Cory Booker unveils plan to combat housing ‘affordability crisis’

(CNN)Presidential candidate Sen. Cory Booker unveiled a housing plan Wednesday to address an “affordability crisis” in the US, shining a national spotlight on an issue that has been at the center of his political identity for more than two decades.

“Making sure all Americans have the right to good housing is very personal to me,” the New Jersey Democrat said. “I’m determined to tear down the barriers that stand in the way of every American being able to do for their families what my parents did for mine.”
Booker’s plan, modeled after legislation he previously introduced in the Senate, focuses on a renters’ credit that he says would lift 9.4 million people out of poverty. In that regard, his proposal is similar to a plan by his 2020 rival Sen. Kamala Harris, a California Democrat who has centered her own housing policy on a subsidy for low-income renters.
But Booker’s blueprint goes further than Harris’, with sweeping changes to restrictive zoning laws, coupled with federal incentives to build more affordable housing. Advocates have called for such changes in cities like Los Angeles, where homelessness has spiked sharply amid rising housing demand and prices.
Booker would also expand the right to counsel for low-income tenants fighting eviction, while targeting discriminatory and predatory housing market practices, and funding grants to combat homelessness.
Although this marks the first time he has highlighted these proposals as a presidential candidate, it’s far from a new policy push for Booker, who has homed in on the issue for decades.
After graduating from Yale Law School in 1997, Booker moved into a public housing complex in Newark called Brick Towers, where he began working as a tenant advocate taking on slumlords. He continued living there as he ran for City Council and later mayor, until shortly before the rundown building was demolished in 2007. He still lives in the same neighborhood today.
But as Booker often mentions on the campaign trail, housing was a personal issue for him even before he moved to Newark. When he was a baby, his parents integrated an affluent New Jersey suburb, enabling his brother and him to attend high-achieving public schools.
In his new plan, Booker would expand the Fair Housing Act to include discrimination based on sexual orientation or gender identity.
“Access to safe, affordable housing can be transformative in the trajectory of people’s lives,” Booker said. “My parents knew this when they moved my brother and me to a New Jersey town with good public schools in the face of racial discrimination. The tenants I represented against slumlords when I first moved to Newark knew it too. So did my neighbors in Brick Towers.”
In Booker’s plan, renters who spend more than 30% of their before-tax income on housing expenses would be eligible for a credit. His campaign cited a Columbia University study showing the policy would help more than 57 million people.
His proposal would seek to increase the supply of affordable housing with a carrot-and-stick approach, by tying federal infrastructure grants to demonstrated progress on the local level while committing $40 billion to building new units.
Booker also would incorporate an element of his criminal justice efforts into his housing plan by nixing a “one strike” eviction policy in public housing, in which a tenant and his family can be pushed out for a first-time offense, including drug use.

The Trump Administration Can Make Housing More Affordable By Letting The QM Patch Expire

The Wall Street Journal reports that the Treasury Department is “putting the finishing touches” on a plan to return Fannie Mae and Freddie Mac to private-shareholder ownership. According to the report, if this plan is carried out, “the companies could return to a status similar to how they operated before the financial crisis.”

Allowing these companies to operate in a fashion even remotely similar to how they did before the crisis would be a tragic mistake.

What’s really needed is for Washington to end, permanently, the government-protected duopoly of Fannie and Freddie. Unfortunately, Congress has showed no real interest in doing so.

Through the Consumer Finance Protection Bureau, the Federal Housing Administration and newly appointed Federal Housing Finance Agency Director Mark Calabria, the administration can, however, take some useful steps on its own to replace the companies’ role in housing finance with private firms—provided, of course, that Treasury’s “finishing touches” won’t get in the way.

Whatever Treasury’s plan may be, reforms that shrink the government’s role cannot come soon enough for people who need more affordable housing. All Fannie and Freddie did before the financial crisis – and all they do now – is incentivize more and more housing debt, making homes more expensive.

