Stock Brokerage firms are now establishing merchant banks to diversify their resources base in line with the new challenges of corporate financing since th Structural Adjustment Programme, SAP.
Mr. L.A. Ogbebor, deputy manager of Capital Trust Brokers Limited attributed the new trend to the non viability and non profitability of stock brokerage. He explained to The Republic that the commissions acruing from dealings in stock broking is so meagre that afer cost deductions the profit is very marginal.
The job of stock brokerage involve paper work. In the end, you would have spent twice the amount you earn as commission on buying and preparing papers for your client he declared.
Mr. Ogbebor further told The Republic that the last time stock brokers commission was reviewed was in th 1960s. Ever since the commission reviews periodically what brokers pay by the way of commission to it.
Mr. Ogbebor further said that there are a whole rang of areas to go into the capital market. But because of these firms of stock brokers, such have to go now.
Among such new grounds are the 300 million non-voting shares the unit trust business and venture capital.
Mr. S.D. Olayemi o Rims Securities Limited noted that as the clientelle of stock brokers increase, the need for specialised service in money market arises.
To meet the need of such customers, merchant banks are established to handle the special service.
He said most firms go into merchant banking because it is easier to set up in terms of manpower requirements than commercial banks.
Mr. Olayemi further noted that it is only firms that are lucky enough to handle government bonds that make some money. It is the commercial banks and merchant banks that always buy off these government bonds from the Central Bank.