NSE laments undercapitalisation of stockbroking firms

By Michael Eboh

The Nigerian Stock Exchange (NSE) has expressed concern over the preparedness of stockbroking firms in the nation’s capital market to meet the demands of their clients in 2009 and beyond, declaring that only 49 stockbroking firms have capital base in excess of N1 billion.

Speaking during a review of the performance of the capital market in 2008 and the outlook for 2009, the Director-General of the NSE, Professor (Mrs.) Ndi-Okereke Onyiuke disclosed that in its routine inspection of stockbroking firms it discovered that majority of the firms lack the necessary capital and information technology infrastructure to cope with emerging trends in the local and global financial cycles.

She further disclosed that during the inspection in 2008, a significant majority of the stockbroking firms are still carrying out their activities with old-fashioned technologies and processes, adding that five of the firms inspected were redundant.

She said, “The compliance department inspected 243 dealing firms out of 248 scheduled for the year. The five firms that were not inspected were mixed. On the average, most dealing firms performed well in terms of profitability. Eighty per cent of firms inspected have completed automation of their accounting, stockbroking and administrative processes. The rest have been enjoined to automate their operations during 2009. Up to twenty per cent of firms inspected have capitalisation in excess of N1 billion.”

Onyiuke disclosed that it licensed six new stockbroking firms to commence operation in the capital market, adding that the six firms have capitalisation in excess of N1 billion.

According to her, the new dealing member firms include: Cardington Securities Limited, Aims Asset Management Limited, Rencap Securities Limited, Redasel Investment Limited, Northbridge Investment and Trust Limited and Peace Capital Market Limited.

Meanwhile the cases of fraud and infractions have not been totally eradicated from the market as a number of dealing firms still breach the rules of the capital market, thereby putting investors confidence in jeopardy.

According to Onyiuke, 341 cases of complaints and infractions were received from investors against dealing firms, adding that it has only succeeded in resolving 243 of the cases.

She said, “In 2008, a total of 341 complaints/infractions were reported against dealing firms. Out of this, 243 cases were amicably resolved while 98 are still under investigation.”

She further assured investors of the soundness of the Nigerian capital market, expressing optimism that the current bearish trend will soon be over and the market would rebound and return to its glorious state.
She disclosed that there will be improved activities both in the primary and secondary market, considering the number of companies that have gotten approval to undertake share offering, and also, the conclusion of private placements which tied down investors’ funds in 2008.

 ÃƒÆ’ƒÆ’¢â‚¬Å“Based on objective market assessment and in line with cyclical patterns of stock markets globally, we are optimistic that the Nigerian market will rebound in the not too distant future considering the most recent resurgence of activities by the bulls whose activities are translating into improved liquidity in our market and renewed, howbeit, gentle confidence build up. The primary market promises to be busy during 2009, considering that a number of companies obtained Council approval during 2008 but are yet to make the issues available in the market. The secondary market promises to be busy as we expect the conclusion of many private placements embarked in 2008.” -vanguardngr
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