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Insurance Firms Gain From Engineering, Oil & Gas as Gross Written Premiums Hit N53bn

…premiums from oil and gas contracts under threat over declining prices

Insurance industry’s gross written premium rose by 8.40 percent at half year 2019 following significant increase in gross written premiums from engineering, marine and aviation, as well as oil and gas non life insurance services. Gross written premium of eight insurance firms listed on the Nigerian Stock Exchange (NSE) at half year 2019 increased to N52.81 billion up from N48.71 billion in corresponding period in 2018.

The firms in question are Sovereign Trust Insurance, Regency Alliance, NEM, Consolidated Hallmark, Cornerstone, WAPIC, AXA Mansard as well as Universal Insurance. A written premium shows the amount an insurance client is expected to pay on insurance coverage provided to him by an insurance company.

Sovereign Trust Insurance earned N7.27 billion as gross written premium by June 2019, an increase of 2.03 percent over N7.13 billion earned by June 2018. However, when compared with the industry, Sovereign Trust Insurance accounted for 14 percent of the industry grow written premium at half year 2019 compared with 15 percent industry share in June 2018.

Regency Alliance recorded 8.30 percent in gross written premium, from N3.41 billion in June 2018 to N3.70 billion at half year 2019, accounting for just 7 percent of the insurance industry’s gross written premium in both years. NEM Insurance increased its market share from 19 percent in June 2018 when it earned N9.16 billion as gross written premium to 22 percent in June 2019 when it posted N11.8 billion as gross premium, resulting in 28.7 percent growth in premiums during the comparable periods.

The share of Consolidated Hallmark Insurance in both period remained at 8 percent of the entire industry. That was despite increasing its gross written premium by 16.4 percent from N3.74 billion at half year 2018 to N4.36 billion at half year 2019.

Further, Cornerstone Insurance lost a bit of its market share from 10 percent in June 2018 to 8 percent in June 2019. This was attributed to a steep fall in its gross written premium for the period which fell by 13.02 percent to N4.28 billion at half year 2019 from N4.92 billion in similar period last year.

Wapic Insurance accounted for 12 percent of the insurance industry in June 2018 but that market share slightly fell to 11 percent same period this year. Gross written premium was N5.70 billion at half year 2019 as against N5.82 billion last year June.

In spite of growing its gross written premium by 3.97 percent from N13.95 billion as at June 2018 to N14.51 billion in June 2019, AXA Mansard market share fell slightly from 29 percent in 2018 to 27 percent in 2019, although it still remains the market leader.

Universal Insurance recorded the highest growth of 110.03 percent during the period. Its gross written premium rose from N579.2 million in June 2018 to N1.22 billion at half year 2019. Nonetheless, it controls the least market share of just 2 percent at half year 2019 as against 1 percent same period in 2018.

The contribution of each of the services provided was analysed to assess their relevance to the general pool. By services provided, motor insurance’s gross written premium of the eight insurance firms under coverage of this analysis rose by 5.6 percent during the period from N9.40 billion last year June to N9.93 billion in June 2019. Year-on-year, motor insurance services accounted for 19 percent of the industry gross written premiums in both periods.

Fire and property insurance service increased by 5.3 percent from N7.9 billion last year June to N8.32 billion same period this year. In both periods, its share of the industry gross written premiums amounted to 16 percent. Marine and aviation grew by 18.9 percent during the period from N3.65 billion to N4.34 billion this year’s June.

 

From N17.04 billion in June 2018, oil and gas gross written premium rose by 18.7 percent to N20.22 billion at half year 2019. Its industry share rose from 35 percent to 38 percent during the period. This is a signal of renewed interest in oil and gas insurance bolstered by increasing prices of crude oil at the international market.

“Oil and gas insurance recorded improvement at half year 2019. While this signals the financial strength and capital adequacy of market players, it is also a reinsurance that policyholders (big corporations) now have renewed confidence in the sector.

“We can attribute this to the optimism of the market players that the imminent capitalisation will drive premium growth. Hence, upon the successful implementation of recapitalisation plans, premiums in the coming periods should grow higher”, said Ahmed Akinyele, insurance analyst at Meristem Securities.

But in the last few days, crude oil prices have headed southwards and for the first time fell below Nigeria’s 2019 budget benchmark. This is also a source of concern to industry analysts.

“The falling crude oil prices would impact pricing of those contracts; declining oil prices indicate reduced revenue for oil firms. This would feed into the prices they will be willing to pay for insurance coverage. Meanwhile, the underwriters on the other hand may still embrace such contracts as most of they are willing to lower premiums in order to attract businesses”, Akinyele added.

