STANDARD CHARTERED BALMES BANK'S LENDING FOR MARKET MELTDOWN

Standard Chartered Bank has attributed the recent meltdown in the Nigerian stock market to excessive credit granted by Nigerian banks to operators and other stakeholders in the capital market.
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Speaking at the bi-monthly general meeting of Money Market Association of Nigeria, in Lagos , weekend, Razia Khan, Global Head of Research, Standard Chartered Bank, also said the withdrawal of funds by foreign investors contributed to the meltdown.

According to her “The global financial crisis did not impact on the Nigerian economy because of the various reforms and policies put in place by the government. The fundamentals of the economy are strong”.

She noted that the securities of the Nigerian stock market have been overvalued and are now undergoing corrections which will put the market to its rightful place.

According to her, “Most of the companies’ assets have been undervalued and need to be revalued”.
She further cautioned the government to be prudent in managing the foreign earning reserves to be able to meet its developmental target. Nigeria is blessed with all the resources and has potentials for growth and development only if the economy is managed well.

She said “The banking consolidation greatly contributed to strengthen the banking sector and gave foreign investors confidence to bring their funds into the country. Furthermore, the various reforms also contributed to reposition the country and made it to secure debt cancellation from the international institutions. The macro economic stability is also an added advantage that has contributed to make the economic fundamentals of the country solid”.

Khan, further noted that the ongoing global financial crisis will not affect Nigeria as the country has enough foreign exchange reserves to cushion and effect.

According to her “The country was able to manage its foreign exchange earnings as its current foreign reserves should take care of the declining world oil prices. Although, Nigeria should be prudent in channeling its funds to the productive sectors, especially to infrastructural needs of the country to aid the real sector”.

While commenting on the recent market meltdown in the country, she blamed banks for channeling most of their funds to the stock market, According to her “The stock market decline exerted systemic influences on other markets. It had positive effects on the real estate market as well as on the banks whose products the investors shifted to as alternative investments.

But the impact on the real sector appears different. The banks’ consolidation has not really impacted on the real sector. The real sector is starved of funds and other infrastructural problems which have all contributed to affect the development of the country.

Many firms which hitherto battled with worsening environment of business were not able to maximize scale or scope economies in order to be competitive. Many firms which had tied their survival to their successes at the market for more funds could no longer do so. The situation at present is really grave although the Nigerian stock market has started correcting itself”.–Vanguard