What to consider before taking a loan

At one point in time or the other, we want to make a purchase, pay for a service or settle an obligation we don’t have the money for immediately.

For many it has been concerning a house of their dream, purchasing a new vehicle, paying children’s school fees or even starting a business.

The inability to meet financial obligations at all times is more common than people would really admit to.

Regardless of your salary size, taking a loan may become necessary in such an instance.

Loans are simply money borrowed in exchange for future repayment at an extra charge, whether they are granted by a banking institution, a credit association or your best friend. The difference, however, would usually be the formality of the loan contract.

Given the obvious backlogs in accessing loans from banking institutions especially the “leg and arm” banks demand as interest and the requirement for a collateral

People are often discouraged from taking loans to meet up with financial challenges as they come up.

However, the inability to access credit has created a new market for many financial technology platforms that now provide loans to individuals and small businesses at affordable rates relative to banks and without the usual cumbersome paper works usually associated with approaching banks for loans.

Peer-to-Peer (P2P) lending and a lot of online borrowing platforms actually help individuals smooth out their consumption by providing the opportunity to put future income to use at a cheap rate than is obtainable at traditional platforms.

While this is a welcome development, many individuals can easily get carried away by the ease and lower cost of borrowing.

On most of these platforms, it takes less than five minutes to process a loan and one can get up to N500,000 on the spot without providing too many documents. In short, it has become money at one’s Beck and Call.

Despite the efficiency brought about by leveraging technology to disburse loans, problems of moral hazard and adverse selection remain.

On the part of the borrower it is aptly put: Not knowing how and what to borrow for because loans are easily accessible.’

If you are about taking out a loan, these considerations are critical so you can avoid the debt trap:

What am I borrowing for?

As humans, we can be very impulsive; you come across a salesman that shows you the best car ever manufactured or your favourite retail store urges you to make a purchase for an item running out of stock.

Even when we are not driven by sentiments we tend to borrow for the wrong reasons or at times take more than we actually need which means paying interest on money that is not productive.

To ensure you borrow for the right reasons, you have to ask yourself if what you are borrowing for is an asset or a liability.

An asset doesn’t necessarily mean buying a property, stock or any investment instrument. An asset is simply anything that adds long-term value to you or your loved ones. It could be your child’s school fees.

Again, your asset help reduces your liabilities. For example, investing in your health.

In any case, you may want to be sure you have commensurate value at least for whatever you borrow for.

Remember the cost of paying for that item is the borrowed capital and the interest rate to be paid. Not just the market price.

So to rephrase, the first question is: what am I getting back in return.

Can I repay the loan, what would it cost me?

The income stream is very important although most creditors would do due diligence to ensure you are able to pay.

What matters is how long and at what cost you would service the loan.

It is very possible to repay a loan and has little left for one’s sustenance.

Oftentimes this leads to a spiralling where the debtor takes on more loan from other sources and is quickly entrapped in debt.

To avoid this, do an honest assessment. If a loan would take more than half your salary to service every month, then it has to be justified by greater returns for the burden from whatever it is used for.

What is the Interest rate offered?

Most online lending platforms offer loans at an attractive rate but nothing beats getting credit at the best rate available.

Before taking out the loan, compare rates so you do not short-change yourself.

Consider that rates being offered critically to see if you would be able to afford the loan. Do not take a loan because the lender offers the best rate in town.

You have to be sure the rate is truly affordable for you.

What is the Collateral?

Although many online platforms have a good Know-Your-Customer (KYC) culture and do not need collateral to disburse loans, it is very good to do one’s research and ensure you consider the collateral requirement in the case where it is required.

Collaterals are like an insurance policy for lenders to exchange for any loss they incur in the events of loan default.

You would want to make sure the collateral is not something way more valuable to you than the loan.

What is the term of the loan?

