Global Crises, SEC and the Nigerian market makers


In line with the recommendations of the Presidential Advisory Committee on the Nigerian capital market, the Securities and Exchange Commission (SEC) has approved three companies to operate as market makers.


The development came as the Governor of the Central Bank of Nigeria (CBN), Prof. Chukwuma Soludo, was named to a United Nations (UN) task force on the global crisis.


Lanre Oloyi, SEC\'s head of media, said out of the three firms, one has been duly registered while the two others are at the final stage of the registration process.


The three firms whose applications were approved by the Commission were chosen from the list of 15 companies that had so far submitted their applications to act as market makers.


Market makers are wholesale operators who create liquidity in the stock market by either buying shares when there is a glut or selling shares when there is scarcity.


The spokesperson of SEC confirmed to BusinessDay at the weekend that so far, only three firms have scaled through to operate as market makers, though declined to mention the names of the firms whose application were considered.


Explaining further, he said: \"At the appropriate time, the SEC will announce the names of the firms that have been approved and given licence to operate. Of the three firms, one has been given final licence while two others just scale through the screening process by the Commission during the week. The Commission is still going through other applications for consideration.\"


He, however, assured the investing public that the Nigerian stock market is still safe and healthy, saying: \"The global financial market crisis only affected our market minimally.\"


Speaking at a workshop for Capital Market Correspondents, at Ijebu-Ode, Ogun State, Oloyi, who represented director-general of SEC, Musa Al-Faki, said: \" There was no crisis in the Nigerian stock market as it was in the global market. What we had was market correction. The Nigerian stock market was only correcting itself and now that the stock prices have reached its bottom peak, it has started rising again. So, the Commission is quite confident about the market and does not see the rebound as a surprise. This is because the fundamentals of our quoted companies are very strong and intact.\"


He further appealed to newsmen to be very objective in their reports about the market because of its sensitivity. \"Our market is quite peculiar from other advanced markets. We never had any crisis in our market because of the regulation put in place. When the global financial crisis started, our market was moving well, until after several months before it started dropping because of over-speculation. So, it is now correcting itself and there is no need to panic.\"


In the same vein, Felix Ogbeha, special assistant to the Minister of State for Finance, Remi Babalola, who represented him at the occasion, expressed confidence in the market.


The minister said: \"The capital market remains the barometer with which the economy is measured, and as purveyors of information, your daily insights into the activities of this sector will help to develop and strengthen the investment culture of Nigerians. In other jurisdictions, there has been some form of interventions to rescue the economy. Back here in Nigeria, stakeholders are meeting to proffer solutions to the crisis that is affecting the stock market. It is my hope that very soon, investors would have cause to smile again as the market regains its stability and strength.\"


He, however, assured investors that the Nigerian capital market is healthy and sound. In his words: \"The continued fall in stock prices will not be long. Investors need not panic; rather, it is time to invest more. The fundamentals of the economy are strong; all that we need do is have confidence in the market and the economy. I am glad that awareness of the Nigerian Stock Exchange (NSE) as an investment avenue has increased tremendously. The downturn in the market is a blessing in disguise and also a lesson on the reality of the operations of the capital market.


\"It is important to view the capital market as a form of long-term basis rather than a speculative jackpot. My investment advice is for Nigerians and other investors to invest more on a long-term basis and the best time to do so is now when we have the lowest stock prices we have seen in a long time. The future is bright and promising.\"


In the meantime, Soludo has been appointed to a high-level task force being set up by the UN to examine the possible reform of the global financial system, including the International Monetary Fund (IMF) and the World Bank in the wake of the current economic turmoil.


Soludo has been holding the post since 2004 when he initiated the banking consolidation exercise, which reduced the number of banks in Nigeria from 89 to 24.


The market-induced consolidation, which raised the shareholders\' funds of banks in Nigeria from N2 billion to N25 billion, has helped to save Nigerian banks from the global financial crises that have seen the United States and the European Government pump in several billions of dollars into their economy to bail out their respective financial institutions.