Engineering insurance services declined by 18.8 percent from N7.63 billion in June 2018 to N6.20 billion as at June 2019. It presently accounts for 12 percent of the market share.

Source: businessdayng

Harnessing Mortgage Industry Potential to Grow Economy

The mortgage industry in Nigeria has got a lot of potentials that close industry watchers say, if harnessed, could lead to the growth of the industry and the wider economy.

A lot still needs to be done for the mortgage industry in Nigeria to get out of the woods. Apparently, the industry is in perpetual growth challenge that has kept its contribution to the gross domestic product (GDP) at a very low level.

Many factors have been fingered for this slow growth, including the Land Use Act of 1978 which rests land ownership rights on 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 one’s collateral to recover bad loan, etc.

The relative newness of the industry, lack of understanding of its dynamics and operational models by many Nigerians, and poor appreciation of the need and the ultimate benefits of keeping money in a mortgage bank are other militating factors.

Another major impediment to the growth of the sector is low investment in the industry. This accounts significantly for the low contribution of the industry to Nigeria’s gross domestic product (GDP). In advanced economies of the world, the mortgage industry makes significant contribution to economic development, but in Nigeria, this is not the case.

Mortgage finance as a percentage of Gross Domestic Product (GDP) is 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.

However, notwithstanding the industry’s low contribution to GDP coupled with the challenging business environment, the industry has all the potential to stimulate the economy when all the identified obstacles inhibiting its growth are removed.

An economy like Nigeria’s can benefit a lot from a flourishing mortgage industry as it will help in directing the economy in the desired direction. As part of efforts at growing the economy, government can make the necessary investment aimed to grow the industry. Enabling policies should also be put in place, leading to reduced high interest rate that can encourage more people to embrace mortgage loans.

Operators are of the view that on account of the identified obstacles, some primary mortgage banks (PMBs) are going through very difficult times, such they are not able to meet loan applications from home seekers.

The operators insist that until all those issues are resolved in a way that encourages the provider of capital, in this case, the mortgage bank, to give out loans, the sector will not grow as desired.

But they hope that 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.

Some finance experts argue that limiting a mortgage institution to a fixed capital 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 finance.

For this reason, the Federal Government needs to come in, look at what is happening in other civilised world and copy because, these days, “copying is no longer an act of deception but actually something that is done even in the civilised world,” says Okika Ekwem, a US-based realtor.

Ekwem says that in the advanced economies like US and UK, there is a secondary market for real estate financing where commercial banks or individual brokerage banks lend money to people and thereafter sell the securitised certificate to the secondary market and come back again to lend to individuals.

Mortgage industry growth that can impact the economy, according to Meckson Innocent Okoro, is possible 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.

To have a viable mortgage industry that can have significant impact on the economy, more PMBs have to be licensed such that there could be as many as 40 in each of the big cities, while each of the smaller cities could get as many as 10.

This is to discourage the concentration of these banks in urban centres and 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.

Mortgage finance as it is today, is not particularly established as a structure and as it exists in developed economies. The culture of mortgage finance is just gradually catching on with Nigerians and mortgage is financed the same way as every other commercial financing.

It is curious that after the recapitalisation and consolidation of the PMBs, Nigerians are yet to feel the impact in the economy. As at today, the interest rate as it is cannot mobilise the industry and the situation is such that even at 10 percent, the level of income in the country cannot still support mortgage growth.

There was a time in this country when the economy and the financial system were highly regulated, there was different interest rates structure for different sectors of the economy and within that period, lending to the housing sector was as low as seven to eight percent which underscored the importance attached to the sector and the government needs to look into this.

Source: businessdayng

Growing Urbanisation Will Do Africa Good Yet

It is a human thing that many of us may delight in a ‘good’ jibe hurled at those perceived not too kind to us. Thus, when the then BBC Business Editor Larry Madowo recently took a dig at the western media for their often poor portrayal of Africa, there were many cheers on social media by Africans.

He wrote: “If you only know Madagascar because of that animated penguins film, you’ve not been using the internet properly. But that is understandable, because the African island nation has faster internet speeds than you in the UK, France, or Canada.

“It has birthed a thriving call centre industry in a country that is also home to 95 per cent of the world’s real vanilla and, even more delightfully, delicious caviar. But all you probably hear of the nation is how impoverished it is — and that’s the problem with much of the western media’s portrayal of Africa.”

I bring this up because of what it implies; that it is not just the media that doesn’t always get it right, but that they are a reflection of the global north to sometimes get a thing or two wrong about Africa.

The noted economic advancement in Madagascar is apt, as it is an example of how Africa has moved from merely being rural.

It is apparent that Europe and the western world, in general, continue to perceive Africa as a rural continent, with this perception forming the basis of their development cooperation with countries Africa. Their development paradigm remains mostly rural than urban-oriented.

