The Nigerian government has granted 84 stock brokers a 22.6 billion naira debt relief to stimulate and reinvigorate activities in the struggling capital market (US$1=155 Naira).
The local media reported Tuesday that Finance Minister Ngozi Okonjo-Iweala announced the measure at a news conference in Abuja, the Nigerian capital.
She also announced the elimination of stamp duties and Value Added Tax (VAT) on stock market transaction fees.
“I will like to announce that the Federal Government has consented to waive the 0.075 percent stamp duties payable on stock exchange transaction fees; and exempt from VAT, commissions: (a) earned on traded values of shares, (b) payable to the Securities and Exchange Commission (SEC), and (c) payable to the Nigerian Stock Exchange (NSE) and the Central Securities Clearing System (CSCS); by including these commissions in the list of VAT-exempt goods and services,” the minister was quoted as saying.
She however disclosed that the debt relief would be accompanied with tough sanctions on stock brokers to discourage excessive borrowing by capital market operators in future.
The sanctions include prohibition from services to Asset Management Corporation Of Nigeria(AMCON), which means that brokers benefiting from the relief would not be allowed to provide any professional services to AMCON for a period of not less than three years.
Another sanction, is that there must be greater disclosure by the brokers, which will require firms to reveal to the apex regulatory agency, Securities and Exchange Commission (SEC), any dealings in any security valued at a minimum of 25 million naira, executed in a single deal or multiple deals on the same day, on behalf of their clients.
There would also be a limit on debt financing which is part of their net capital requirement.
The minister said under this, no broker that has received forbearance shall permit his aggregate indebtedness to exceed 100 percent of his net capital.
Activities on the floor of the Nigerian Stock Exchange (NSE) started on a downward slope following the 2008/2009 global financial crisis and the banking crisis.
Major market indicators dropped as the NSE All Share Index (ASI) plummeted from a peak of about 66,000 points in March 2008 to less than 22,000 points by January 2009.
This singular act wiped out over 8 trillion naira (or around 70 percent) of the total capitalisation of the stock exchange.
Since then, activity on the stock market has remained sluggish, even though there are some signs of recovery, with the index now at about 26,494 points.