AEI’s newly released housing price data show exactly how harmful these government policies are, especially for folks with lower income. From 2012, the lower price tier of homes has seen the most appreciation of all the tiers: nearly a 60 percent rise in prices. Those at the higher end of the market, on the other hand, have increased only about 15 percent, with relatively little appreciation since 2017.

Source: Forbes

AFR Ranked as a National Top Mortgage Lender

 American Financial Resources, Inc. (AFR) has been honored again as a Scotsman Guide Top Mortgage Lender. Recognized as one of the nation’s leading companies in overall volume, AFR ranked 10th in correspondent volume and moved up to 14th in wholesale volume.

Scotsman Guide, a leading resource for mortgage originators, just released its seventh annual Top Mortgage Lenders rankings.

“AFR is proud to confirm its ranking as a top mortgage company. Our focus has been and continues to be on market segments where our expertise makes a difference. We take great pride in offering, and helping to navigate, a wide variety of loan programs and appreciate the continued consideration as a national leader,” said Bill Packer, executive vice president and chief operating officer, American Financial Resources. “We are excited to be recognized at a national level, once again, and look forward to continue growing our role as an innovative leader, delivering exceptional service and fulfilling our mission to help bring more families home.”

AFR was ranked among entries from hundreds of mortgage companies across the country. To be eligible, AFR provided verified qualitative data regarding loan volume from mortgages on one- to four-unit residential properties in the United States. Using the data, Scotsman Guide affirmed AFR’s impact as a leading mortgage lender.

About American Financial Resources (AFR)
American Financial Resources, Inc. (AFR), the leading FHA 203(k) lender for sponsored originations in the country and an innovator in the construction and renovation lending area, is ranked among the nation’s leading mortgage lenders. AFR utilizes the latest technology and delivers educational resources to mortgage brokers, loan originators, correspondents and their customers.

About Scotsman Guide
Scotsman Guide Media is the nation’s largest provider of digital and print resources for the mortgage-origination industry. The magazines also are available in digital format. Each month, the magazines reach tens of thousands of subscribers nationwide. Scotsman Guide is the leading resource for mortgage originators and connects mortgage brokers with wholesale and commercial lenders.

Source: Finance

Reuters poll indicate India’s moribund housing market is stuck in low gear

The outlook for India’s moribund property market has brightened somewhat, with house prices this year expected to rise more than predicted three months ago, but those increases will still be the weakest in at least a decade, a Reuters poll found.

Until 2015, India’s annual property price growth had typically been in the double digits. However, more recently a ban on high value currency notes and a liquidity shortage driven by bad debts on banks’ balance sheets have led to a cooling in lending and a housing inventory pile-up.

The latest poll of 18 property analysts taken May 10-June 3 showed home prices are expected to rise 2.3% nationally this year, up from 1.3% predicted in March but well below overall inflation.

That is much slower than last year, when house prices rose at an average rate of 5.6%, already its weakest since at least 2010, when the Reserve Bank of India started tracking changes in house prices.

House prices are expected to rise 2.5% next year and 3.8% in 2021, well below the projected pace of consumer price inflation for those periods.

But those modest rates might not even be realised as over 80% of analysts who answered an additional question said their outlook for the housing market was skewed more to the downside.

That comes despite two RBI rate cuts this year and strong chances of another one this week, although analysts are split on whether an easing would be a good idea or not.

“Five years are too short a time to undo decades of damage. The industry stakeholders have given this government the benefit of the doubt. However, with a fresh term in hand, this government will have to deliver on a lot of initiatives,” said Anuj Puri, chairman at ANAROCK Property Consultants.

The National Democratic Alliance (NDA) government, led by Prime Minister Narendra Modi, introduced a host of incentives to shore up the struggling real-estate market last year.

Modi’s party gained a huge parliamentary majority in an election last month.

“The residential sector has endured significant pain over the last few years, but the NDA government’s return to power will reassure investors of stability and continued focus on growth,” said Aashish Agarwal, head of consulting services at Colliers International India.