Loans often time come with clauses that spell out new conditions in the case of a default. The term would often specify the rights and responsibilities of both parties when the borrower misses the repayment schedule. Some terms may spell out a higher rate of interest upon default which would put more burden on the debtor. It is very good practice to know the terms of borrowing.

Alternative means of financing

Considering alternative means of financing is a good strategy to ensure you get to achieve your goal at the least possible cost. You may want to consider for example if your small business needs more debt or equity (sharing ownership with someone who has capital you need) or if asking that friend who wouldn’t ask for much interest for a loan instead.

Source: By Segun Adams

500 bills pending at 8th National Assembly

As the Eighth National Assembly winds down, there are growing concerns among analysts as over 500 bills are still pending in both chambers of the National Assembly.

Findings has revealed that while the Senate has passed over 285 bills since inauguration on June 9, 2015, President Muhammadu Buhari has so far declined assent to 41 bills passed by the National Assembly within the period under review.

Although the National Assembly has commenced the process of reconsidering and passing some of the bills earlier rejected by President Buhari, pundits say with less than one month to the end of the Eighth National Assembly, this would be a tall order.

Our reports that the life of the Eighth National Assembly ends on June 8, 2019.
Investigations showed that some of the bills still pending in the National Assembly include the National Housing Fund Bill, Small and Medium Enterprises Development Agency Bill, Federal Mortgage Bank of Nigeria Bill, Industrial Development (Income Tax Relief) Amendment Bill, Stamp Duties (Amendment) Bill and National Agricultural Seeds Council Bill.

Also yet to be passed are the four petroleum industry-related bills, namely, the Petroleum Industry Governance Bill, Petroleum Industry Administration Bill, Petroleum Industry Fiscal Bill and the Petroleum Host and Impacted Communities Bill.

The Agricultural Credit Guarantee Scheme Fund (Amendment) Bill, Chartered Institute of Entrepreneurship (Est.) Bill, Nigerian Maritime Administration and Safety Agency (Amendment) Bill, Advance Fee Fraud and Other Related Offences (Amendment) Bill, as well as over 10 constitution amendment bills are also yet to be passed.

Others include Climate Change Bill, National Transport Commission Bill, Federal Road Authority (Establishment) Bill, National Broadcasting Commission Amendment Bill, National Oil Spill Detection and Response Agency (NOSDRA) Act (Amendment) Bill, Electoral Act (Amendment) Bill, Suppression of Piracy and other Maritime Offences Bill, Federal Audit Service Bill, Anticipatory Opening of Bank Accounts for Corporate Customers (Prohibition) Bill, among others.

While some of the bills are awaiting second reading, third reading and committee stage, others are pending concurrence, even as other proposed legislations are being reconsidered after the President rejected them.

In the same token, some bills have been passed but are still being cleaned up by the Legal Services Department.

Kabiru Gaya (APC, Kano), chairman, Senate Committee on Works, told BusinessDay in an interview that the National Assembly would make conscious efforts to ensure that most of the bills are passed before the end of the Eighth Assembly.

Gaya, who is also a senator-elect in the Ninth Assembly, admitted that taxpayers’ money would go down the drain if the bills are not passed by the Eighth Assembly.

The former governor of Kano State, however, said there was no cause for alarm as, according to him, bills that could not be passed by the current National Assembly would be rolled over and passed by the incoming Ninth Assembly.

“We are trying hard to make sure that these (pending) bills are passed. For those the President made observations, we are trying to correct those observations the way the Executive wants it and send it back to the Executive to sign it quickly. Why we are doing that is because we don’t want to lose the time, the taxpayers’ money we have spent in preparing these bills,” Gaya said.
“It takes not less than six months to one year to do a bill. And all that includes taxpayers’ money we have spent. So, we need to fast-track that. Otherwise, if all these lapse, it means we will start all over in the new Senate. Bring the bill for first reading, second reading, public hearing and third reading.

“So, we will look at those bills and appeal to Mr President that where these bills do not need another alteration, he can approve them and sign them, just like he signed the North East Development Commission Bill,” he said.

