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CBN Advise Government To Adopt “Big Bang Approach” to Fixing Economy

The Central Bank of Nigeria held its monetary policy committee meeting last week ending it with a decision to hold on all rates. Excerpts of the Monetary Policy Communique issued by the CBN indicates its members chose to retain MPR at 13.5% as well as CRR and liquidity ratios at 22.5% and 30% respectively. 

However, a cursory review of the communique reveals a somewhat aggressive tone from the CBN in terms of the direction of the economy and its expected reaction of the government. Of particular interest to us were its comments on the planned 50% increase in Value Added Tax from 5% to 7.5%.  

The Good; The CBN revealed its support for the planned increase stating the obvious that it will increase government revenue.  “The MPC also noted the Government’s current drive to increase Value Added Tax (VAT), adding that this will improve fiscal revenue to support expenditure and reduce the budget deficit as well as Government borrowing when implemented.” Emefiele  

The bad: The Apex bank mentioned that an increase in VAT rates won’t salvage the government’s tight shoestring budget as it needed to do more to drive up revenues.  

“The Committee, however, noted that this was too little to close the gap in Government finances.” Emefiele 

BIG BANG: If an increase in VAT is not enough to shore up government revenues then what should it do?  

“Consequently, the MPC called on the Government to, as a matter of urgency, adopt what it termed a BIG BANG approach towards building fiscal buffers by purposefully freeing-up redundant public assets through an efficient, effective and transparent privatization process. This would raise significant revenue for Government and resuscitate the redundant assets to generate employment and contribute effectively to national economic growth.” 

What this means: The BIG BANG approach is basically the CBN telling the government point blank that it needs to sell off more government assets to raise money as well as cut increased cost of running government business.  This issue was a hot topic for debate in the run-up the elections where the government announced it was considering selling some of its assets to raise finance.  

But what assets are there for the government to sell? NNPC, Nigeria’s State Oil company behemoth is perhaps the juiciest of them all. However, political considerations, as well as vested interest, may not allow for the sale of the company as recommended in the PIG bill yet to be signed by the president. 

A review of ongoing companies slated for privatisations the BPE shows only NIPOST is currently being considered by the Bureau.

Source: nairametrics  

CBN Retains Benchmark Interest Rate at 13.5%

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) on Friday announced the retention of its Monetary Policy Rate (MPR) at 13.5 percent.

This announcement was made by Governor of the CBN, Mr Godwin Emefiele, while addressing newsmen in Abuja on outcome of the two-day meeting of the MPC, which started yesterday.

According to the apex bank chief, the committee decided to leave the benchmark interest rate unchanged in order to monitor developments in both the global and local spaces.

The central bank further said the MPC agreed to leave the asymmetric corridor at +200 and -500 around MPR, liquidity ratio at 30 percent and the Cash Reserve Ratio (CRR) at 22.5 percent.

CBN Explains How Banks Will Deduct New Deposit Charges

The Central Bank of Nigeria (CBN) recently announced the imposition of 2% charges on bank deposits above N500,000 in addition to already existing charges on withdrawals.
The development is part of the central bank’s plan for nationwide implementation of the cashless policy which will begin by March 31, 2020.

The apex bank made this known in a circular to all Deposit Money Banks (DMBs) in the country on Tuesday, September 17. The new policy has, however, been condemned by many Nigerians who believe it is obnoxious.
Also, the policy has generated some confusion as many seek to know how Deposit Money Banks (DMBs) will be deducting the charges. This prompted the central bank to provide further explanation regarding the new charges.

According to the apex bank, the charges on deposit and withdrawal on the savings account will be carried out on the excess of the limit it has set.

The Central Bank of Nigeria (CBN) recently announced the imposition of 2% charges on bank deposits above N500,000 in addition to already existing charges on withdrawals.
The development is part of the central bank’s plan for nationwide implementation of the cashless policy which will begin by March 31, 2020.

