in place in the market.

“We must appreciate the fact that there is a lot of challenges in the market now and those challenges cannot be ruled out from the general economy. So, you can’t just say that operators are looking for intervention fund. The only way I think government can intervene is through the regulators, by ensuring that all regulatory issues are addressed, and all the regulators are doing their work, ensuring that the market is transparent, efficient, free, orderly and all operators can operate and play in the market according to the rules. For me, that is the intervention that is required at this point in time.”

Vehemently opposing the call, Mr. Sony Nwosu, President, Independent Shareholders Association of Nigeria, (ISAN) declared: Now, the market operators and regulators have never thought it necessary to plan how they should do things properly, rather they are planning how to get tax payers’ money in form of intervention fund to mop up the shares in the market and after a while, those who use taxpayers’ fund to mop up the market will start throwing into the market 50 shares; and after the shares are sold, they will jack up the price; and then throw in another 50 shares and jack up the price again until they will make as much money as they want at the expense of the investors. I regard this as unethical.”