This observation is not new. Studies have for several years showed how this perception of Africa appears to overlook or fails to see, the rising trend in urbanisation calling for a rethink on the rural development paradigm.

But Africa is set to become more urban than rural. To see why first take this comparison of Africa and Europe’s rate of urbanisation: It took Europe 110 years to move from 15 per cent urban dwellers in 1800 to 40 per cent in 1910. Well into the twentieth-century, urbanisation was mainly a phenomenon of the industrialised global North.

But in 2013, a little more than a hundred years later, six of the ten countries with the highest urbanisation rates in the world are in sub-Saharan Africa. In Africa, 14 per cent of the population lived in cities in 1950, and in 2010, 60 years later the percentage was estimated to be over 40 per cent.

By 2050, it is projected that way more than half of all Africans will be living in cities. According to the World Bank, urbanization is the single most important transformation the African continent will undergo this century.

The thing, however, is that rural Africa will still have its place. And, that most of Africa’s urbanization is yet to happen, there is still time to get the things right.

Typically, African cities share three features that constrain urban development and create daily challenges for residents: They are crowded, disconnected and costly.

They are crowded and not economically dense, meaning that investments in infrastructure, industrial and commercial structures have not kept pace with the concentration of people, nor have investments in affordable formal housing.

They are disconnected because they have developed as collections of small and fragmented neighbourhoods, lacking reliable transportation and limiting workers’ job opportunities while preventing firms from reaping scale and agglomeration benefits.

Costly for households, particularly slum dwellers estimated at around 60 per cent of Africa pay a high price for low-quality services including housing, water, food and other amenities.

As a knock-on effect, workers’ high food, housing, and transport costs increase labour costs to firms and thus reduce expected returns on investment.

The growth of cities, however, if handled right, is development’s good omen for the continent. Cities have been civilisation’s crucible for economic activity, leading to wealth and job creation.

City planners in the region must be aware of this and are in different stages of planning for growing urbanisation. One example is the updated Kigali City Master Plan expected to be launched this month.

It takes into consideration the changing population demographics, the need to provide services to the citizens, aspiration for economic development.

These include ensuring affordable housing, an efficient transportation system and compatible land uses that promote public health, safety, and welfare that will benefit all.

Source: newtimes

World Bank: Total Commitment to Nigeria is now $11 billion

The World Bank’s net commitment to Nigeria currently stands at $11 billion. This was disclosed by the Country Director of World Bank Group, Mr Rachid Benmessaoud, at the maiden ceremony of the Nigeria Portfolio Performance Award, organised by the bank and the Ministry of Finance.

The award ceremony was put together to recognise the outstanding performance from the implementation of World Bank-supported projects at states and federal levels.

According to Benmessaoud, the World Bank is committed to fighting poverty and 60% of its programmes will be implemented at the state level and another 40% by the Federal Government.

The projects cut across health, education, agriculture, social protection, energy, infrastructure, and governance among others in the 36 states of Nigeria, including the FCT.

Benmessaoud stated that the World Bank was working on a new framework that could reform the challenges faced by the government.

“The country’s partnership strategy is always anchored on the economic reform plan of the government and in this case, we have used the Economic Recovery and Growth Plan (ERGP).

“This is the medium-term programme of the government on which we are anchoring our country partnership framework.”

He also said the award ceremony was introduced to recognise various entities that would drive the World Bank’s programmes in terms of finance.

We have different criteria with which we have evaluated these entities and we felt that bringing all of these entities together into an award ceremony would help us to recognise all of the good works they are doing and recognise those that have done something special that others can replicate.

“There is a lot of learning that we are emphasising in our engagements, states have to learn from each other.’’

 

Criteria for the awards: Benmessaoud said the criteria include the investments of various states, quality of briefings prepared and quality of mechanisms that exists at the state level.

He added that the awards would henceforth be an annual event and that Nigeria is the biggest beneficiary with more than 30 operational projects.

Reacting to the development, the Governor of Kaduna State, Nasir El-Rufai, commended the idea which he stated would make the states to compete at the level of governance. He promised Rachid that his state would assist the bank to implement its projects.

“One of the things I found upon taking office about four years ago was that most governors do not know what is going on as far as World Bank-financed projects are concerned.

“Often you find large amounts of money sitting idle that can be used for the benefit of the states that the governors are not aware of.

“The more the states carry out their projects, the more impact they will have on social sectors because most of the projects financed by the World Bank are targeted at social sectors like education, health care, nutrition and so on.’’

El-Rufai pleaded for more interventions like this and prayed for a frequency of lush funds as one single intervention cannot alleviate poverty at once.