The apex bank made this known in a circular to all Deposit Money Banks (DMBs) in the country on Tuesday, September 17. The new policy has, however, been condemned by many Nigerians who believe it is obnoxious.
Also, the policy has generated some confusion as many seek to know how Deposit Money Banks (DMBs) will be deducting the charges. This prompted the central bank to provide further explanation regarding the new charges.

According to the apex bank, the charges on deposit and withdrawal on the savings account will be carried out on the excess of the limit it has set.

Source: legitng

Experts Identify Technology, Real Estate as Growth Drivers of Economy

Experts have identified investments in technology, real estate as growth drivers needed to boost the nation’s economy on sustainable basis. According to them, if investors, entrepreneurs and regulators of sectors that drive the economy can continue to intensify collaboration, the future of technology in Nigeria and Africa appears promising.

They also stressed the need for government to create enabling business environment and fix the parlous infrastructure for optimal productivity. Speaking at an investment forum in Lagos, Partner, West Africa Financial Services and Chief Economist, PwC Nigeria, Dr Andrew Nevin, said unlocking dead capital and investment in real estate is key to growing the economy.

According to him, PwC estimates that Nigeria holds at least $300 billion or as much as $900 billion worth of dead capital in residential real estate and agricultural land alone.For real estate, he said there is housing deficit of 17 million, which creates immense employment benefits for Nigerians. Nevin, who spoke at the African Private Equity and Venture Capital Association (AVCA), Focus Live, said Nigeria also needs to look into its Diaspora remittances, as the country currently accounts for over a one-third of migrants flows in Sub-Saharan Africa.

He said migrants’ remittances were 77.2 per cent of last year’s government’s budget and more than 10 times the foreign direct investment (FDI) flows in the same period.The Managing Director of AIICO Pensions Managers, Eguarekhide Longe, who decried the setbacks on gathering data in the country, said private equity investments is also essential in growing Nigeria’s economy as the country is a price sensitive market for investors.

Longe said private equity has made gains from the telecommunication sector but there are still challenges with the payment system. He said entertainment is also a revenue generator but needs some sort of coordination to harness its potentials. The creative sector is difficult to replicate but there is need to put structures behind it.

Senior Partner and Managing Director, AfricInvest Nigeria, Abiola Ojo-Osagie, said in developing the economy, Nigeria must not forget the application of technology to navigate to the side of returns. Ojo-Osagie said there is need to unleash local talent into portfolio development, while promoting local development through value-driven strategies.

Co-Founder, Lidya, Tunde Kehinde, said the opportunities intechnology are ernomous, saying what will happen in the future will elude the ones in the past. Kehinde said there is more openness for businesses using technology with access to different services.

He said technology will change expectations of people and force all traditional entities to change the face of their businesses.Kehinde added that there will be dramatic shift in the way people do things with customer customers orientated initiatives.

Source: Guardianng

Experts, OPS Pick Holes in CBN’s Cashless Policy … Say Charges’ll Increase Burden of Bank Customers

Experts and stakeholders have picked holes in the implementation of the Central Bank of Nigeria’s cashless policy, with the imposition of charges on cash deposits and withdrawals.

Some experts, who spoke to our correspondents in separate telephone interviews on Wednesday, said that the charges were unnecessary as they added to the burden that customers already bore.

Some other experts urged the apex bank to review downwards the cash handling charge on daily cash withdrawals that exceed N500, 000 for individuals and N3m for corporate bodies.

The apex bank had in a circular to Deposit Money Banks stated that from Wednesday, September 18, it would impose three per cent processing fees for withdrawals and two per cent processing fees for lodgements of amounts above N500, 000 for individual accounts.

For corporate accounts, the apex bank said that DMBs would charge five per cent processing fees for withdrawals and three per cent processing fee for lodgements of amounts above N3m.

The apex bank said charges were introduced to drive development and modernisation of the country’s payment system in line with the vision 2020 goal of being amongst the top 20 economies by the year 2020.

Too many charges can discourage savings

But reacting to the development, finance experts said that the move would discourage the culture of savings among Nigerians.