“While recovery will be slow and led by reputed developers in select micro-markets, a large part of the market will continue to suffer from construction delays caused by the liquidity crunch.”

What started as a bad loan problem in the banking sector last year slowly morphed into a full-blown liquidity crisis, which forced one of the largest infrastructure lending companies, IL&FS, to default on its interest payments.

“When funding becomes scarce, as a developer you become really pressurised to hive off your inventory as fast as possible,” said Rohan Sharma, head of research at Cushman & Wakefield India.

“This creates a barrier for a price run to happen even if there is demand.”

A regional breakdown of the latest Reuters poll data showed Delhi and Mumbai, India’s two most populous cities, will not contribute much to property price growth.

House prices in Delhi, including National Capital Region, were forecast to fall 2.5% this year and stagnate next year. In Mumbai they were expected to rise 0.5% and 1.0%, respectively.

“Delhi (including NCR) and Mumbai witnessed spiraling housing prices which often didn’t match with the affordability of the larger consumer base,” said Anshuman Magazine, regional chairman and CEO at CBRE.

A majority of analysts rated Delhi and Mumbai average house prices either “extremely overvalued” or “overvalued”.

However, two-thirds of the same pool of analysts said houses were fairly valued in the southern cities of Bengaluru and Chennai. Property prices in both cities were forecast to rise 2.0-3.5% over the next two years.

Source: Yahoo News

Dealers seek better risk management for banks

Banks and other financial institutions need better risk management structure to deepen banking penetration and security, financial market dealers have said.

In a communique at the end of the seminar organised by Financial Markets Dealers Association (FMDA) Bonds Workgroup in Lagos, the group said risk management needs more attention, and that the futures market should be deployed to deepen risk management.

“Futures market in Nigeria will further support the Government on achieving the targets set out in the Economic Recovery and Growth Plan (ERGP). Improve risk management tools to better serve the opening-up of the financial services sector towards global competitiveness – effectively deployed, will mitigate the risks to which market operators including governments are exposed to,” it said.

Speaking on the theme: The Nigerian futures market – A tool for risk management, Debt Management Office (DMO) Director-General Patience Oniha said the debt office remains committed to the development of the financial market. She said by issuing the 30-year bond, the debt office has showed confidence in the economy.

“While one of our primary responsibilities is to raise money for government, we realised that the government alone cannot develop the economy. It in attempt to develop the market and support the private sector the DMO is committed to it. In introducing the 30-year bond, obviously, we monitored developments in the market and the demands of investors, the trends in inflation and monetary policy indicators of which direction the economy is going,” she said.

Continuing, she added: “And I think that the important thing for the 30-year bond is that it is not only government raising 30-year money, but creating a 30-year benchmark that supports the economy.The private sector can raise money because there is now a reference point for private sect or to raise a 30-year bond.”

Also, FMDQ OTC Securities Exchange Managing Director/CEO, Bola Onadele, said the operators were doing their best to deepen the derivatives and futures market.

Speaking on the theme: Futures as a an asset & liability management tool, he added: “We are looking at futures as a tool for asset/liability management. Of course, you know banks have to focus on managing their assets and liabilities. And there are six elements in that. Managing the balance, managing the funds transfer, managing the capital, institutions, compliance, law and regulations. All those things come under the purview of asset and liability management. But, the one that is most visible that people talk about is the mismatch that come in interest rate. The banks can borrow short-term and lend long term. Nigeria has just issued 30-year bond, and pension funds and banks bought 30-year bonds.

“They did not use 30-year money to buy 30-year assets so that  they do not mismatch it.’’

He added: ‘’But what is important, which you see in other climes, are risk management tools. When you have taken such position, how do you hedge the exposure you have? And this exposure come as interest rate risk, foreign exchange rate risk, which you know the CBN promoted the Forex Futures. So, what we are dealing on here are other types of futures or commodities.

Onadele said in the past, 2017 and last year, the banks had loans towards margin lending for equities.

