Nigeria’s Securities Dealers unfold survival options for post COVID-19

In a rear display of ingenuity and clear understanding of options for survival post COVID-19 pandemic, a panel of seasoned capital market operators identified strategic investment opportunities to boost income streams of Securities Dealers on the Nigerian bourse.

But the engaging five- man panel, who spoke at a recent Chartered Institute of Stockbrokers’ Mandatory Continuous Professional Development (MCPD) Webinar, titled “Opportunities for Stockbrokers: Post COVID-19 Pandemic”, advised Securities Dealers to do a lot more in enhancing their skills and competencies with a stern warning: Market ultimately belongs to those who embrace pro-active and innovative business strategy under the new normal.

The top Stockbrokers, identified asset classes, including equities, fixed income securities, commodities and derivatives as potent investment vehicles which present opportunities for Securities Dealers to specialize.

The lead speaker and the Nigerian Stock Exchange’s Divisional Head, Trading Business, Jude Chiemeka, made a comprehensive presentation on the Conference Theme, and posited that COVID-19 pandemic had imposed on all professionals, the need to review business models and re-invent the wheel if need be.

“The markets will continue to move in cycles in response to economic policies and global news flow. This volatility creates opportunities for market participants to benefit from bursts of short-term market swings over the long-term, albeit the ability to innovate and use newer market tools such as Exchange Traded Funds (ETFs), Securities Lending, Hedging Solutions and a host of others to ride these movements in the market will differentiate market participants.

“The operating environment has changed very dramatically in adjustment to the impact of COVID-19. The lockdown has resulted in a paradigm shift of what work should look like and the need for companies to re-invent their working models from this perspective. To thrive in times like this, market intermediaries need to embrace more innovative and pro-active strategies to ride the wave.

“Stockbrokers have a role to play in deepening the products traded in the market by facilitating cross listings of securities existing in other markets that help investors achieve their diversification and hedging needs, issuance of unsponsored Depository Receipts, currency tracking ETFs, access to international markets such as technology and health care.”, Chiemeka said.

Corroborating him, the Chief Executive Officer, Stanbic IBTC Nominees, Akeem Oyewale, who noted that the new generation of investors would be financially literate, maintained that Stockbrokers should be scouting for business opportunities beyond Nigeria.

“Income stream of brokerage firms has become challenging as the market is largely dominated by top ten Dealing Member Firms. There is a compelling need for shared resources and cost optimization on the part of market operators. Demutualization of The Nigerian Stock Exchange is expected to present robust opportunities. We shall witness mergers and acquisitions. We should be looking outside our shores for business opportunities. There are dormant products on The Exchange, including Collective Investment Scheme (CIS) and Securities Lending. These also present business opportunities. The next generation of Stockbrokers should be ready to manage financially literate investors,”, Oyewale enthused.

The Managing Director and Chief Executive Officer, Lagos Commodity and Futures Exchange (LCFE), Akin Akeredolu-Ale advised Stockbrokers to go back to the drawing board in the areas of innovation and creativity in order to maximize business opportunities that post COVID-19 shall provide.

Akeredolu-Ale who spoke extensively on how Commodity Exchange can upscale Nigeria’s Gross Domestic Products (GDP), explained that LCFE had put in place, effective structures, to commence trading in Solid Minerals, Agriculture, Oil and Gas and Currency.

“LCFE is established to provide a trading platform for price discovery, transparency and enhanced revenue generation. Over one Trillion Dollar worth of commodities are traded by eight top top companies. We shall provide business opportunities for Securities Dealers. Our business model is to trade fungible assets.

“We have carefully selected global operators in various fields. Our core business is to trade electronic receipts. The receipts must be signed off by relevant agents before trading. We are not out to operate warehouses. We have certification agents for warehouses to ensure global best practices. Our focus is on aggregators that already have certified warehouses. We shall engage with all members in the ecosystem.”, said Akeredolu-Ale.

A fixed-income dealer and Chief Executive Officer, Commercio Partners Asset Management, Tosin Osunkoya listed some of the challenges facing fixed income operators as lack of capacity, liquidity, infrastructure, and weak business relationships with banks and pension firms. He however identified opportunities such as increasing size of Securities in the short and long end of the curve, untapped retail market for Eurobond for Dollar and Naira trading lines and shorting the market in an over-bought situational price correction.

The Webinar’s Moderator and Managing Director, FBNQuest Securities Limited, Fiona Ahimie also urged Securities Dealers to position themselves for post COVID-19 as it will come with an array of business opportunities of which only the globally competitive operators can take optimal advantage.