Gaya, however, cautioned his colleagues to be mindful of the kind of bills they sponsor, else the Executive may find it difficult to assent to them.

“We should be sending bills that are more dynamic and in tune with the current situation, not bills on associations, unions and so on. Let us have few bills that are good enough for the country,” he said.

Stakeholders also expressed worry that they may have to start from the beginning by re-initiating the bills and lobbying members of the Ninth National Assembly in order to begin fresh legislative process for the enactment of the bills.

Ralph Agama, a constitutional lawyer, called on lawmakers to devote more time to enacting critical legislations rather than embarking on endless breaks.

He, however, submitted that it was better for the National Assembly to delay the enactment of bills than hurriedly passing them and creating a lacuna when the bills are eventually signed into law.

This, he argued, is responsible for the increasing number of rejected bills.

“I don’t think that the National Assembly operates without rules governing procedures of whatever they do. So, if their assignment is governed by rules, they must first be seen to do it within the ambit of the law or the timeframe within which the law permits them to pass them.

The fact that these bills are critical for one reason or the other needs a lot of scrutiny to ensure that what they are delivering to Nigerians is that which can stand the test of time,” Agama said in a telephone interview with BusinessDay.

“And that is one of the things that we see when bills are transmitted to be signed into law without proper scrutiny, you discover that when these bills metamorphose into law, they will come with a whole lot of lacuna that at the end of the day, giving the interpretation to some of those provisions, people begin to cry foul for injustice.

“On the Electoral Act (Amendment) Bill, it is very vital to our democracy. And if anything is hurriedly done, it may still not stand the test of time. On one hand, there is the need for time to properly scrutinise bills, both executive and private bills, so that whatever will be given to Nigerians will stand the test of time.

“On the other hand, we can’t because this Eighth Assembly is running out, hurriedly pass those bills. You are sacrificing the interest of Nigerians on the altar of time. Take it leave it, governance is a continuous process. And so wherever they have stopped, these bills can still be brought back to the Ninth Assembly. It will be better than hasten up to pass those bills where at the end of the day, it will not satisfy the yearnings of Nigerians,” Agama said.


Blackout looms as labour plans power transmission shutdown

The Trade Union Congress has asked Nigerians to look for alternative power source beginning from Monday (today), as it declared that it would shut down the nationwide operations of the Transmission Company of Nigeria today.

But the TCN described the move by TUC as ill-motivated, stressing that it was wrong for the labour union to claim that there was industrial disharmony in the transmission company.

It was also learnt that the plan by the TUC to ground operations at the transmission firm had caused disagreement between the two major unions in the power sector.

In a message to workers at the Abuja headquarters of TCN, which was sighted by our correspondent on Sunday, the trade union claimed that for some time now, workers of the transmission company had been subjected to inhuman treatment by the management of the firm.

The TUC stated that despite the interventions of labour, the TCN management had continued to disregard the Nigerian workers at the firm.

The union said it was on this note that the TUC directed its members to solidarise with the workers and ensure a total shutdown of electricity transmission facilities across the federation through the picketing of TCN offices nationwide on Monday, May 13, 2019.

The union urged Nigerians to bear with it and look for an alternative source of power pending when the issues are resolved.

But the transmission company said the plan by TUC to picket the transmission company was ill-motivated.

The General Manager, Public Affairs, TCN, Ndidi Mbah, told our correspondent on Sunday that there was no iota of truth in the statement credited to the labour union that there was industrial disharmony in the company.

The transmission company stated that “TUC was ill-informed by Chris Okonkwo, current President of the Senior Staff Association of Electricity and Allied Companies, having lost the support of TCN staff members in his bid to use the association to advance his selfish interest.”