The UN General Assembly President, Miguel DEscoto, who announced the full composition of a high-level task force he is setting up, said Joseph Stiglitz, who won the Nobel Prize for Economics in 2001 and is a former chief economist at the World Bank, will chair the panel known as the Commission of Experts on Reforms of the IMF and Financial System.


\"The task force will suggest steps that member-states can take to secure a more stable global economic order,\" he said in a statement issued by the UN News Service.


Many economies are either into recession or are slipping into recession as a result of the financial crisis brought on by the sub-prime credit crisis in the United States.


Others in the panel include another Malaysian, Jomo Kwame Sundaram, the Assistant Secretary-General for Economic Development and the UN Department of Economic and Social Affairs (DESA), who at one time was a lecturer with Universiti Malaya and Universiti Kebangsaan Malaysia, and Jose Antonio Ocampo of Colombia, who is a former Under-Secretary-General for Economic and Social Affairs.


Also in the panel are Jean-Paul Fitoussi, Professor of Economics at the Institute dEtudes Politiques de Paris in France, Avinash Persaud of Barbados, who is chairman of Intelligence Capital Ltd and Yaga Venugopal Reddy, former governor of India\'s Reserve Bank.


Japan\'s Eisuke Sakakibara who once was dubbed \"Mr. Yen,\" and now Professor at Waseda University in Tokyo is also in the panel, and China\'s Yu Yongding, the Director of the Institute of World Economics and Politics.


When Mr. Descoto announced the formation of the panel last month, he said that \"there is growing recognition that the current turmoil in the financial system cannot be solved through piecemeal responses at the national and regional levels but requires a co-ordinated effort at the global level,\" Bernama said.


As a result of Nigerian\'s banking consolidation exercise, all the banks in the country are strong, healthy and robust with shareholders funds of about N2.7 trillion as at September 30. This is about 821.50 per cent higher than the N293 billion cumulative funds of the 89 existing players pre-consolidation.


And world leaders battling a dire and deepening economic crisis yesterday vowed to co-operate more closely, keep a sharper eye out for red-flag problems and give bigger roles to fast-rising nations - but kicked many hard details down the road for their next summit after President-elect Barack Obama takes office.


Perhaps as important as the modest concrete steps they took, the leaders of the planet\'s richest nations - and some of the fastest-developing - made clear their recognition of the world\'s increasingly interconnected financial architecture and the responsibilities that go along with it.


\"There shall be no blind spots,\" German Chancellor Angela Merkel declared. \"There is here a great common will to ensure that such a crisis is not repeated.\"


Underscoring how bad things have gotten this time, President George W. Bush, the summit host, said he had agreed to the recent $700 billion rescue plan for U.S. financial institutions only after being told the nation was at risk of falling into \"a depression greater than the Great Depression.\"


Also significant at the summit: the inclusion of a far broader range of countries than the elite, old-guard group that usually holds such summit meetings.


\"Emerging market countries were not the cause of this crisis, but they are among its worst affected victims,\" declared Indian Prime Minister Manmohan Singh.


Leaders from 21 nations and four international organisations attended the emergency summit that was held as Washington was blanketed in a gray mist and which took on a workaday feel appropriate to the grim crisis that drew them together. At the conclusion of talks that took place over two days, they released a joint communique that was modest in scope but high in hopes.


Covering eight pages and 47 action items, the document\'s over-arching focus is to establish a series of new safeguards for the fragile and opaque global financial system. Nearly all the efforts are aimed in some way at better flagging risky investment patterns and regulatory weak spots before they bring down companies and then ripple dangerously through entire economies, as has happened in recent months.


To that end, the leaders called for such mundane things as \"supervisory colleges\" where financial regulators can compare market notes across countries, better co-operation between nations on regulations, the eventual standardisation of accounting rules governing how companies can value potentially tricky assets, and new attention to credit-rating agencies.


The leaders also supported expanding the membership of the Financial Stability Forum, a group that has been examining the causes of the financial crisis and crafting ways to prevent future problems. And the group called for broadening the financial police work of the 63-year-old International Monetary Fund as well as modernising the institution to better keep pace with the changing economic environment.


