By NBF News

By Peter Egwuatu
LAGOS — The Nigerian Stock Exchange, NSE, yesterday announced that the Foreign Portfolio Investment, FPI, in the market has risen to N381.34 billion in 2010, from N202.483 billion recorded in 2009, representing a growth of 46.9 per cent.

The Exchange also announced that any capital market operator that has a negative capital base and fail to recapitalize would be forced to close shop.

The NSE revealed that new issues valued at N2.424 trillion was recorded in 2010, representing 9.8 per cent of the Gross Domestic Product, GDP, as against N279.25 billion or 1.2 per cent of GDP in 2009.

Reviewing the operations of the stock market in 2010, the Interim Administrator of the NSE, Mr. Emmanuel Ikazoboh, who disclosed this,  said: 'Operators in the market need to meet the capital base set or risk being suspended from further activities in the market.

'Available statistics show that purchases by foreign investors during 2010 was about N381.34 billion representing 48 per cent of the aggregate turnover.' This is an increase when compared with the N202.483 billion recorded in 2009.

Concurrently, total sales (outflow) during the year was about N194.63 billion culminating in a net flow in excess of N186.71 billion, an increase over the preceding year's net flow.'

He explained that some of the stockbrokers have had their capital base eroded by the margin loan debt, stressing that the Exchange has the responsibility to  protect investors whose account were being used by some dealing member firms to continue to operate because they have no funds of their own any more.

It was gathered that the NSE's  capital base for dealing member or stockbroking firms has been fixed at N1.5 billion, while Issuing Houses are being required to shore up their capital base to N5 billion.

According to the NSE, ' we have told stockbrokers  during the time we had meeting with them that they have to bring in more cash to continue operation rather than use investors' money to run their business.'

It will be recalled that, the Exchange parley with stockbrokers last Friday over the issue of recapitalisation ended  in sharp disagreement as it was gathered that the brokers insisted that the Exchange should have given them a bailout  option as obtained in the banking sector when the Central Bank of Nigeria (CBN) intervened in some troubled banks.

Faulting the stockbrokers over the claim that the NSE should extend bailout option like the CBN did to banks, Ikakoboh stressed that the Federal Government cannot bail out the stockbroking firms by pumping money into them because it does not want to take over those firms.

According to him, ' The NSE cannot inject funds in dealing members firms as it will amount to taking over the firms.

It should be noted that the  issue of recapitalisation by operators in the capital market was put on hold since 2009 following the crash of the capital market from the end of the first quarter in 2008, against the expected shoring up stockbrokers capital base to N1 billion from N20 million.

Explaining further on the issue of recapitalisation by market operators, the Interim Administrator of the NSE said,  'We are taking this action serious because it is the only the way we can protect investors. And we are also protecting the stock brokers themselves. We have a situation where some of them as a result of margin loan have had their hands burnt, and therefore their capital was completely eroded.

We cannot because of that fold our hands and allow them to continue to operate because they will continue to use their investors' funds to continue to operate'.

Reviewing the market, the NSE said turnover of the 2010 stood at 93.3 billion shares valued at N797.6 billion, representing 3.22 per cent of the Gross Domestic Products.

Value of traded shares in the market in the year was said to have risen by 16.31 per cent while volume traded volume slipped by 9.2 per cent from the 102.8 billion valued at N685.72 billion ( 2.9 per cent of GDP) recorded in 2009.

In his effort to ensure compliance, the NSE said out of the total of 366 complains received in the year as against 249 in 2009, 291 were adjudicated against dealing members firms, 66 against non dealing members while 9 were inactive operators.

On the other hand a total of 135 complain were resolved while 231 are still being investigated pending resolution.

According to the Exchange during the year under review, 74 dealing firms were suspended for failure to submit their audited account for 2008, 2009 and 2010 respectively compared to six in 2009.