It added, “TCN management believes that TUC, unknown to the union, is being used by unpatriotic elements. TUC, as a law-abiding organisation, is expected to find out why Okonkwo could not secure the support of TCN staff members, NUEE (National Union of Electricity Employees) or SSAEAC, TCN Branch before accepting to lead the picketing of TCN.”

Mbah stated that the union should know that TCN had successfully expanded the capacity of the grid from 5,000MW in February 2017 to 8,100MW in December 2018.

“It is on record that TCN receives less than 30 per cent of its revenue from the power distributors and yet it has been able to attain this unprecedented stride in grid expansion largely due to the support of the members of staff,” she stated.

Source: By The Punch

Fidelity Bank signs $50m financing agreement with AFDB

FIDELITY Bank and the African Development Bank, AFDB, have signed a $50 million line credit to support small and medium enterprises (SMEs), with 30 percent of the fund to be reserved for female entrepreneurs. Fidelity Bank Managing Director/ Chief Executive Officer, Fidelity Bank, Nnamdi Okonkwo, disclosed this on the sidelines of the Balogun Business Association rally held in Lagos.

Okonkwo said: “My team and I are actually here to get first hand information of what our customers’ need and to do a self-check. Have we satisfied them service wise? Are there areas we can support them?

As you are aware, just yesterday, we signed $50 million service support fund agreement with the AfDB, 30 percent of this will be going to female entrepreneurs. We have a huge number of such entrepreneurs in this market. So it is more than just a coincidence that we are here today to connect with our customers and know how we can serve them better.

” Fidelity Bank rewards customers with N68m On the criteria for accessing the fund, he said: “Fidelity Bank is a strong supporter of SMEs. Most of them are accessing funds at nine percent under the various intervention scheme and for those who do not qualify for the single digit loans they borrow at the commercial rate but as much as possible, we try to make sure we provide a single digit loan for these customers using the various windows available.

“As you know, the world is about sustainability and inclusion. As you know as well women are mostly, in the entire world, by culture, excluded in a way that they have been fighting to actually achieve a balance and Fidelity Bank is very mindful of this. If you look at our executive board, we have the highest number of females than any other bank in this country in terms of Executive Directors.

That is one way that Fidelity Bank is saying that we are a gender-sensitive organization. Now for that reason as well, when you get a facility like the $50 million and thirty per cent is set aside just for women entrepreneurs, it is another step by Fidelity Bank to continue to ensure gender balance.

That is basically why we are doing that.” Speaking on the connection between the bank and BBA, Okonkwo said: “We simply came here to connect with our customers. This is Balogun Business Association Plaza, Lagos Trade fair complex.

Fidelity as you know, we do not only serve the corporate end of the market, we also serve the middle and the lower class of the market. We are very strong in SMEs and most of these people here are SMEs. They are the engine hub of trade and commerce in this country and in line with our customer forum calendar we do this occasionally, we come out here.”

Source: By  Elizabeth Adegbesan

X-raying policy developments as pension sector hits trillions

The Retirement Savings Accounts (RSA) remittance data for the fourth quarter of 2019 recently released by the National Pension Commission (PenCom) showed that N15.36 billion has so far been remitted into RSA within the period under a recovery drive.The data also showed that funds were remitted into 966,155 employees’ accounts out of 2,044 organisations, but the private sector still controls the larger proportion of RSA.

Beyond the RSA remittances, PenCom has for years taken major steps to deepen the pension industry and protect contributors’ investments.

For example, of the N15.36 billion received into the National Pension Commission (PenCom’s) Retirement Savings Accounts (RSA) as at fourth quarter of 2018, the principal contribution was N7.87 billion and penalty of N7.49 billion, which raised hopes for pension contributors and the industry.

According to the report, PenCom received a total of 3,046 applications for the issuance of Pension Compliance Certificates, out of which 2,044 were approved and issued. Also, 1,002 applications were rejected for failing to meet appropriate requirements.

