The governor of Central Bank of Nigeria, Sanusi Lamido Sanusi, has given the assurance that the country’s capital market will recover next year, emphasizing the importance of further deepening the capital market for lasting economic growth.
“I have always said that the market will recover in 2013,” he said at his Lagos office on Tuesday, while reiterating his reservations.
According to ThisDay, Sanusi said the market which crashed due to (among a few other factors) the inability of major debtors to pay back loans to banks, will not recover fully until the capital market is given its place as a long-term security provider.
“Without a very strong and deep capital market the economy will continue to depend on banks for investment funds,” he said. “A situation where the banking sector remains the dominant player in terms of capitalisation is not ideal,” he added, noting that banks do not have what it takes to provide the kind of long-term loans required to drive economic growth.
The Nigerian Capital Market crash witnessed a nosedive in market capitalization from an all time high of 13.5 trillion naira in March 2008 to 4.9 trillion naira in January 2009. The All-Share Index plummeted from about 66000 basis points to less than 22000 points during the same period.
Consequently, the apex Nigerian bank moved to sanitize the banking sector, indicting 8 bank chiefs for lending without sufficient collateral, amongst other inappropriate practices, and offered bail outs to the affected banks.
In May 2011, the Asset Management Corporation of Nigeria (AMCON) acquired bad debts from the financial institutions with the intent of recovering payments from defaulters with outstanding loans valuing at least 5 billion naira ($32 million).
In October, owner of Zenon Petroleum and Gas Limited, Mr Femi Otedola, who was also listed as the corporation’s biggest debtor with an outstanding debt of $900 million, cleared his debts.