Source: nairametrics

Why Financial Institutions Should Embrace Estate Devt

Despite being among the fastest urbanising cities on the African continent, Lagos is also growing speedily too.

But one of the major challenges facing the nation’s economic capital and the Nigeria at large in the face of rising urbanisation is the dearth of affordable housing for the citizens.

Simply put, there is urban housing crisis not only in Lagos but nearly all cities in the country face similar crises. Nigeria’s housing crisis exists in urban and rural places, manifesting more in the form of slum dwelling, homelessness, overcrowding, squatter settlements and substandard housing units.

But in  the ongoing effort to solve this challenge, financial institutions readily come to mind given that they have the highest number of business networks and outlets in the various states. This means that they must be involved in all efforts being made to provide shelter for both their staff and customers doing business with them.

Shelter does not come from absolute, it comes through concerted efforts with government providing the needed impetus. Although financial institutions in Nigeria especially banks are know to be providing financial support to customers to meet various needs, the challenge really borders on the type of collateral requirement which in most cases seems to target materials presented. Collateral requirements often  discourage several would-be participants from the bazaar.  There are big banks that can aside giving loans also go into building housing schemes.

Today however, many are no longer doing so for reasons best known to them and government that ought to be propping them to action seems incapacitated doing so. This problem is noticeable in the urban areas where you have banks, multinationals and other financial institutions.

In the rural areas, poor housing quality, deficient environmental condition as well as inadequate infrastructural facilities are the order of the day. The causative factors of this problem include: poverty, population increase due to urbanization, high cost of land, non-implementation of the housing policies, failure on the side of the government, high cost of building materials and corruption.

As more and more Nigerians make towns and cities their homes, the resulting social, economic, environmental and political challenges need to be urgently addressed. House prices and rents, on the other hand, have grown ahead of general inflation. This is why government should latch on the rules and corporate social responsibilities of these institutions to bring about housing provisions for the public.

In a situation where a bank like Zenith Bank takes up 5,000 housing units scattered all over the country; UBA, First Bank, GTBank, Fidelity Bank, Union Bank, Access Bank each taking 5,000 units and other banks taking 3,000 units on a two year basis scattered in various locations in the country, these shortages would have reduced drastically. Even if they sell these to the public, using their customers as point of contact, these would not have reached this crisis dimensions.

To make matters worse, the composition of houses for sale and rent on the market has been inexorably shifting towards very expensive house. The problem of adequate housing is not peculiar to Nigeria. According to the UN Habitat, 30 percent of the world’s urban population live in slums, deplorable conditions where people suffer from one or more of the following basic deficiencies in their housing: lack of access to improved water; lack of access to improved sewage facilities (not even an outhouse); living in overcrowded conditions; living in buildings that are structurally unsound; or living in a situation with no security of tenure (that is, without legal rights to be where they are, as renters or as owners).

 

There is so much criticism towards our financial system for not making credit more readily available, especially for mortgages. Banks are in business to lend, and today unlike troubled counterparts in Europe, they have good balance sheets and plenty of money available. So what’s with the apparent reticence to open the money spigot? Remove your negative emotions towards these maligned institutions for a moment and look from their side of the ledger.

In today’s world of low interest rates and a flat yield curve a bank has less than a 3 percent net interest margin….the amount between what it pays depositors and its loan rates. The very best possible outcome on a loan for our forever criticized bank is to get paid back all its principal and make a small spread on the interest.  Get paid back 95 per cent of every loan and it goes broke. Careful scrutiny of any type of loan is judicious business practice and necessary to remain solvent. A top quality financial lending institution can be lucky to earn is 1 to 1.4 percent on total assets.

Although, banks in Nigeria have not been lending to public expectations but proffer reasons for not doing much lending anymore. Whether, that is true or false, one is allowed to do what he chooses with what belongs to him. Since the financial crash of 2008, new regulations have made operating a bank much more cumbersome and expensive.

Banks in the United States were (sometimes with government coercion) proactively raise hundreds of billions of dollars in fresh capital and this was after writing down billions in mortgages and other problematic credits. Some bad mortgage assets still linger, not yet fully resolved after five years on the balance sheets of our the US biggest banks like Citigroup (C), JP Morgan (JPM), Bank of America (BAC), and Wells Fargo (WFC).

A new study from Habitat for Humanity says that housing microfinance can and should become a mainstream offering for financial institutions in Sub-Saharan Africa. Housing microfinance consists of small, non-mortgage backed loans starting at just a few hundred dollars that can be offered to low-income populations in support of incremental building practices.

The business case study, released recently entitled “Building the Business Case for the Housing Microfinance in Sub-Saharan Africa.” This builds on a project carried out over six years in Kenya and Uganda called “Building Assets Unlocking Access”.