The report shows that the cumulative number of applications received during the year was 16,536 out, of which 16,100 were approved and issued certificates while 436 were rejected. PenCom reiterated that it continued to apply various strategies to ensure compliance with the provisions of the Pension Reform Act of 2014.

The pension industry had achieved a 1.63 per cent growth in the scheme’s membership during the fourth quarter of 2018, moving from 8.34 million contributors at the end of the preceding quarter to 8.47 million.The report showed that the RSA scheme, which had an increase of 138,236 contributors, representing 1.64 per cent, drove the growth recorded in membership. The RSA registrations also grew by 0.82 per cent (29,455) in RSA membership from the public sector to stand at 3.6 million. The figure represents 42.92 per cent of the total RSA registrations.

Also, the private sector membership rose by 2.32 per cent (108,781) in the quarter under review, bringing total registrations from this sector to 4.8 million, representing 57.08 per cent of total RSA membership. This growth can be attributed to the increased level of compliance by the private sector.

Further analysis of the report showed that the commission received 1,282 applications for transfer of Nigeria Social Insurance Trust Fund (NSITF) applications totaling N56.78 million. All applications received were processed and transferred to the RSAs of the NSITF members. From inception to December 2018, N19.64 billion had been transferred to the RSAs of 272,463 NSITF contributors.

Rising CPS
No fewer than 8.5 million people were enrolled in the Contributory Pension Scheme (CPS) since its inception 15 years ago, the Head, Communications Department, PenCom, Peter Aghahowa, said at the just concluded 30th Enugu International Trade Fair. The scheme introduced in 2004, was a process where a certain percentage of enrollees’ salaries were saved on a monthly basis with the employers also contributing. The scheme had PenCom as the regulatory body with Pension Fund Administrators (PFA) working under its directive.

Aghahowa said the scheme had made the life of retirees much easier, unlike the defined benefits scheme, which it replaced, noting that it had become imperative for every state of the federation to key into the scheme for easy pension administration.However, he said it was saddening that despite the enormous advantages inherent in the scheme, some state governments were yet to embrace the scheme to make life better for retirees in their respective states.

Protecting investments
PenCom has barred PFA’s from investing in the bonds of nine states that are yet to amend their state pension laws to join the Contributory Pension Scheme (CPS). Research also revealed that this restriction might be extended to 15 other states that had joined the CPS, but are not showing full commitment to funding the RSA of their workers.

The CPS was established under the Pension Reform Act (PRA) to replace the DBS. This was because the DBS had huge liabilities, which were not being funded, leading to situations where retirees endured long waits to get their entitlements, while many of them died without being paid. Unfortunately, the same scenario, which was prevalent in states operating the DBS, is now happening in the states operating the CPS due to poor funding of the scheme.

“The states have to enact the laws to do the CPS because they are going to operate based on the provisions of the laws. We can only encourage them because of the benefits in the scheme.“We don’t invest in bonds of states that have not enacted their laws. We have some that are not complying properly while some are complying partially. I believe we will review some of those things again. But for now, if you have not even enacted any law, don’t think we will start investing in your bonds,” he said.

New milestones
PenCom has deployed the RSA Multi-Fund Structure conceived by the commission to align with contributors’ risk appetite with their investment horizon, at each stage of their life cycle.The RSA Multi-Fund Structure is to achieve optimum returns for contributors by aligning their pension savings with their individual risk/return profiles, provide investment portfolio choices to contributors, and enhance the safety of pension assets through adequate portfolio diversification, increased investment in equities and alternative assets, such as infrastructure and private equity.

As of December 31, 2018, the RSA Fund had been successfully split into four funds, while the sensitisation of RSA contributors is still ongoing to create awareness on the features of the RSA Multi-Fund Structure. Presently, RSA contributors have the opportunity to choose a Fund that best suits their risk-return profile.

The commission, in line with the provision of the PRA 2014, has developed a framework for the recovery of outstanding pension contributions with a penalty for defaulting employers. Based on the framework, the commission has engaged recovery agents for continuous enrollment into the CPS and recovery of unremitted pension contributions and penalty from defaulting employers.

