Stockbrokers in the Nigerian capital market have set out the options for them to remain in the business as the on-going economic recession continues to affect the financial market with dreadful consequences on the income streams of the market operators.
This comes on the heels of concerns that the current operating environment characterised by high interest rate, weak purchasing power, poor corporate earnings, unstable exchange rate, high inflation rate and investor apathy among others are fast eroding stockbrokers income and fueling speculation that many of them may be pushed out of the business .
Painting the gory picture of the stockbrokers’ weak financial muscle, Sehinde Adenagbe, Managing Director and Chief Executive Officer, Standard Union Securities said it would be difficult for stockbrokers to break even under the current climate.
“Overhead cost is rising steadily yet workers are clamoring for higher pay to cope with the high cost of living. Office rent, epileptic power supply and transport costs are of great concern to us and there are other contending issues that are eating deeply into the income of stockbrokers”, Adenagbe posited.
Speaking on the survival strategy, Oluwaseyi Abe, president and Chairman of Governing Council, Chartered Institute of Stockbrokers (CIS) advocated personal development on the part of the stockbrokers in order to expand their income streams. “Recession is a time to take a breath. Invest on knowledge this time and be moderate. Stockbrokers should be multi-task to be relevant on all platforms and Exchanges.
“Also, they should not forget the age -long advice of an investment expert, Warren Buffet whose ideals covered risk taking, savings, expectation and earnings among others as survival strategy”, Abe said.
While corroborating Abe, Adedeji Ajadi, Registrar and Chief Executive, CIS advised stockbrokers to be more creative and ready for diversification in order to remain in business. “This is not the time to limit business opportunities to trading listed securities. What about bonds, unlisted equities and foreign exchange? Stockbrokers are also investment advisers. This is the right time to work with governments at various levels as consultants and advisers on how to create alternative sources of revenue, and better manage scarce resources to ride through the challenges of the economy at this time”, Ajadi explained.
Oluropo Dada, Managing Director and Chief Executive Officer, Network Capital Limited stated the need for stockbrokers to leverage their wide professional latitude to peep into money market instruments by way of portfolio switching in favour of money market instruments such as Treasury Bills.
Dada described money market instruments as very attractive at present as the Federal Government is deploying them to attract foreign investors.
“This possibly accounts for massive sell-offs of some stocks in the market. Stockbrokers are now buying instruments with strong fundamentals like Nestle Foods and Nigeria Breweries for proprietary trading to remain in business in this period of recession .”, according to Dada.
Bola Ajomale, Chief Executive Officer, NASD OTC Exchange simply urged stockbrokers to wear their investment banking cap and work on buy-outs, mergers and growth of Small and Medium Scale Enterprises (SMEs) in order to cope with the current realities.
Also, Tunde Oyekunle, Chief Executive Officer, Finawell Capital Limited advised stockbrokers to consider alternative income streams such as setting up of a strong fixed income desk to trade bonds and FX.
He also recommended commodity trading and Derivatives such as forward contracts to boost income in the wake of recession.
While corroborating Oyekunle’s view, Samuel Ndata, Doyen of the stock exchange urged his colleagues to diversify whatever little income in stockbroking to agriculture in order to stay afloat.
David Adonri, Chief Executive Officer, Highcap Securities Limited stated that to remain in business, stockbrokers must embark on austerity measures by cutting cost and patiently awaiting recovery of the economy.
Fakrogba Charles, relationship Officer, Foresight Securities and Investment Limited who noted that economy moves in cycles said that stockbrokers should advise investors to invest in value stocks as recession is not a permanent feature.
In his response, Segun Oye, principal partner and Chief Executive Officer, Alicorn Consulting Limited simply explained that “recession comes with external factors that can only be managed by aggressive reduction of overhead and option of innovative diversification.”