The Nigerian Stock Exchange has refuted claims that Nigerians banks have an estimated N1 trillion trapped in the capital market as either facilities for margin loans or direct investment.

The loans, according to the Exchange, are loans granted to people who used their share certificates as collateral for other business purposes in the capital market.

Prof. Ndi Okereke-Onyiuke made the clarification at a meeting with chief executive officers of quoted companies and capital market correspondents.

According to her, the banks granted the loans to their clients using share certificates and shareholdings because of the liquidity they provide.

She explained that the share certificates and shareholding serve as collateral in the manner under which they were used and are not margin loans.

She contended that about N300 billion of the estimated amount was given to stockbrokers while other went into other ventures for real estate purposes, private placement purchase. She reiterated the Banana Estate and many other estates in Abuja and across the country have these trapped funds in building projects which developers could not sell because they were uncompleted.

She observed that most of the trapped funds are in real estate, were people borrowed to build instead of putting the money in the real estate sector of the NSE.

She noted that some of those who borrowed money used the money to buy private placement because of the promises that they will make a killing in private placement.

“A lot of private placement came; we counted about 180 in one year. 180 companies that ought to have gone to the bank for money went by way of private placement.

The Stock Exchange was shouting that these companies were conducting completion board meetings as if they were publicly quoted companies. They were supposed to print memorandum not prospectus but they were printing prospectuses. They were supported to print placement memorandum and place it before 50 business people”.

She contended that the fact that they were registered as public limited companies does not mean that these companies could raise money like publicly quoted companies.

Okereke-Onyiuke noted that the Exchange had to place a buyers’ beware caution in the newspaper to warn people from buying these private placements because of those who could not differentiate between quoted and unquoted companies that were petitioning them.

She said some people got loans while others sold their share in legally quoted companies to go and buy private placement because some told them “buy now at N2 and when we are listing we will be listing at N10 and you make N8 times the number you are buying. They have not come to list and the money is tied down”.

She said it was because of this that the Exchange established emerging markets.