PenCom, under its Director-General, Mrs. Aisha Dahir-Umar, maintained that the services of Recovery Agents (RAs) were used for the recovery of outstanding pension contributions and penalty from defaulting employers.The agents were mandated to review the pension records of the employers assigned by the commission, with a view to recovering outstanding pension contributions with the penalty. For the period under review, the sum of N365.56 million was recovered by the RAs, bringing the total recoveries made by the agents from the inauguration of the exercise in 2012 to date to N15.36 billion, representing the principal contribution of N7.87 billion and penalty of N7.49 billion.

The recovery, which has been largely successful, has boosted the confidence of contributors and by extension encouraged non-participating employees and employers to embrace the Scheme. Both the principal contributions and penalty have been credited into the workers’ RSA accounts. The penalty is meant to compensate for the income that would have been earned if the contributions were remitted as and when due.

The commission is also prosecuting recalcitrant employers, who fail to remit their employees’ pension contributions into their RSAs and has instituted legal actions against 167 recalcitrant employers, out of which 78 have opted to settle out of court, while 34 judgments have been obtained and 23 are at different stages in the courts.Besides, the commission said it has a fully functional Complaints Monitoring and Resolution Team, which attends to complaints on non, late, or under-remittance of pension contributions into employees RSAs.

The implementation of various strategies has improved the level of remittance of pension contributions by the private sector employers, boosted the confidence of contributors and encouraged non-participating employers to embrace the scheme. PenCom noted that it has consistently been engaging various state governments, trade unions, relevant stakeholders and the general public on the full benefits of the CPS with a view to bringing them to full implementation of the scheme.

Source: By Victor Uzoho

‘Why Nigeria is still in darkness’

Nigeria is still in darkness because of infrastructural deficit and the huge debt owed power generation companies (GenCos) by power distribution companies (DisCos), Century Power Generation Company Limited Chief Executive Officer, Dr Chukwueloka Umeh, said at the weekend.

Century Power Generation is a subsidiary of Nestoil Plc, an indigenous conglomerate with interest in oil and gas, power generation, engineering and other key sectors of the economy.

He added that the bane of the industry include lack of provision of the right infrastructure by the Federal Government, absence of policy directions for operators to follow and funding among others. He said stakeholders are, however, awaiting the government to take the lead in ensuring that the sector moves forward.

According to him, key stakeholders such as the Ministry of Power and the Nigerian Electricity Regulatory Commission (NERC) should provide an environment that would enable power distribution companies generate enough revenue for investment purposes, adding that by so doing, they will find it easier to meet their obligations to the consumers.

Umeh said: “The government agency should allow the DisCos to make money in order to make timely payments to the power generation companies (GenCos) for the gas supplied to them by the gas companies. Once the DisCos are allowed to make money to cover their investment, they would be able to solve metering and other problems facing them.”

According to him, banks are willing to provide funds to operators, once the government has shown a considerable level of commitment in the industry.

He said: ”There is still a lot of excitement from banks and other private sector players when it comes to the issue of providing funds for the sector. There is still a level of excitement in the industry. This is not about the issue of whether the industry can work or not; the issue is that the industry would work because it is a matter of time once the necessary problems in the operating environment has been taken care, mostly by the government.

“Banks are not in business in order to give money to people freely. They are in business in order to improve their profitability, get enough shareholders’ value and help contribute to the growth of the Nigerian economy. They are not ready to lose money. So also is Century Power Limited. Banks are only waiting for the government to make the energy (sector) work.”

The Federal Government had provided a bail-out of N700billion to operators in the power sector about two years ago. Though the money was meant to strengthen the operation of the power generation and distribution firms, but the problems persist.