The project was a partnership between Habitat’s Terwilliger Center for Innovation in Shelter and the Mastercard Foundations. So far, the project has reached over 47,000 households and mobilised more than $43 million in capital to benefit over 237,000 individuals. The business case study argues that housing microfinance, small non-mortgage backed loans for short terms, can become a mainstream offering in the market to address growing housing needs in the region, incremental building patterns, and the land tenure realities of low-income households.

There are an estimated 1.6 billion people in the world living in substandard housing. This figure is climbing, especially as the world becomes more urbanised and people migrate to cities for economic opportunity. In Sub-Saharan Africa, however, as much as 99 percent of people do not have access to formal financing – credit, savings, mortgages – that can enable them start building or improving their homes.

Traditionally, they build homes gradually as their resources allow. Developer-built, bank-financed homes are rare in Africa, serving fewer than five percent of households in most countries.

Solving the housing challenges in Africa will require a massive amount of capital investment and most of that will need to come from the private sector which the financial institutions are the only sector that can provide such huge sums of money.

Source: sunnewsonline

World Bank

We’ve spent $11bn in Nigeria- World Bank

The World Bank has declared that it has so far spent around $11billion over the years on projects across the country.

Country Director of the World Bank in Nigeria Mr Rachid Benmessaoudade made this disclosure in Abuja on Thursday at the maiden edition of the Nigeria Portfolio Performance Award.

He said the projects which this huge sum of money was spent on over the years are targeted at alleviating poverty and improving the lives of Nigerians.

He described the World Bank’s financial commitment in Nigeria as being among the largest in the entire Africa continent with over 30 operational projects.

The projects he said are spread across health, education, agriculture, social protection, energy, infrastructure, governance among others, in all 36 states of Nigeria, and the FCT.

He said that 60 percent of the bank’s programmes were implemented at the state level and another 40 percent at the Federal level

Benmessaoudade also revealed that the bank was working on a new country partnership framework “that would outline the new reform challenges that the government faces and how it could support it in implementing solutions to the challenges.”

According to him, “the country partnership strategy is always anchored on the economic reform plan of the government and in this case we have used the Economic Recovery and Growth Plan (ERGP), which is the medium-term programme of the government on which we are anchoring our country partnership framework.”

He said the bank feels that “the world bank can play a catalytic role in creating a conducive environment for private sector to finance infrastructure so that we can create the fiscal space for the government to put more money in human capital and in social spending.”

Permanent Secretary, Ministry of Finance, Dr. Mahmud Isa-Dutse, assured the World Bank of the ministry’s commitment to build an enabling environment to manage its portfolio in Nigeria and assist the bank deliver on all its projects implementation.

Kaduna State Governor, Nasir El-Rufai, said “one of the things I found upon taking office about four years ago was that most governors do not know what is going on as far as world bank-financed projects are concerned. Often you find large amounts of money sitting idle that can be used for the benefit of the state that the governors are not aware of. The more the states carry out their projects, the more impact they will have on social sectors because most of the projects financed by the world bank are targeted at social sectors like education, health care, nutrition and so on.”

El-Rufai said that the Nigerian Governor’s Forum (NGF) was currently more aware of the bank’s projects because of the bank’s constant briefings, but that some governors engaged more than others as some were hands-on while some were a bit disconnected.

Source: thenationonlineng

Is For-Profit Investment in Social Housing a good or a bad thing?

The two-bedroom brick house in the village of Dunchurch in central England looks much like any other freshly built home in the UK: newly turfed garden, mullioned windows, magnolia-painted walls waiting for pictures to be hung.

But the buyer of the semi-detached house, a short stroll from the Dun Cow pub, will share ownership of their home with an unlikely partner: one of the world’s largest private equity firms, headquartered on New York’s Park Avenue. The home is among those recently made available, in this case under a shared ownership deal, by Sage Housing, a fast-growing provider of affordable homes that is majority-owned by the US real estate giant Blackstone. Similar deals are quietly being conducted worldwide.

Blackstone is among hundreds of companies — including private equity groups, fund managers, institutions, listed real estate groups and others — that see big business in affordable housing. Public-sector housing providers in the UK, as in many countries, have struggled to keep pace with demand for homes for middle and lower-income workers in areas where employment growth is strong.

Increasingly, heavyweight profit making groups are seeking to fill the gap, pledging to generate commercial returns for investors while fulfilling housing need. But opponents of the trend, including social housing groups and the UN’s special rapporteur on the right to housing, see trouble ahead.