The Registrar, Chartered Institute of Finance and Control of Nigeria, Mr Godwin Eohoi, called for a downward review of the charges to 0.5 per cent for individuals and 1.5 per cent for corporate organisations.

He said bank customers were already suffering the burden of various charges from DMBs for carrying out various banking transactions.

He gave some of the charges as card maintenance fee, Automated Teller Machine withdrawal charge, stamp duty, Commission on Turnover and SMS alert.

Eohoi said with all these charges, it would be unfair for the apex bank to impose additional charges on cash withdrawal and deposit in a bid to promote cashless economy.

He said, “The move by the CBN to promote cashless policy is commendable because it has some benefits such as reducing the amount spent by the apex bank in cash management.

“However, the Nigerian economy is still fragile and at a time when the CBN is promoting financial inclusion, it would not be fair to impose additional charges on bank customers that are already overburdened with different types of charges from banks.

“The cash deposit and withdrawal fee announced by the CBN is too high. They should reduce it to 0.5 per cent for transactions involving individuals and 1.5 per cent for corporate companies.”

A former Director-General, Abuja Chamber of Commerce and Industry, Chijioke Ekechukwu, said the imposition of the charges should be reviewed downwards considering that many Nigerians were still unbanked.

He said, “The policy is aimed at reducing cash transactions and if you reduce cash transactions, it becomes easier for banks and CBN to manage cash.

“Each time cash is moved from one location to another, it involves a lot of costs. So, this cashless policy will help the CBN and the Nigeria Financial Intelligence Unit to track transactions.

 

“Above all, it may not ultimately reduce the need to withdraw cash. When the benefit of the cash you are going to pay is far above the charges you are going to get, then you will definitely ignore the charges, withdraw the cash and make the payment.

“If they maintain the kind of charges and remove automatically what they call maintenance charges, stamp duty and others, it will help to promote the cashless policy.”

 Greatest impact on small business – NECA 

The Nigeria Employers Consultative Association and the Lagos Chamber of Commerce and Industry said the latest charges would increase the burden on bank customers.

It said that the implementation of the policy would signal the imposition of charges on deposits in addition to already existing charges on withdrawals.

The Director-General, NECA, Mr Timothy Olawale, who though said the directive was purportedly to move the country into a cashless economy, and reduce crime involving cash, said there should have been enough notice before implementation.

Olawale added that it would also have the greatest impact on retail businesses and other medium-scale retailers in the Fast Moving Consumer Goods sector.

He said, “Though the overall aim of reducing cash transactions is good, the policy will, however, increase the cost of doing business and force organisations and individuals to start multiple deposits and withdrawals in order to beat the charges.”

Implementation notice too short – LCCI

On his part, the Director-General, LCCI, Mr Muda Yusuf, said the notice given by the CBN was too short and that it would have disruptive effects on bank customers and other stakeholders. He suggested a much longer notice.

He said, “The latest circular by the CBN should have given a much longer notice to economic players. The notice given for the effective date is extremely short. The circular was dated 17th of September while the effective date was 18th of September.

“This is just a notice of one day.  This would have short-term disruptive effects.  We implore the CBN to give at least two months to allow for players in the economy to adequately prepare themselves. This is particularly so for investors who are major players in the retail segment of the economy.”

While he noted that it was difficult to justify the decision to penalise cash depositors, he said the emphasis of the policy should be on discouraging cash transactions and withdrawals, which was more in consonance with its objective.

Policy could spur multiple withdrawals and deposits

A professor of economics at the Department of Economics, Olabisi Onabanjo University, Ago Iwoye, Ogun State, Sheriffdeen Tella, also decried the new policy, stating that it was contradictory to the cashless policy mantra of the CBN Governor, Godwin Emefiele.

While he noted that there already existed many charges heaped on individuals and corporate clients by banks through withdrawals and management of accounts, among others, he said the addition would be an overkill.

He said the directive would only encourage multiple withdrawals and deposits, in order to beat what it aimed to achieve. He described the new policy as favouring commercial banks and disfavouring their customers.

