•As stockbrokers lament tough operating environment
•Say they may be pushed out of business if….
Investors in the nation’s stock market have lost about N281
billion of their investment value in the past eight months as the ongoing
economic recession continues to hit the financial market. This is just as
stockbrokers continued to lament over difficult operating environment which has
placed their businesses in difficulties.
Vanguard findings showed that the Nigerian Stock Exchange,
NSE market capitalisation, which represents the value of total investment in
the stock market by investors, dropped by N281 billion or 2.9 per cent from
N9.850 trillion it opened in the first trading day of January this year to
close at N9.569 trillion last week Friday.
Another stock market gauge, the NSE All share index dropped
by 2.7 per cent or 783.77 points from 28, 642.25 points it opened in January to
close last week at 27,599.03 points. Meanwhile, stockbrokers have said that the
on-going economic recession continues to affect the financial market with dire
consequences on the income streams of the capital market operators and has
given them concern for their continued existence.
According to stockbrokers, “There is a deep concern that the
current operating environment characterised by high interest rate, weak
purchasing power, poor corporate earnings, unstable exchange rate , high
inflation rate and investors’ apathy among others are fast eroding our
dwindling income fuelling speculation that many of us may be pushed completely
out of the business.
So, if the government does not intervene appropriately we
may be forced to go out of business and this will affect our employees and put
them in the unemployment market.” Painting the gloomy picture of the
stockbrokers’ weak financial situation, the Managing Director and Chief
Executive Officer, Standard Union Securities, Mr. Sehinde Adenagbe said it
would be difficult for stockbrokers to break even under the current climate.
“Overhead cost is rising steadily and workers are clamouring
for higher pay to cope with the high cost of living. Office rent, epileptic
power supply and transport costs are of great concerns to us and there are
other contending issues that are eating deeply into the incomes of
stockbrokers,” Adenagbe posited. Speaking on the survival strategy, the
President and Chairman of Governing Council, Chartered Institute of Stockbrokers
(CIS), Mr. Oluwaseyi Abe 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 multitasking 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.
Agreeing with Abe’s submission, the Registrar and Chief
Executive, CIS, Mr Adedeji Ajadi 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 said Managing Director and Chief Executive
Officer, Network Capital Limited, Mr. Oluropo Dada said there is the need for
stockbrokers to leverage their wide professional latitude to go 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,”
Dada said The Chief Executive Officer, NASD OTC Exchange, Mr
Bola Ajomale 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.
The Chief Executive Officer, Finawell Capital Limited,
Mr.Tunde Oyekunle advised stockbrokers to consider alternative income streams
such as setting up of a strong fixed income desk to trade bonds and forex. He
also recommended commodity trading and Derivatives such as forward contracts to
boost income in the wake of recession. Oyekunle’s view was corroborated by the
Chief Dealer, Coo Hedge Securities and Investment, Mr. Samuel Ndata who urged
his colleagues to diversify whatever little income in stockbroking to
agriculture in order to stay afloat.
Mr. David Adonri, the 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. The Relationship Officer, Foresight Securities and Investment Limited,
Mr. Fakrogba Charles 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, the Principal Partner and Chief Executive
Officer, Alicorn Consulting Limited, Mr. Segun Oye simply explained that,
“recession comes with external factors that can only be managed by aggressive
reduction of overhead and option of innovative diversification . Speaking as
well on the economic recession in the country, Managing Director/CEO, B.
Adedipe Associates, Dr. Biodun Adedipe, said that the recession is bad news for
all stakeholders, and it also demands creativity and pragmatism to reverse.
He tasked the government to provide leadership by spending
more, especially on infrastructure to prevent a full blown depression and push
for economic recovery. Adedipe, further charged the government on the need to
make business environment more friendly, ensure policy alignment with
expansionary necessity and press more into transparency and value for money
spending.
According to him, the government needs to revisit the
exchange rate policy — the current arrangement is counterproductive for an
import dependent economy with weak real sector.” Also speaking on this
development, Managing Director, Cowry Asset Management Limited, Mr. Johnson
Chukwu, said that with the economy going into a recession, there is the
likelihood of more job losses as consumer demand declines further.
“I think that our economic managers at both the fiscal and
monetary sides need to evolve coordinated stimulus response to inject liquidity
into the System and reverse the economic decline,” he said.” He, however, urged
the nation’s economy managers on why emphasis should be shifted from fighting
high rate of inflation to intensifying efforts in restoring economic growth.
Source:Vanguard
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