Source: By Akinola Ajibade

Experts back IMF’s stance on Africa’s rising foreign debt

Financial experts at United Capital Research have echoed the International Monetary Fund (IMF) and the World Bank on the Bretton Woods institutions’ advice to African countries to curb their appetite for foreign debt and instead focus on ways of increasing revenue internally.

In a note obtained by New Telegraph last weekend, the experts pointed out that despite the IMF and the World Bank warning about the long-term risks of rising external borrowings, African nations continue to accumulate foreign debts.

The experts stated: “In recent years, most African countries have turned to the international debt capital market to satisfy their funding needs while turning a blind eye to the cheaper but stricter loans by supranational organizations. “As at the start of 2019, 20 African countries have tapped into the Eurobond market, bringing the total outstanding African sovereign Eurobond to $92 billion with over 50 per cent of the Eurobonds with yields above seven per cent.”

Besides, they stated: “In our view, we allude more to the views of IMF and World Bank that African sovereigns need to look inwards to grow revenue and reduce their rising fiscal deficit. With that said, we opine that funds raised in the capital market should be tied to capital projects with matching funding maturity.”

Source: NationNg

Experts set for demolition of sections of Jos Main Market

Demolition and explosive  experts from South Africa have expressed their preparedness for the controlled demolition of compromised parts of the burnt Jos Main Market slated for Saturday , May 18.

Commissioner for Information and Communication  Mr. Yakubu Dati stated this in a statement.

The experts, according to Dati, were led by  demolition engineers – Mike Pekins and Kyle Pekins – representing Mamco Wreckers Consortium.

He said tonnes of explosives are being deployed according  to the  work plan to ensure a  safe and efficient exercise.

He said the consortium remains  the best in Africa, having successfully carried out the controlled demolition of Bank of Industry (BOI) skyscrapers at the ever busy Broad Street in Lagos, among several assignments.

Dati said  persons  living within 200 metres to the market are to vacate on or before Thursday, May 16.

He said   vehicular movement  would be restricted around  entry points to the market.

The commissioner said roads around the market will be closed for the safety of lives and property.

He urged security agencies, traders, stakeholders and the public  to note the new date.

The commissioner   conveyed  the state government’s  regrets for any   inconvenience the exercise  might cause members of the public.

Source: By Kelvin Osa Okunbor

NCRIB urges govt to curb building collapse

To combat the menace of building collapse in the country, government at all levels need to be more proactive in implementing building laws, the President, Nigeria Council of Registered Insurance Brokers (NCRIB), Mr Shola Tinubu, has said.

He spoke in an interview with reporters in Lagos.

He also said that they have to continually engage stakeholders in the construction built environment and related institutions to elicit their input for a long lasting solution to the malaise.

He called on the government to give more impetus to the implementation of the enforcement of compulsory building insurance as enshrined in Section 64 and Section 65 of Insurance Act 2003.

He further advised Nigerians to, on their own, insure their personal assets in order to mitigate their losses when and if losses like building collapse occur.

He added that every individual should ideally live up to his responsibility of care by protecting whatever is valuable to him or her, both life and property, noting that their slogan has been,” Whatever is worth having, is worth insuring”.

Speaking on efforts to drive insurance penetration in the insurance industry, he said the council is quite aware of the desire of the National Insurance Commission (NAICOM) to drive insurance penetration in the country, noting that it is commendable.

“While the entire industry operators are saddled with the task to make this vision come to pass, the NCRIB would soon be redoubling its efforts by making inputs into the initiative. We like to use this opportunity to appreciate NAICOM for its favourable disposition towards growing the industry and assure that our council will continue to complement the commission in this regard.”

He further stated that the council is committed to adding greater value to its members.

“I am most delighted that today, it is a pride for any member to belong to the NCRIB, because of the added value members are getting from the council. Through this value addition we have been able to douse the negative views and a flurry of ill fillings that was the lot of many members about two years ago. We have given value in terms of training. We have also given value in terms of information sharing, leading to facilitation of business through public bids”, he noted.