He said, “The charges are becoming too many that people may decide not to take their money to the banks anymore. They may begin to look at other options.

“The new charges will not in any way encourage the cashless policy the CBN is trying to promote. I see it more as being contradictory.

“Government should look at other ways of making money for the banks.”

CBN, FIRS directives contradicting

Maritime logistics expert and the Chief Executive Officer of Hermonfield, Mr Tunji Olaosun, said there was a lot of contradiction in the directives coming from the CBN and the Federal Inland Revenue Service.

He said, “It appears they don’t talk to themselves because of the conflicting signals coming from them.

“From the CBN’s instruction, it shows that the CBN wants to discourage cash transactions and encourage cashless transactions. But at the same time, the FIRS is saying it will impose tax on transactions done online.

“So in essence, if we carry cash, CBN penalises us; if we do cashless, FIRS taxes us. So, which one do they want us to do? Both are agencies of the Federal Government which means the ministry they are confusing Nigerians.”

 

Olaosun, who is also an Information and Communications Technology expert and the co-founder of Flink Teshnik Concept, suggested that the Minister of Finance should come out with a clear-cut directive to resolve the confusion.

The National Coordinator, Save Nigeria Freight Forwarders, Dr Osita Chukwu, condemned the policy in strong terms.

He said the government was bent on imposing more hardship on Nigerians with the recent policies that were being churned out.

“He said, “First, they increased Value Added Tax; then they are now imposing charges on both cashless and cash transactions.

“The reason is because they get everything free. They don’t buy fuel, they don’t pay for amenities. Why won’t they impose more hardship on tax payers who are funding their lifestyle?”

Implement aggressively, reduce PoS transactions’ costs

The Managing Director, Financial Derivatives Company Limited, Mr Bismarck Rewane, who was recently named in President Muhammadu Buhari’s Economic Advisory Council, said the initiative should be lauded as it aimed to further drive the CBN’s cashless policy.

According to him, the CBN cashless policy should have been more aggressive and long implemented with full force.

He said, “I think that anything to encourage people to use electronic means of banking is good. If you go to advanced countries, even in Kenya, nobody carries cash.

“Cash is unsafe and it impedes regulation of circulation of money. Anything the CBN is doing on cashless policy should be supported. As a matter of fact, I am surprised that they confined it to only about five states.

“The CBN ought to step up and actually extend it to other places; but this is like a pilot, I guess. It is a way of making sure that people drop cash migration to electronic payments.”

Rewane said the charges on PoS transactions should, however, be reduced, but not abolished in order to drive financial inclusion.

Make online, PoS transactions free

The Managing Director/Chief Executive Officer, Cowry Asset Management Limited, Mr Johnson Chukwu, said, “The fact that we are also imposing taxes on online payments is a negation of the drive to encourage people to move away from cash.

“At this point in time, we should make all online transactions free of taxes so as to encourage that migration in terms of cultural orientation.

“Our culture is that we use cash to make payment. So if you want people to move away from cash, we need to remove charges on electronic payments.

“If you impose tax on electronic payment, and at the same time you are also imposing charges on cash deposits and withdrawals, you will basically be pushing people to begin keeping their cash at home.

“Given the overriding need to encourage cashless transactions, the government or the CBN and the tax authorities should avoid, in the meantime, imposing taxes on electronic payment platforms and allow that sector to mature.”

A professor of finance at the University of Lagos, Sunday Owualah, said the CBN initiative would definitely not augur well because presently, any transfer or third party deposit into any current account attracted a stamp duty of N50.

Source: punchng

N1.07trn to Hit Money Market This Week

Liquidity in the Nigerian money market is expected to increase as N1.07 trillion inflows from combination of Treasury Bills maturity, Open Market Operation ( OMO) and Primary Market Auction (PMA) hit the system this week.

A breakdown of the inflows show that N536.3 billion will come from Treasury Bills maturity, N356.5 billion from OMO and N179.8 billion from PMA.