“So, the risk factors, interest rate risk, foreign exchange risks, equity price risk and commodity price risk are called risk factors and banks have to deal with them in managing their balance sheets and financial positions, which are highly dynamic everyday.

‘’The CBN made a statement, trying to put caps on what a bank can hold on government securities. If they do that, which is because the CBN wants money to go to the real sector, but if they do that, the demand for government securities will go down, what happens is that immediately demand goes down, price will go down, yield will go up, meaning that the government will borrow much higher,” he said.
Source: The Nation Online

Private sector lending: CBN moves against banks

The Central Bank of Nigeria (CBN) has finalised plans to roll out legal and administrative framework that will cut or put a ceiling on the percentage of government’s securities – bonds and Treasury Bills– banks would be allowed to invest in.

CBN governor, Mr. Goodwin Emefiele, dropped this hint yesterday in Abuja, while briefing journalists on the outcome of Monetary Policy Committee (MPC) meeting where members resolved to adopt ‘a hold’ position in all the parameters of MPC indices to shield economy from inflationary pressure.

The anchor lending rate (Monetary Policy Rate) was left unchanged at 13.5 per cent as adopted in March, across asymmetric corridor of +200/-500 around the MPR; Cash Reserve Ration (CRR) at 22.5 per cent and liquidity ratio at 30 per cent.

Emefiele said that given the recent uptick in April inflation (11.37% as against March figure of 11.25%), majority of MPC members voted for retention of the rates.

Specifically, the CBN governor expressed strong exception to the reluctance by banks to advance credit lending to private sector/real sector of economy, thereby denying real sector the required funds.

He accused deposit banks of channelling funds in their vaults to buying government’s securities.

“In view of the abundant opportunities available to banks for unfettered access to government securities, which tends to crowd out private sector lending, the Committee called on the Bank to provide a mechanism for limiting DMBs access to government securities so as to redirect bank’s lending focus to the private sector, noting that this would spur the much needed growth in the economy.

It called on the government to use all machinery at its disposal to increase tax revenue to enable the government fund its budget adequately,” he said.

Analysis of the Q1 2019 results released by three banks – Access Bank, Zenith Bank and Guaranty Trust Bank – recently, for instance, shows that their total investment securities for the period increased to N2.80 trillion from N2.54 trillion in the first quarter of 2018.

Shedding lights on measure to curtain banks’ restriction on excessive investments in bonds, TBs, Emefiele said: “On MPC warning to the banks against Federal Government Securities, the truth is that according to our own regulations, there is a particular minimum percentage of treasury bills or government securities that the banks must invest in order to remain liquid. But again, we have observed, and unfortunate too and increasingly so, that the banks rather than focusing on granting credit to the private sector, they tend to direct their focus to mainly in buying government securities.”

He said that the MPC has frowned at that, and has directed the management of the Central Bank to put in place policies or regulations that will restrict the banks from unlimited access to government securities.

“It is important and expedient that the MPC gives this directive to the management of the Central Bank because this country badly needs growth,” he said. “For us to achieve growth, those whose primary responsibilities it is to provide credit, who act as intermediaries in providing credit and are accord as the catalyst to the economy must be seen to perform that responsibility.

“And that they (Money Deposit Banks) would rather than performing that responsibility to the private sector who are the engine of growth of an economy, they would be directing their liquidity to other sectors of the economy.

“This is what the MPC frowns at and, therefore, giving the management of Central Bank the power to limit their propensity or their appetite for just going for government securities rather than directing credit to private sector of the economy.”

Besides, the governor said that the CBN is aware that banks expressed concern in respect to the volume of Non-Performing Loans (NPLs) in their books, which they hinged on lending credit to the private sector.

He said step would be taken by CBN to address NPLs.

“Management would certainly take this up, we will think of how to do that,”  he said. “We do know that banks (and this is related to the issue of NPL as well), have always expressed some resistance to increasing credit ratio to the private sector, given the bad experience about NPL that resulted from this.