The National Housing Federation, a group for UK social housing providers, has fought back against for-profit groups seeking to call themselves “housing associations”. “If you are a for-profit organisation, are you there for the long term?” asks Kate Henderson, NHF chief executive. “The question of accountability is a key one . . . will they add value in a sector that desperately needs investment, rather than being there to extract value? Housing associations are known for being not-for-profit and they exist to deliver long-term value to their communities.

They can do this because they don’t have to return value to shareholders.” Leilani Farha, the UN special rapporteur on the right to housing, goes further. In March, she wrote an open letter to the chief executive of Blackstone attacking the company’s housing investments as “inconsistent with international human rights law and norms”.

Recommended UK social housing Blackstone under fire over push into UK social housing “Unprecedented amounts of global capital are being invested in housing as security for financial instruments and traded on global markets, which is having devastating consequences for people,” she said. Farha cited evictions, charges to tenants and rent increases among the problems she had found; she also attacked Blackstone for lobbying to defeat a rent control proposal in California. Blackstone fought back. In a reply to Farha, the group’s co-heads of real estate said they were “bringing significant capital and expertise” to a sector that badly needed it.

“We share your concern about the chronic undersupply of housing in major metropolitan centres around the world,” they added. The company pointed to examples such as Hembla in Sweden, a listed rental landlord which it says has reinvested all its income in the properties it owns since Blackstone acquired a controlling stake. It also has a development pipeline of 5,000 new homes and says evictions cannot be a problem, since Swedish tenancies are indefinite by law.

A development in Sweden owned by Hembla The company’s UK housing business, Sage, has its roots in buying up affordable homes that developers are obliged to build as a condition of planning permission, a strategy that has irked non-profit groups, which say it has encroached on their turf.

The private equity giant is keen to show it is also adding to the stock of homes being built: it has begun partnering with developers to fund new sites, contributing to a goal of 20,000 new homes in five years. The homes are designated “affordable” under UK planning law, meaning they operate with rent controls or under shared-ownership deals. Blackstone owns its housing assets within a series of different funds, ranging from “permanent capital” vehicles to private equity-type funds with shorter time horizons.

Sage is owned within its Real Estate Partners Europe V fund, an opportunistic fund, and could ultimately be sold or listed. Others are joining the fray: CBRE Global Investors, the fund management arm of the world’s largest property services group, this year launched a UK affordable housing fund, seeking annual returns of 6 per cent from investing in a range of homes, from homeless accommodation to rented homes for “key workers” such as nurses or teachers.

An open-ended fund with an indefinite lifespan and social impact aims, the product aims to generate its returns by working in partnership with non-profit providers and without significant borrowing; it will fund developments as well as buying existing homes.

Hannah Marshall, head of UK funds at CBRE GI, says it will share the risk attached to changes in regulated rents with its partners, including the impact of a series of rent cuts currently under way. Legal & General, the UK insurance company, registered a social housing provider late last year as part of a broader push into housing, investing from its own balance sheet.

The insurer says it expects to hold assets for the long term, adding that the sector needs to move away from its reliance on debt funding: “An equity model where institutional investors are the long-term holders of assets represents a much-needed shift away from the current debt-only funding model that [cannot] scale up at the speed that is needed to address the affordable housing shortfall.”

 

Recommended Property sector Housing associations call for £42bn to build social homes For all residential landlords, failures in services to tenants can result in a public outcry, tarnishing a property owner’s image and forcing changes in strategy. Non-profit UK housing associations have had to contend with blots on their own reputation.

This year, L&Q, one of the largest, apologised for maintenance problems on one of its London estates, including serious damage from water and sewage leaks. “We got it wrong, we didn’t fix things when we should have, and as a result we let down our residents,” the group’s chief executive wrote in an industry magazine, Inside Housing.

The NHF’s Henderson acknowledges that housing associations need to improve to maintain their reputation. “This is about differentiating ourselves from other sectors,” she says. Private investors moving into affordable housing can look to Germany as a cautionary tale. Indebted states and municipalities sold off swaths of housing in the early 2000s to private equity groups, which quickly became known as “locusts”.

Will [for-profits] add value, rather than being there to extract value? Kate Henderson, NHF chief executive According to an account by Vonovia, a listed housing group, the private equity owners “came under financial pressure, with the effect that maintenance and investment in the housing stock had to be largely cut back.

This was at the expense of serious housing defects.” Many of those portfolios have now found stability as listed housing groups, including Vonovia itself, but suspicion still hangs over private equity’s role in housing in Germany. Jan Crosby, UK head of housing at business advisers KPMG, says prospective investors need to “get under the skin of the economic model” when considering an investment in affordable housing.

“It is important that there is enough disclosure when people are making investment decisions,” he adds. “Is it building new housing or is it taking existing housing? Who are the tenants going to be? Who is paying the rents, in a rental model? Is it regulated or unregulated? How long will the property be targeted at affordable or social tenants? They should understand how the returns are driven. “From that, people can make a judgment as to whether it is a social impact investment or just an investment in residential.”