The money market last week recorded total inflow of N347 billion from matured OMO bills. However, the Central Bank of Nigeria (CBN) auctioned and sold OMO bills to mop up N527 billion, which caused a spike in average money market rates by 2,011 basis points.

Treasury bills closed on a negative note. Yields across the curve increased marginally by 1 bps on the average to 13.40 percent from 13.39 percent the previous day, according to analysts at FSDH research, an arm of FSDH Merchant Bank Limited.

Yields on medium and long term maturities increased by 4bsp, while the yields on the short- term maturities declined by 4bsp.

Increasing VAT is Not The Ultimate Solution to Nigeria’s Revenue Problem

Nigeria’s finance Minister, Zainab Ahmed, recently admitted that Nigeria has a revenue problem. That was a euphemistic method of describing Nigeria’s current predicament.

Since 2015, national expenditure has doubled but the nation has continuously failed to meet revenue targets, necessitating the need to incur debt to meet the government’s obligations.

The reasons for Nigeria’s declining revenue are not farfetched. Nigeria derives the bulk of its government revenue and foreign exchange earnings from oil exports. However, the inflow of petrodollars has steadily declined in recent years owing to a fall in the price of crude oil from a peak of $113 per barrel in 2012 to around $60 in 2019. A situation which has resulted in the inability of the government to meet revenue targets.

To make up for the shortfall, the government has attempted to increase revenue generated from taxation, with the number of taxpayers doubling since 2015. Nevertheless, there remains a gaping hole in the nation’s coffers necessitating the need for heavy borrowing to make up the revenue shortfall.

However, Nigeria’s revenue shortfall is only half of the problem. The state of the government’s expenditure also leaves more to be desired. Currently, the government expends most of its earning on debt servicing with data from the Debt Management Office (DMO) revealing that 60 percent of government’s revenues goes into debt servicing. What is left goes into public administration, particularly paying salaries of public servants and government employees. It is therefore not difficult to deduce that not only does Nigeria have a revenue generation problem, it has an equally seriously problem with expenditure management.

It was therefore unsurprising that last week’s announcement of a proposed increase in the Value Added Tax (VAT) rate from 5 percent to 7.5 percent has been met with condemnation. While the federal government’s desire to increase the VAT rate is understandable, given that Nigeria not only has one of the lowest VAT rates in Africa, but also one of the world’s lowest ratios of tax to GDP; increasing the VAT rate in current circumstances is illogical at best.

In an economy which still grapples with the aftereffects of the recession it suffered in 2016, as well as spiralling unemployment and a low growth rate, increasing taxes is counterproductive to economic growth.

Typically, nations struggling with low economic growth and other forms of macroeconomic pressure tend to reduce tax rates in order to spur production and boost consumption, Nigeria instead has done the opposite. By increasing the VAT rate, the government is directly increasing tax burden on companies and consumers, thus reducing disposable income available for consumption of goods and services. This is far from ideal for the growth of the economy.

In addition, contrary to the rhetoric emanating from the government that the increase in VAT has no effect on poor people, the VAT is a regressive tax which affects the poor more than it affects the rich. Basic commodities including food, transportation etc. will invariably become more expensive, with the severest effects suffered by the nation’s poor. In a nation already adjudged the poverty capital of the world, a policy which results in higher cost of living should be the last on the government’s agenda.

Therefore, rather than increase the VAT rate or introduce new ones, the government’s priority should be improving tax collection. Currently, Nigeria ranks as one of the nations with the largest VAT gap in Africa. This implies that the government currently does not collect as much VAT as it should lends credence to the opinion that the focus should be on improving tax collection, not increasing rates.

There is an urgent need to improve the nation’s tax collection system such that the informal sector is adequately captured while also expanding the nation’s tax base to cover more taxable persons.

Furthermore, rather than increase the VAT rate, the government should be focused on addressing structural deficiencies in the macro economy, as well as improving the ease of doing business across the nation. Both acts will help to engender economic growth and ensure the successes of businesses, two scenarios which will expand the economic pie and result in higher tax revenues to the government, without destroying the spending power of citizens and bottom lines of businesses.

