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The regulatory authorities in the nation’s financial sector and the Federal Ministry of Finance yesterday met in Lagos with a resolve to jointly take measures to preserve and promote the continued vibrancy, liquidity and buoyancy of the capital market. The Finance Ministry, Central Bank of Nigeria (CBN), Nigeria Deposit Insurance Corporation (NDIC), Securities and Exchange Commission (SEC) and the Nigeria Stock Exchange (NSE), at a joint session in Lagos said they would not allow the stock market to crash.

The market has been on a bear run that has lasted for over three months, leading to an unprecedented depression and huge losses for individual and institutional investors. Since March this year, market capitalisation of the NSE dipped from a record level of over N13 trillion to N10.4 trillion last Wednesday before rallying Thursday and yesterday.

But Minister of State for Finance, Mr. Remi Babalola, said the nation’s capital market, when viewed from the point of what it should do, has done very well.

He described the stock market as “very robust, liquid and on the right track.” He described as incorrect, insinuations that the stock market had crashed, saying the market’s contribution to the Gross Domestic Product (GDP), its influence in moderating interest rates, among others, point to the fact that it is moving in the right direction.

“When certain things are based on rumours and not on market fundamentals, we have to correct them. This is the right time for investment to come into the country. The market is strong and robust,” he assured.

CBN Governor, Prof. Chukwuma Soludo, in his remarks, said all the regulatory authorities agreed to continue to collaborate together to protect the stock market and improve internal processes to enable the effective discharge of functions. Soludo said the regulators also underscored the need for continued reforms in the market in order to further deepen it through policy, regulatory and supervisory interventions. Making specific reference to the recent bear run in the market, the CBN governor explained that volatility was a feature of the stock market everywhere, noting that it is a normal occurrence for “prices go up and down.”

“If you watch the American stock market, it loses 500 points in a day and comes back again. Nigeria has been used to a linear curve that is always going up. That is why people panic when the bears set in. But the market is going up now,” he explained.

On the controversial issue of margin trading by stock brokers, which was allegedly stopped and is believed to have triggered the bearish run on the market, Soludo said the apex bank never issued any circular directing banks to stop lending money to brokers nor ever contemplated issuing one.

“I don’t know where the rumour started from. No circular was issued and none was contemplated. It did not come from us. There is no basis for it,” he said.

Soludo said the CBN does not prescribe to banks which sector to lend to, stressing the banks decide who and which sector to lend to, depending on their risk appetite. The Director General of the NSE, Prof. Ndi Okereke-Onyiuke, also cleared the air on the exchange’s change of name of the ‘Margin Accounts’ of stock broking firms kept with the Central Securities Clearing System (CSCS).

In place of the margin account by which it was previously known, the NSE changed the name to ‘Custodian Account’, which fuelled speculations that margin trading had been stopped. However, Okerke-Onyiuke said what stock brokers do in Nigeria was not really margin trading as practiced in other countries. She said the proper name for the account is custodain account. She, however, said the exchange has reverted to the old name to avoid misconstruing its intentions.

By Ayodele Aminu, Moses Obajemu and Linda Eroke