Source: ft

Cost vs Access: SMEs Worry Over Structure of Bank Funding

Esther Menua needed N15 million to expand her small grocery store in Lagos. She went to a tier-two commercial bank but was asked to provide a plot of land valued at N25 million. The bank worker who attended to her also informed her that the cost of the loan was 23 percent per annum, and she must pay back in 12 months.

Menua chose to borrow the money to meet the expansion plans, but she was unable to pay back the money, which now amounted to N18.45 million plus interest. Her landed property was eventually sold by the bank after several threats.

“For me, access to funds is tough, but cost of funds is tougher,” Menua said, downcast.
Like Menua, many micro, small and medium businesses (MSMEs) are going through funding challenges at different levels.

BusinessDay sampled the opinions of entrepreneurs to determine between cost and access, what was the bigger problem for MSMEs attempting to get funding for business expansion. The opinions were divided, with the majority thinking that both access and cost of funds have equal weight.

“Interest rate is very high,” said Adepeju Jaiyeoba, lawyer and chief executive of Mothers Delivery Kit, which reduces maternal mortality in rural communities.

“I have experience in issues around debt recovery due to my capacity as a lawyer and I know that the problem is the seen and unseen costs borne by entrepreneurs like us,” she said, adding that access is also a big issue.

Ibrahim Maigari Ahmadu, chief executive of Liverstock247.com, Nigeria’s first livestock online marketing and listing platform, said interest rate is high just as there are many gridlocks to access to funds.

“Nigerian commercial banks are risk-averse. They put so many bottlenecks on the way when you want to access funds,” Ahmadu said.

“Interest rates are very high, which is a major inhibiting factor. Collaterisation is structured to knock you out,” he said.

He explained that the risk-averse nature of banks prevents them from funding the agriculture sector.

Nigeria’s benchmark interest rate is among the highest in Africa at 13.5 percent. Ethiopia’s is 7 percent; Kenya’s 9 percent; South Africa 6.75 percent; Zambia 10.25 percent, and Cameroon 4.25 percent.

Similarly, Rwanda is 5 percent; Mauritius 3.5 percent; Algeria is 8 percent, and Senegal is 4.5 percent.

Interestingly, the National Bureau of Statistics’ recent MSME report shows that 85 percent of businesses could not have access to external financing between 2013 and 2017.

In fact, only 5.3 percent of SMEs had access to bank credit, even with 40 percent of them having relationships with banks.

“Both access to funds and costs are big issues for me,” said Attah Anzaku, CEO of AgroEknor, exporter to Europe, Asia and the Americas.

“Even if you have the access, cost is crippling,” he added.

Oladapo Abiodun, chairman, Small and Medium Enterprises Group (SMEG) of the Lagos Chamber of Commerce and Industry (LCCI), said cost and access to funds are intertwined, adding that tenor of funds is an often ignored but important issue.

“The funds we have are not suitable for the kind of economic environment we have. The economy requires long-term funds, which are unfortunately not available,” Abiodun, who is also the CEO of an export-oriented firm, Comtrade Foods Limited, said.

He explained that most SMEs can hardly afford to provide collateral required by commercials banks.

“In many climes, government intervenes to guarantee such funds and even provide the needed mentorship,” he said.

Attempting to bridge the gaps are Financial Technology firms or Fintechs, which are growing in Nigeria but also have lending rates that are in double-digits per annum just like deposit money banks scattered across the country.

But the Bank of Industry (BoI) intervenes by providing funds at 9 percent per annum. Businesses told BusinessDay that banks like the BoI and the Bank of Agriculture (BoA) need recapitalisation to enable them to fund more businesses.
Muda Yusuf, director-general of LCCI, said access to funding is much more difficult for MSMEs but cost of funding is a much bigger challenge for medium and large enterprises.

“For micro and small businesses, because they are perceived as high risk, collateral is tougher and many of them cannot provide such,” Yusuf said.

“For them, the big issue is not just the cost but access. If you ask them to pay 30 percent per annum, they will pay, after all some micro and small businesses borrow from microfinance banks at 5 percent per month or more, which amounts to 60 percent per year or more,” he added.

He explained that bigger firms can provide collateral due to their size but worry about high funding costs.

Source: businessdayng

Union Homes REITs Posts N561m Gross Income on Higher Rental Income

… To pay N1.75 per share dividend

Fund holders of the Union Homes Real Estate Investment Trust will receive N1.75 dividend per share for the financial year ended December 31,2018, an increase of 133 percent over 75 kobo per share dividend that was to fund holders in 2017. The fund managers realised N561 million as gross income last year in spite of the negative sentiment that pervaded the market.