Also, perhaps there is a need to drastically reduce government expenditure.

In summary, Nigeria has a revenue problem. However, there are no short-term solutions to this problem. Increasing taxation without addressing the underlying fiscal and structural issues might increase government revenue in the short run but will ultimately render the Nigerian people and nation worse off in the long run.

Source: Businessdayng

See Why CBN Has Increased Charges on Withdrawals, Deposits

The Central Bank of Nigeria, in a circular to all deposit money banks, yesterday announced the commencement of charges on deposits in addition to already existing charges on withdrawals.

According to the circular, the charges, which take effect from today, will attract three percent processing fees for withdrawals and two percent processing fees for lodgements of amounts above N500,000 for individual accounts.

Corporate accounts will attract five percent processing fees for withdrawals and three percent processing fee for lodgements of amounts above N3,000,000.

In a statement by the Director, Payments System Management Department at the bank, Sam Okojere, the CBN said the charges on deposits shall apply in Lagos, Ogun, Kano, Abia, Anambra and Rivers States as well as the Federal Capital Territory.

It also stated that the implementation of the cashless policy would take effect from March 31, 2020 nationwide.

The statement added: “with effect from September 17, 2019, the CBN has approved for banks to unbundle merchant settlement amounts and charge applicable taxes and duties on individual transactions as stipulated by regulations.”

Infinity Trust Leads This Week’s NSE Watchlist

Stocks to watch, comprises the top gainers and losers from the previous week, as well as companies that are expected to have corporate actions this week.  

Stocks to watch is not a Buy/Sell/Hold recommendation. 

 Infinity Trust Mortgage Bank Plc 

Infinity Trust Mortgage Bank Plc takes the first spot in this week’s watchlistas the company will be holding a Facts Behind the Figures session today at the Nigerian Stock Exchange (NSE). 

While the company has not disclosed this in any form, firms usually hold such events when a fund raise or some other key development is at hand.  

 Tripple Gee Plc  

Tripple Gee Plc takes the second spot in this week’s watchlist, as the company will be holding its Annual General Meeting (AGM) today. AGMs are opportunities for management teams to unveil plans for the rest of the year.  

 UACN Property Development Company (UPDC) 

UACN Property Development Company has a spot in this week’s watchlist, as the firm was the best performing stock last week, appreciating by 51.52% to close at N1.50.  

Investors could decide to sell down their holding this week to cash in their profits. The rally in the stock was due to the news of UAC Nigeria divesting its holding in the firm to shareholders. UPDC will in turn divest its holding in a REIT, to its shareholders. 

 AIICO Insurance Plc  

AIICO Insurance Plc was one of the top gainers last week, hence its place on the watchlist. Investors took positions in the stock, once news of a potential investment by private equity firm, Leapfrog, was announced.  

While details of the price at which Leapfrog is taking a stake are unknown, from precedence, it would be at a premium to its current market price.  

 University Press Plc  

University Press Plc has a spot in this week’s watchlist, by virtue of being one of the top 10 losers for last week. The stock declined by 6.25% to close at a 5year low of N1.05. Players in this space have struggled and the stock could tank further, as there are no compelling reasons for an uptick.  

Source: Nairametrics

The Power Of Purpose: Unlocking Africa’s $10 Trillion Opportunity In Housing

Africa has the youngest and fastest growing population on earth. It is expected to double from 1.3 billion today to over 2.5 billion by 2050. However, Africa does not have the money to build what it needs. In 2014 Shelter Afrique said that “African urban areas will need 565 million additional housing units between 2015 and 2030, just to keep up with rapid population growth and urbanization”–creating a huge business opportunity. One person who has been a passionate activist for growth and innovation in this space is Paul Musembwa, the CEO of Warp Developments. I caught up with him in Atlanta to find out more.