“Yet the MPC themselves have also directed the management of the CBN that we should think about administrative legal and regulatory framework to be put in place to ensure that some of the credit risks that are associated with granting loans to the private sector that ultimately result in NPLs should be mitigated such that when banks decide to begin to lend to private sector, the probability that NPLs would rise should be moderated.”

Emefiele, who this month became the first Nigerian Central Bank governor since the return to democracy in 1999 to be given a second term, said the apex bank predicted that growth this year would come in at 2.38 per cent.

Nigeria emerged from its first recession in 25 years in 2017. Higher oil prices and recent debt sales have helped it accrue billions of dollars in foreign reserves.

But growth remains fragile and inflation edged up in April to 11.37 per cent from 11.25 per cent a month earlier.
Emefiele, while thanking Nigerians, executive arm of government, legislative and the media for support in his tenure renewal for second term of five years as CBN governor, said improvement in macroeconomic will be given priority in second phase of his tenure.

He said: “I think it is very important that I use this opportunity to thank Nigerians, particularly the members of the press for their support in the last four or five years. “Your support has been immeasurable. If you recall that the later part of 2015 into 2016, and 2017 were very difficult for the Nigerian economy and, by extension, the Monetary Policy authorities.

“At this time, we’ve seen what we can call a relative improvement in the macro economic variables in Nigeria; exchange rates being stable, reserves looking good and inflation moderating downward. But it is also important for me to say that there are still challenges ahead.

“If we consider that notwithstanding the improvements in the macro economic variables that inflation still has its own pressures arising from issues bordering on prices and supply shortages for food; issues bordering on unemployment, and the need for us to think on how to diversify our economy, I will say the challenges ahead are still enormous, but we would need your support.”
For next phase of his administration as CBN governor, Emefiele said there will be a need for the apex bank to aggressively be thinking about how to reduce the level of unemployment and increase the level of employment in the country.

“I must confess that, yes, there is a relationship between employment level, improved economy and security in the country,” he confessed. “We all have to work together. Those who are making life difficult for people to go to their farms, to be able to produce or conduct their farming activities; we use this opportunity to appeal to them to please allow our farmers, particularly in the food producing belt of the country who are affected, to allow these farmers go to farm.

When people go to farm, they get employed and make food available, feed their families and employ other people. And when they do so, ultimately, it reduces the level of insecurity in our country.”
Moreover, he said a lot of work needs to be done. “We need to consolidate on the growth that we have right now that is fragile. The economy growing at 2 per cent is suboptimal if we consider that this country’s population grows at an average of over 2.7 per cent per annum.”

Source: Abduwahab Isa

W/Bank Grants Nigeria 30yrs To Repay $350m Rural Power Fund

Nigeria will have about 30 years to repay the World Bank the $350 million it borrowed from it to fund the expansion of access and supply of electricity to rural communities, educational institutions and under-served micro, small and medium enterprises (MSMEs) in the country under the Nigerian Electrification Project (NEP).

Our Correspondent gathered from the Bank that the country would, however, get an initial five years’ grace on the repayment of the loan which was approved in June 2017, by the Bank, to be disbursed through it International Development Association (IDA) credit window.

According to the fact sheet on the loan, the NEP is to be managed by the Rural Electrification Agency (REA) and will leverage private sector investments in solar mini grids and standalone solar systems to provide electricity to about 2.5 million people and 70,000 MSMEs.

It will also fund the provision of reliable electricity to seven universities and two teaching hospitals under the Energizing Education Programme (EEP).

“The program will help increase access to electricity services for households, public educational institutions, and underserved micro, small and medium enterprises,” said the fact sheet in its description.

According to it, the project comprises of four components, with the first component being, solar hybrid mini grids for rural economic development which will be implemented under a market-based private sector led approach to construct, operate, and maintain economically viable mini grids.

This it added will be supported by subsidies that reduce initial capital outlays. “It consists of minimum subsidy tender for mini grids; and performance-based grants program,” it noted.

