Margin loan overhang poses challenges to brokers

The continue pressure of margin loan overhang on operators on the Lagos floor of the Nigerian Stock Exchange (NSE), is currently posing great challenges on their operations, President, Chartered Institute of Stockbrokers (CIS), Mr Mike Itegboje has said.To this end, Itegboje has renewed calls for the establishment of a Stabilisation Fund for the capital market as a way of resolving the liquidity challenge in the market.It will be recalled that operators in the equities market currently owe banks in the country about N1.7 trillion. Speaking recently at the 2012 Annual Dinner, Awards Night and Investiture of Fellows ceremony in Lagos, Itegboje explained that the margin loans overhang had been posing a big challenge to brokers as they were suffering from lack of fresh credit lines from banks to trade in heavily discounted stocks currently in the market.Although there have been indications that the Federal Government is considering a debt forbearance package, it has been delayed in coming. The CIS president noted that the setting up of a Stabilisation Fund would provide liquidity in the market and assist in its recovery. 'We appeal to the men of goodwill to join us in demanding for a stabilisation fund for the capital market. It can be done through the Asset Management Corporation of Nigeria (AMCON) or Central Bank of Nigeria (CBN),' he said.The CIS boss explained that the fund could be used to fund market makers to equip them financially and be able to mop up excess stocks of highly liquid securities as the need arises.'The Fund will be recoup when the market rebounds and becomes attractive to investors. This will restore investors' confidence,' he said.As brokers continued to wait for intervention of government in the market, Itegboje also tasked stockbroking firms to employ strate-gies and innovations that would enable them play bigger roles in the nation's capital market.
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