Paul, welcome. Please tell us a little bit about what you do with Warp

I am the CEO of Warp Developments. Warp is dedicated to homeownership for all because of its impact on humanity. To quote John Hope Bryant, one of Atlanta’s greatest philanthropists, “homeownership is the hedge fund for the average middle class family.” Homeownership defines the middle class. It is the most effective tool for financial inclusion in the United States and Canada. If it works here, it will work elsewhere. My mission is to make universal homeownership a reality.

That’s a great purpose. What is the housing problem in Africa and what is the size of the market opportunity?

We should be building 40 million new homes or 160 Atlantas every year. That’s why Warp’s initiative is dubbed “A City A Year.” Africa has 54 countries. Altogether they do not build 1 million homes a year. The gap is the opportunity. 40 million modest homes require an investment of more than $1 trillion every year. The multiplier effects would add $10 trillion to annual GDP. That is 5 times current GDP. Closing Africa’s housing gap can generate 5 times current GDP! That will end Africa’s poverty.

And what are some of the myths about working in Africa that need to be dispelled?

“Africa is corrupt, politically unstable and dangerous. Land ownership is complicated. People cannot service mortgages. People are dishonest. You can’t succeed in the housing business.”

Africans say this. If we don’t believe in ourselves we should not expect foreigners to believe in us. Take a closer look. Africa is booming despite chronic underinvestment. These myths must be dispelled.

In the mid 70s Dr. Muhammad Yunus started lending money to poor women in Bangladesh. He discovered that the poor, without collateral, were better credit risks than wealthier people. That simple idea birthed microfinance and Grameen Bank. Dr. Yunus dispelled a myth that had denied finance to the majority of people in Bangladesh. He had no precedent.

Today microfinance is mainstream and impacting hundreds of millions of people. Dr. Yunus won a Nobel Prize. We have to dispel the myth that low income people anywhere in the world cannot own homes “because they are poor and/or have poor credit.” That change in thinking opens up 40 million homes a year  in Africa. I say that Africa is a great place to do business.

So what kind of technologies do you think would work there?

Technology should serve our objectives. We want to make homeownership universal to elevate the standard of living. That means we should use technologies that help us build 40 million homes a year at prices people can afford. We also should attract the funding that enables people own their homes outright in ten to twenty years. Finally, we should do all this in a manner that protects the planet.

We can use building technology that creates jobs, builds skills, increases wealth, and sustains the planet. Pre-fabricated housing, interlocking mortar-less block and 3D printing can work. Then there is a fintech opportunity worth over $1 trillion a year. Most Africans are unbanked. Out of necessity, Africa is already the trailblazer in mobile money. Developed countries can’t keep up. Africa has the best use-cases for blockchain and cryptocurrency technology. The size of the opportunity makes Africa the ideal platform for innovation and experimentation. Bring the tech!

Thank you Paul. Finally, what message do you have for investors looking to participate in this giant opportunity? 

Bill and Melinda Gates said that “Africa will be the world’s priority for the foreseeable future. There are 1.3 billion people. Median age of 19, whose GDP per person is under $1,600. Imagine increasing that to Malaysia’s level of $10,000 by 2030. Wow! China’s economy is massive just because hundreds of millions of people are moving into the middle class. Africa has almost as many people as China today. It will have twice as many in 2050. Does it make sense to invest in safe places like Europe and Japan with aging and declining populations? No! Interest rates don’t lie. Africa pays double digit interest rates because it needs money to grow. Europe and Japan are at zero or negative. You have to work really hard to find a modest return.

Africa needs more than $1 trillion a year just for housing. Throw caution to the wind. Risk-adjusted returns are phenomenal! If Warren Buffett was 30, he would be all-in. If you have a long-term perspective, gain mindshare now. Africa’s GDP will be at least $29 trillion by 2050. Engage now or Africa will go it alone until it doesn’t need investors. Then it will be too late. Don’t fall for the jaundiced narrative.  Above all think like venture capitalists not lenders. Gamble on 100 opportunities. You will get 1 unicorn.

Source: forbes

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