Source: By Omobola Tolu-Kusimo

What mortgage can do in a struggling economy

When there are downsides in an economy such as Nigeria is passing through at the moment, everything and everybody is affected. Besides weakening the economy, economic downturn also weakens purchasing power of individuals and households.

The challenge of life and living in Nigeria is that the managers of the country’s economy don’t seem to have any clue to how to bring about a turnaround. The country appears to be mired in economic inertia.

This means that the hard times are not as much the challenge of everybody as they are the concern about what to do to bring about a turnaround. Of the multi-pronged approach so far adopted to get the economy on its feet again, mortgage, unfortunately, is not in consideration.

 In advanced economies, the mortgage industry makes significant contribution to economic development. But here, it is not the case because mortgage finance as a percentage of Gross Domestic Product (GDP), till date, is still as low as 0.5 percent which is several steps behind other economies including Mexico, Malaysia and South Africa where mortgage contributions to GDP are as high as 10 percent, 25 percent and 29 percent respectively.

Given what the government was able to able to do with mortgage in British economy, it means that mortgage has all the potential to stimulate the economy. But there are obstacles to the growth of the industry which have to be tackled.

 The relative ‘newness’ of the sector; lack of understanding of the dynamics and operational models of the sector by many Nigerians, and poor appreciation of the need and the ultimate benefit of keeping money in a mortgage bank are some of the militating factors.

Government can benefit a lot from a flourishing mortgage banking sector as it will help in regulating the economy in the desired direction.

 The Federal Government says is diversifying the economy to solve current challenges, but attention doesn’t seem to be paid to the mortgage sector. If government really wants to stimulate the economy, it has to reduce the interest rate and, all things being equal, more people will embrace mortgage loan to buy houses, leading to increased activities in the construction sector.

 Because of the identified obstacles, many primary mortgage banks (PMBs) are going through very difficult times, such that some are still unable to meet up with the kind of capital requirements in this sector.

 If government pays a closer attention to the PMBs by removing some of the obstacles that they have such as the drawbacks of the Land Use Act of 1978 which vests land ownership in the hands of the state governors; the right to easily foreclose on delinquent borrowers, ease of creating a legal mortgage and perfecting titles and the ease of falling back on their collateral to recover bad loan etc, this sector will surely improve tremendously.

Until all these issues are resolved in a way that encourages the provider of capital, in this case, the mortgage bank, the sector will not grow as desired but when these obstacles are removed, the supplier of mortgage will allocate more funds towards the provision of home loans while home buyers will better appreciate the implication of prompt interest and capital repayments as well as ensure discipline on the part of the people.

 Okika Ekwem, a US-based realtor, says  the poor capital base of the PMBs is inadequate, dismissing the idea of a fixed capital base for mortgage institutions. “Saying that a mortgage institution should have a fixed base of, say N10 billion, is wrong because that amount is too meager; even N100 billion is also meager given the kind of projects they are to finance. The federal government needs to come in, look at what is happening in other civilized world and copy. These days, copying is no longer an act of deception but actually something that is done even in the civilized world”, he said.

 In the civilized world, according to him, there is secondary market for real estate financing where commercial banks or individual brokerage banks lend money to people and thereafter sell the securitized certificate to the secondary market and come back again to lend to individuals.

 Mortgage sector growth is possible in Nigeria if the Federal Mortgage Bank of Nigeria (FMBN) plays the role of a regulator while the federal government, through the CBN, should empower the PMBs more.

In this case, the country needs more PMBs established. Meckson Innocent Okoro, an estate manager explains this is to discourage the concentration of these institutions only in urban centres. “When this is done, access to housing finance will be increased; the PMBs must be positioned to champion the whole issue of affordable or social housing for the low income earners in the country. Anything the country wants to do without a functional mortgage system that can guarantee homeownership for a good number of people will not succeed”, he posited.

Source: By Chuka Uroko

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