That was 5.81 percent higher than the gross income the fund made in 2017. The major component of the gross income for the period was the rental income which added up to N263 million during the reference period, representing 47 percent of the total incomes made by the UH REITs and an increase of 29.18 percent when compared with the rental income generated in 2017.

The manager of the fund also cut down its cost of operations, especially its management fees to N177 million which was lower by 13.70 percent when compared with what was charged in 2017. Net income made by the firm rose by 23 percent to N363,650 in 2018 from N294,706 that was realised in 2017.

However, the fund’s net asset value (NAV) fell from N12.72 billion in 2017 to N9.78 billion in 2018 due to swap of properties during the year.

“Basically, properties were sold in exchange for shares. The shares subsequently cancelled and a book profit of N600 million resulted’, Patrick Illodianya, manager of the fund said.

 

“Compliance with the asset allocation requirement of the fund (90% in real estate related investment and 10% in liquid asset investments) as at 31st December, 2018 was 85.9% in real estate investments and 4.7% in real estate related, while 9.41% was invested in the liquid asset. The REIT improved in the portfolio mix for the year 2018”, according to a statement issued by the fund manager.

The fund manager optimised the market dynamics in the real estate segment going by a higher demand enjoyed by 1 bed and 2 bed flats near the city. This is in addition to the retail trends that support the development of mid-sized shopping centres.

Source: businessday

Nigeria’s Pension Contributors add N186.43 Billion to Pension Asset

Pension fund assets in Nigeria increased by N186.43 billion in the first quarter of 2019 to push the total pension assets to N9.03 trillion.

This is according to the analysis of the Summary of Pension Fund Assets recently released by the National Pension Commission (PenCom) covering the first quarter of 2019.

The breakdown: According to the PenCom report, the total monthly pension contributions received from contributors from both the public and private sectors hit N5.28 trillion as at the end of the first quarter, 2019. This shows an increase of N186.43 billion, representing a 3.66% growth over the total contributions in one quarter.

During the first quarter of 2019, the total contributions received from the public sector amounted to N93.80 billion (50.31%) while the private sector contributed N92.63 billion (49.69%).

 

Pension Fund Investment: In the first quarter of 2019, the total pension fund assets grew from N8.64 trillion as at the end of December 2018 to N9.03 trillion as of March 2019, representing a growth of 4.55% (N393.06 billion). The growth indicates an increase in the quarterly growth rate compared to 3.49% for the previous quarter.

  • Over the years, a larger chunk of the pension fund has been invested in FGN securities, which are regarded as safe with low investment returns.

  • In the first quarter of 2019, FGN Securities still accounted for 72% (N6.5 trillion) of the total pension fund in Nigeria. Items listed under FGN securities include FGN Bonds, Treasury Bills, Agency Bonds, Sukuk Bonds, Green Bonds and so on.
Pension Industry Portfolio as of March 2019

Schemes Membership: Further breakdown shows that the pension industry recorded a 1.87% growth in the scheme membership during the first quarter of 2019, moving from 8.47 million contributors at the end of the preceding quarter to 8.63 million.

  • According to the PenCom report, the growth in the industry membership was driven by the Retirement Savings Account (RSA) Scheme, which had an increase of 158,853 contributors representing 1.89%.
  • However, membership of the Closed Pension Fund Administration (CPFA) Scheme declined by 16 members (23,316) while the Approved Existing Scheme (AES) membership remained unchanged at 40,951.

A breakdown of the RSA registrations indicated a 0.87% (31,508) increase in
RSA membership from the public sector during the first quarter of 2019 to stand at
3.6 million, which represented 42.49% of the total RSA registrations.

  • In addition, private sector membership increased by 2.65% (127,345) in the quarter under review, which brought total registrations from this sector to 4.9 million representing 57.51% of total RSA membership.
  • PenCom noted that the growth in RSA membership can be attributed to the increased level of compliance by the private sector as a result of the various steps taken by the Commission to improve compliance and coverage, as well as the marketing strategies of the PFAs.

Withdrawals from RSA: During the quarter, approval was granted for payment of N4.51 billion to 10,733 RSA holders who were under the age of 50 years and were disengaged from work and unable to secure another job within 4 months of disengagement.

  • The cumulative total number of RSA holders who were paid benefits for a temporary loss of job was 313,468 and were paid a total of N107.93 billion being 25% of the balances of their RSAs as prescribed by the Pension Reform Act 2014.
  • Further analysis showed that the private sector accounted for 95.38% of those who benefitted from these payments while the public sector accounted for 4.62%.

Source: nairametrics

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