The second component of the NEP, it explained would be stand-alone solar systems for homes and MSMEs with the intention to significantly increase the market for stand-alone solar systems in Nigeria in order to provide access to electricity to more than one million Nigerian households and MSMEs at lower cost than their current means of service such as small diesel generating sets.

“It consists of market scale-up challenge grants; and performance-based grants,” the fact sheet added. It said the third component of the NEP which is the energizing education objective, will provide reliable, affordable, and sustainable power to public universities and associated teaching hospitals, while the fourth component will be technical assistance designed to build a framework for rural electrification upscaling, support project implementation as well as broad capacity building in the REA; Nigerian Electricity Regulatory Commission (NERC); Ministry of Power, Works, and Housing; and other relevant stakeholders in the industry.

Source: EconomicConfidential

CBN begins process for the proposed Payments System Vision 2030

The Central Bank of Nigeria (CBN) has begun the process of developing the Payment System Vision 2030 strategy, which will define the strategic agenda for the Nigerian Payments System over the next ten years.

The new Payments System is coming just one year after the introduction of Payment System Vision (PSV) 2020.

The information is contained in an official document obtained by Nairametrics. The document was addressed to all Deposit Money Banks, Other Financial Institutions, and Payment System Providers. According to the CBN, the payments industry is currently experiencing radical change internationally and in many countries domestically.

CBN stated that since 2006, two strategy roadmaps have been published. These have created a robust and well-utilized payments environment. However, the apex bank noted that innovation and competition are now being driven by deployment and adoption of new technology solutions and the encouragement for new entrants through new regulatory regimes.

In light of this and also in an effort to consolidate the previous strategy roadmaps, CBNstated that it is time to create a new agenda for the payments system in Nigeria.

“THE TWO PREVIOUS RELEASES OF PSV2020 HAVE LARGELY ACHIEVED THEIR OBJECTIVES. NOW IS THE TIME TO CREATE A NEW AGENDA FOR THE PAYMENTS SYSTEM IN NIGERIA – PAYMENTS SYSTEM VISION 2030 – ONE THAT DEFINES A FRAMEWORK FOR THE NEXT TEN YEARS.”

Earlier Developments: In March, CBN disclosed that it has commenced a review of Payment System Vision (PSV) 2020, with a view to setting new targets under a refreshed version tagged PSV 2030. This was revealed by the Deputy Governor, Financial System Stability (FSS) of the CBN, Mrs. Aisha Ahmad, at the 2019 Electronic Payment Incentive Scheme (EPIS) Efficiency Awards held in Lagos.

“ELECTRONIC TRANSACTIONS ARE NOT YET AT DESIRED LEVELS, INCREASING DIGITISATION HEIGHTENS CYBERSECURITY THREATS WHILE POLICYMAKERS ARE FACED WITH THE TWIN BUT OFTEN CONFLICTING OBJECTIVES OF FOSTERING TECHNOLOGICAL INNOVATION WHILST MANAGING THE RISKS TO FINANCIAL STABILITY.”

Mrs. Aisha further stated that in furtherance to payment system objectives in response to industry demands, payments system has changed significantly and continues to evolve. New technologies and a growing number of financial technology companies in the markets are supporting faster payments and settlements.

Stakeholders involvement and phases: The CBN stated that given the current rapid pace of change, it is seeking the views of a wide range of industry stakeholders and experts. Essentially, the  PSV2030 framework must recognise the swiftly evolving user requirements, technical solutions, regulatory environments and external threats that typify the industry.

The creation of PSV2030 comprises of three main phases:

Phase 1 – Scope and Consult: During this current phase, the CBN seeks input from current and potential stakeholders, both nationally and from other countries

Phase 2 – Design and Plan: The information received from Phase 1 will be used to develop the Payments Framework that will recognise the approaches being adopted in other countries but will be appropriate for the local market in Nigeria.

Phase 3 – Deploy: Likely to be a sequential implementation over many years and is adaptable within the defined framework to respond to changes in technology and platforms. The framework should look to introduce a new architecture where appropriate and seek to retire legacy environments when no longer relevant.

