 |
| Ngozi Okonjo-Iweala |
The announcement of a write-off of
N22.6 billion of the debt owed sundry commercial banks and bought out by Asset
Management Corporation of Nigeria (AMCON) is a matter of grave concern. As an
initiative, it is wrongheaded for, among other things, enabling damaged firms
to be recycled rather than allowed to exit the market as the doctrine of free
enterprise dictates.
The Minister of Finance, Dr. Ngozi
Okonjo-Iweala, said that the Federal Government adopted a number of measures to
reduce transaction costs and offset the N22.6 billion bank loans owed by 84
stockbroking firms. But the Nigerian capital market is comparatively expensive
in respect of revenue going to the Treasury, namely, VAT and Stamp Duties and
for trading commissions to the Securities and Exchange Commission.
Monetary authorities in many parts of the
world gain credibility by the logic of the policies they offer for each
peculiar economic cycle and the country’s development agenda. Subsequent
implementation of these initiatives and policies is often the justification of
populist or electoral acceptance or dissent in many countries, today. To that
extent, it is appropriate for regulators in the capital market to initiate
fiscal sacrifice that is dressed up as a stimulus to recovery, and as incentive
to participation. In such a policy, the framework of the parties involved
should be certain: offering all persons and companies trading in the capital
market, a level playing field. This is the only way to ensure transparency and
non-discrimination in the market. This does not appear to be present in the recent
intervention in the capital market.
In fact, the N22.6 billion so-called
stimulus is, arguably, the highest amount of gratuitous proposition ever made
by the Nigerian treasury to any vested interest group in the land. The
philosophy underlying this intervention is simply supercilious. Originally,
enlightened money men as bankers and stockbrokers struck a private contract,
without dispute, to issue margin loans and literally play on the Nigerian stock
market.
And quite pertinently, this continued
unfettered for years. They celebrated a series of initial public offers from
the consolidating banks and kept their tons of profit. These men rode the crest
and price rallies that were dumbfounding, and created a self-fulfilling rise of
all indices on the Nigerian Stock Exchange.
Bubbles created in stock prices were so
obvious and were well in the view of every sane onlooker and participant.
Neither the bankers nor the stockbrokers called time on their margin contracts.
In fact, they cleverly walked away as the bubble began to burst. Those writing
off the huge debt of the capital market operators ought first to ascertain the
trading profit of the 84 stockbrokers and how much tax return was made by each
firm and its directors to the public treasury.
It does appear that the Finance
Ministry, thanks to the dexterity of lobbyists at the highest levels and at
different venues, has interloped into a market relationship between banks,
AMCON and a number of private firms. The ministry has decided, misleadingly,
that the exit of these firms from the stock market will reverse the doctrine of
free enterprise of entrance and exit. This is a grossly flawed logic.
These stockbroking companies are their
own agents and they act as intermediaries for their clients. Where these clients,
relying on the judgment of the moneymen lose their investments, the hazard must
extend to the brokers who, presumably, traded on the same assumptions.
The downturn in the market should be
read more circumspectly. Brokers are marginal or majestic in the market to the
limit of their resources, and it is not in the place of the public treasury to
underwrite vested commercial interests at the neglect of the Nigerian people.
No other jurisdiction has paid off stockbroker commercial debts.
The tendency for superficial fixes is
ever so prevalent. It is a highlight of the misdiagnosis that after two months
of the stock exchange appointing market makers, the sky is still grey because
the larger picture, the Nigerian economic fundamentals, are still hobbled by a
set of negative and stagnant variables.
What is required now is greater caution
in fiscal spending. A series of fiscal intervention in the textiles, aviation,
and agricultural sectors have yielded poorly, indicating that these initiatives
have not been thought through. Even then, the compelling N22.6 billion is a
gift of a strange colouration. What justifies this bailout, which principal
effect is to enable the bohemian and swashbuckling work ethic of a few private
companies to be revived?
The sanctions imposed on these firms as
corollary to the tax-payers’ N22.6 billion include being barred from
AMCON mandates ‘for not less than three years’, restriction on debt financing
of their trades or taking of proprietary positions, compulsory reports of trade
in excess of N25 million and use of custodians. These are mild or inadequate
actions in exchange for N22.6 billion gift of public money. There are so many
more pressing alternatives, the reconstruction of public infrastructure, for
instance, for which this sum could be deployed. If in the end this stimulus is
allowed to stand, it must rank as the sacrifice made by so many at the instance
of a few.
It will be tantamount to a reward from
the public purse in the sum of N22.6 billion for deviant behaviour by private enterprise
in pursuit of private greed. Which law of the land allows such anomaly?
Stockbrokers who were in cohort with bankers and others with misguided
enthusiasm on the stock market to create the bubble that Nigerians are still
paying a price for, do not merit a national gift of N22.6 billion. The stimulus
should be cancelled.
Culled from The Guardian.
No comments:
Post a Comment