First Bank boss seeks strict capital market control mechanism

THE Group Managing Director of First Bank of Nigeria Plc, Mr. Bisi Onasanya, has said that strict market control mechanisms must be in place if the Nigerian capital market will attain the desired level of recovery envisaged by all participants.

Speaking while presenting a paper, “Rejuvenating the Nigerian Capital Market for Sustainable Growth and Global Competitiveness: Issues, Challenges and Options, Onasanya stated that the market mechanism should be strong enough to drive efficient price discovery processes.

He noted that it was heartening that the current focus on macro-prudential regulations was skewed in favour of reinforcing coordination across regulators in the financial services sector.

Onasanya observed that though the federal government has commenced efforts to design forbearance for brokers in order to help jump-start activity in the market, he noted that further reforms to the economy, including such reforms as are necessary to boost final demand, especially through the availability of credit at the retail level will be essential to drive a return of domestic savings to the capital market in the medium-term.

According to him, two ingredients must be in place for the bailout package being worked out for brokers to be effectual.

“First is the provision of funds at concessionary rates. These new levels of liquidity will help brokers begin the balance sheet adjustment necessary to return to functional levels of liquidity in the market.

“Nonetheless, funds at concessionary rates would still be inadequate to address the over N300 billion operators’ debt overhang. In order to address this, the capital market would need forbearances on the debt owed by operators, including long-term restructuring of margin facilities.

“AMCON has addressed the bulk of margin lending driven by bank debt. But the bulk of the outstanding debt is owed on proprietary positions, and the obligations attendant upon this has been the single most important cause of industry operators’ insolvency.

The FBN boss affirmed that the fact that the capital market crisis has dragged on for so long without any sign of prompt recovery was an indication that the authorities were not looking at the broad range of policy responses needed to solve the present crisis.

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