Before the recent development in the Expanded Discount Window (EDW) where banks borrowed from the Central Bank of Nigeria but failed to apply effective risk management skills and good corporate governance, the story use to be that of margin loans saga. 
The CBN had estimated that the total bank margin loans amount to N716billion ($4.8billion) but brokers widely believe that the true extent of the loans could be N1.4trillion. 

These players in the capital market believe that a large chunk of the margin loans were tied down in private placements and public offers, and as such many investors where caught in the web of meltdown. Till today, some of the offers have still not been listed on the Stock Exchange. Some example are ENCON, Industrial and General Insurance (IGI) and other companies. 
Banks had engaged in indiscriminate granting of margin loans to their clients without adequate cover, but upon considerations which in most cases are purely based on personal recognition. 

With this development, many brokers/lenders were caught up in the margin lending frenzy without adequate contractual agreement and proper documentation. 
Wale Agbeyangi, managing director/CEO, Cordros Capital Limited, notes that a large chunk of collateral stocks on these margin loans were not liquid enough and “as such exiting when the bearish trend began was almost impossible.” 
Stockbrokers’ experience showed that some banks initially wanted all their margin loans paid back while some were open to discussion with brokerage firms. A few of the banks of the other hand adopted the legal approach to recovery. Example these banks institute legal actions, petition the Economic and Financial Crimes Commission (EFCC). 

Debt/interest restructuring is one of the most innovative ideas coming from banks. For example, one brokerage firm with a margin exposure of about N650million with one of the banks has benefited from the restructuring plan which has seen it paying back N200million. 
The incentive received from the banks includes a six months interest moratorium and a one year moratorium for principal repayment. The interest charged was also reviewed downwards from 18 percent to 12 percent. 

Some factors are responsible for brokers’ inability to meet margin obligations. 
Some of the factors according to Agbeyangi include that: “market index has fallen greatly by about 55 percent since the start of the market meltdown to date. Brokers are not generating enough patronage and hence income to meet up their margin loans obligations. 

Box load portfolio had been greatly decimated by the stock market meltdown and as such both the principal and interest have been eroded. Certain proportion of the money borrowed is still tied down in private placements. An average investor who remains in the capital market since the inception of the market meltdown in March 2008 to date must have suffered about 65 percent decline in the value of his/her equity asset. 
The general economic recession in the country, influenced by the decline in crude oil prices at the world commodity market has led to lower income per capita for the nation. Hence, individuals are finding it very difficult to meet their debt obligations.” 

Afrinvest ( West Africa ) Limited in its 2009 banking review noted that Nigerian banks were clearly exposed to the stock market on several levels. Some of the exposure levels are as lenders and providers of liquidity to stockbrokers and other investing institutions, and as lenders to retail stock market investors (often backed by shares as well as other collateral) but often also aimed for purchase of banking sector equities during the capital raising boom.

The Business Day Newspaper, Friday August 21, 2009.