None of the items was splashy, and most would be understandable to few outside of financial experts, but officials argued they have far-reaching potential.


\"It\'s not glamour,\" said French President Nicolas Sarkozy.


More than two dozen items were slated for some level of action by the end of March, around the time the leaders expect to gather again, with the rest left for later. Concrete proposals were few, however, with most details slated to be worked out by finance ministers in the coming months and beyond.


The leaders also discussed the shorter-term problem of how to bring their nations\' economies back from the brink. Some had pushed ahead of time for a pledge of co-ordinated new government stimulus spending by each nation.


But with Bush cool to such action in the U.S., the communique only endorsed taking such action \"as appropriate.\"


A handful of the hundreds of protesters that flocked to the U.S. capital city succinctly summed up skepticism about their benefit to the families around the world who are increasingly worried about mortgages, retirement savings and jobs. \"Money for people\'s needs, not bankers\' greed,\" said their bright yellow signs.


The talks were undoubtedly remarkable, however, for drawing together such a vast number and array of nations and bringing them to agreement on a set of actions, however limited, in less than a month\'s time. Leaders from major powers including Britain, Germany, France and Japan were there, alongside rulers from developing countries such as China, India, Brazil and South Korea as well as from the oil-rich Gulf State of Saudi Arabia. The summit was just announced on October 22, and the urgency of the downward-spiralling global economic situation led to much faster action than is typical in the usually glacial diplomatic arena.


With fears high that signs of discord among the world\'s most powerful politicians could send markets plunging again come Monday, the presidents and prime ministers appeared uncharacteristically determined to hold their tongues about any disagreement over either the cause of the current crisis or their compromise agreement. This despite the fact that the action plan seemed to lean in most areas far more toward the U.S. preference for boosting oversight and free-market incentives than the European desire for increased regulation and requirements.


Sarkozy, British Prime Minister Gordon Brown and European Commission President Jose Manuel Barroso emerged with praise for the meeting as a sign of historic co-operation.


Canadian Prime Minister Stephen Harper said after the summit that \"despite the great diversity of countries in the room for those two days of the summit, there was a practically unanimous agreement on all major topics.\"


Bush, though, is on his way out of office and the leaders were clearly looking beyond him to his successor. Many met on the sidelines of the summit with Obama\'s surrogates, former Secretary of State Madeleine Albright and former Republican Rep. Jim Leach of Iowa, while speculating about whether the Democratic president-elect might veer from Bush\'s approach by the time of the next summit.


\"The president-elect believes that the G-20 summit of leaders from the world\'s largest economies is an important opportunity to seek a coordinated response to the global financial crisis,\" Albright and Leach said in a statement late Saturday. \"There is one president at a time, so the president-elect asked us to represent him in receiving the views of these important partners. We also conveyed President-elect Obama\'s determination to continuing to work together on these challenges after he takes office in January.\"


Still, Bush made sure he kept an iron grip on the proceedings. His was the only voice heard in any official setting - during the toast at Friday\'s dinner and before and after the closed summit meetings. All the other leaders had to scramble to set up briefings or news conferences at alternative sites in order to express their thoughts.


The inclusion of the developing nations was demanded by Bush, in part in hopes they would act as a brake on European desires for tough new regulations of financial firms or products. But the decision also was hailed as necessary to the effectiveness of such a meeting, because the financial crisis that began in the U.S. had spread to the poorer nations.


Indeed, one goal of the meeting was to boost the effort to help such struggling nations weather the financial crisis largely caused by their bigger, more developed counterparts. Japan\'s Prime Minister, Taro Aso, urged China and others to contribute to the International Monetary Fund\'s $250 billion bail-out pool, aimed mostly at poorer countries. Japan on Friday said it was ready to put in as much as $100 billion.


Talk of blame was kept to a minimum, though many still hold the belief that the primary fault for the cascade of ruinous events lies with the U.S., where it has become the norm to offer easy credit, outsized rewards for high-risk investing, and lax oversight to the whole process. - Guardian


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