The Central Bank of Nigeria (CBN) yesterday blamed the near collapse of Nigeria’s capital market on sharp practices of some commercial banks and a “systemic” failure of regulators in the sector.
At the resumed public hearing of the House of Representatives’ sanctioned probe of the country’s ailing capital market, the apex bank’s Deputy Governor in charge of Financial System Stability, Dr. Kingsley Moghalu said regulators including the Securities and Exchange Commission (SEC), the Nigerian Stock Exchange (NSE) were culpable in the capital market near collapse leading to the withdrawal of $15 billion by foreign investors from the market.
Moghalu yielded that some of the policies introduced by the CBN equally contributed to the crises in the banking sector and capital market.
Amongst others, Moghalu, stated that the global financial meltdown further aggravated the crisis in the capital market. He listed perceived uncertainty in the economic environment; the Niger Delta crisis, panic recall of margin and share loan facilities by banks as well as downward renegotiated Foreign Trade Support lines given to Nigerian banks.
Also, the apex bank disclosed that the N620 billion injected into the eight ailing commercial banks has been refunded.
He said CBN’s intervention in bailing out the banks was justified as the move was to save the banking sector from total collapse, considering the level of non-performing loans of the eight banks as well as their level of indebtedness running into trillions of naira.
Moghalu accused Nigerian banks of manipulating bank shares in cohort with some stock broking firms. According to the CBN’s Deputy Governor, banks’ reports to regulatory authorities and investors were seldom accurate, by implication, depriving regulatory authorities, investors and other stakeholder’s right information to take timely and sound decisions.
He said diagnostic and forensic investigation conducted by the CBN revealed “insider-abuse”, including concealing of insider loans, and use of depositors’ fund to acquire banks’ owned shares among other governance abuses.