The President of the Institute of Chattered Accountants of Nigeria (ICAN), Chief Richard Uche, has attributed the sudden crash in the nation’s capital market to illegalities perpetuated by banks which did not only give individuals loans to buy shares but also to their subsidiaries to buy their own shares.

Speaking with journalists as part of the activities of the on-going 4th Northern Districts Conference in Abuja, he said the crash in the market had created sour debts for banks which might require government intervention.
His words: “You can give loans to individuals to buy shares. However, you cannot give loans to your subsidiaries to buy shares. In fact, it is illegal. True figures can only be obtained from the CBN but one can only imagine that there are a number of sour loans. We know what caused these stock market problems that we are having and that is margin lending. And there were billions upon billions of these loans that were granted to subsidiaries of banks, and individuals to buy into the stock market.

“Now that the stock market indexes are down, it would appear that the securities for those loans are no longer there, when you recall that there were shares that were pledged to obtain these loans. Now that it is not there, there is a problem for the banks to recoup the loans, that is what I am saying that the government could help the sector.”

When asked what form the government intervention should take he said, “as for the capital market, what we are talking about here is trying to help banks that were lending on margin basis to a number of investors. Let the banks get a bail-out in the form of buying over some of the sour debts - debts that have become stale and so on as a result of the activities in the stock market. “And I think over all, this will help the financial sector come back alive and live up to the responsibilities of lending to the productive sector.”

Answering another question on the use to which the nation’s excess crude oil revenue account should be put, Chief Uche said, “I think it is something our government should seriously consider doing because the whole essence of the Excess Crude account was to store the flourishing revenue for a rainy day.  That rainy day has come. Other countries are doing it. This is the so-called bailout funds that are coming from government elsewhere to resuscitate their ailing industry and the like.

“I think this is our own source of bail-out fund. We should use it to resuscitate the stock exchange, we should use it to help our agriculture, we should use it to increase capacity utilisation in our ailing industry, such as the textile.”