Upshots: Meanwhile, the CBN stated that the objective is to complete a consultative draft of PSV2030 in time for an International Payments Conference in early September 2019.

Therefore, the CBN request stakeholders contributions on different dimensions of an efficient and effective payments system. Also, to respond to all or part of the questions and topics outlined in the document to provide a framework for consistent responses.

Source: By Bamidele Samuel Adesoji

DMO makes history as FGN risk-free yield curve extended to 30yrs

The Nigerian debt capital markets (“DCM”) experienced a landmark occasion in April 2019, when the Federal Government of Nigeria (“FGN”), via the Debt Management Office (“DMO”), issued its longest-tenored local currency bond – a 30-year bond – for the first time in history.

The issuance of the ₦53.16bn Fixed Rate (14.80 percent) FGN Bond is a clear indication of the commitment of the improving Nigeria’s ability to raise sustainable debt towards promoting economic growth and national development.

Investors demonstrated their ardent appetite for the issue with the results of the April 2019 FGN Bond Auction revealing that a total subscription of ₦80.41bn was received for the ₦20.00bn offered (₦53.16bn allotted) by the DMO for the 30-year bond, representing an over 400 percent subscription rate. This is a glaring indication of investors’ desire for investments at the longer end of the sovereign debt yield curve.

Whilst the decision to issue a long-tenored bond is not an anomaly, this latest issuance comes almost 40 years after the last 25-year bond (previously the longest-tenored local currency FGN Bond) was issued by the FGN in 1980, following previous issuances in 1976 and 1979.

With the success of this offering, the DMO has, in addition to managing government’s debt sustainably, reinforced its role in the development of the domestic capital market by facilitating the extension of the sovereign debt yield curve, which represents appropriate funding for housing credit and infrastructure as well as an investment opportunity for both pension fund administrators (“PFAs”) and insurance companies looking to reduce mismatches in their asset durations and liability horizons.

The DMO has listed the bond on the platform of FMDQ OTC Securities Exchange (“FMDQ”) to enhance its visibility and promote secondary market liquidity for the bond. The DMO also listed the bond on the Nigerian Stock Exchange.

The capital market community has lauded this audacious move by the DMO, which positions Nigeria to stand amongst other African markets such as South Africa and Kenya which have previously issued 30-year bonds. Nigeria remains the leading West African nation as stakeholders expect this bond issuance to serve as a case study for other countries within the region, to take the plunge by extending their yield curves.

“The introduction of the bond is a welcome development as it creates further opportunities for growth in the Nigerian financial markets,” said Bola Onadele. Koko, managing director/CEO of FMDQ.

“Furthermore, yield curve extension creates more impetus and opportunities for the introduction of risk management (hedging) products such as bond futures and interest rate derivatives to help fund managers (such as PFAs) and insurance companies that have invested in the bonds to manage the interest rate risk, which is typically higher for longer-tenored debt securities. We are aware that FMDQ, the capital market regulators and other market stakeholders are intensifying concerted efforts to launch these hedging products soon to improve the diversity and global competitiveness of the Nigerian financial markets,” Onadele. Koko said.

“The DMO should indeed be congratulated for its proactivity in reaction to the desires of the buy-side which motivated the DMO’s request to one of the Exchanges to conduct a survey to determine the local and international markets’ appetite for FGN Bonds with tenors over twenty (20) years, and also on their impressive speed to action on the feedback received from the exercise, which indicated the considerable interest by the surveyed investors in longer-tenored sovereign bonds,” he added.

Other stakeholders have indicated that the DMO has cleared the path for other issuers such as subnationals and corporates to access longer-term funding for their projects as the 30-year FGN Bond serves as a benchmark for pricing of non-sovereign debt at the longer end of the yield curve.

Onadele. Koko further added that evidence from the recent issuances of the Viathan Funding PLC ₦10.00bn 10-year bond (the first power bond in the country) and NSP-SPV Powercorp PLC ₦8.50bn 15-year bond, both of which were also listed on FMDQ, indicates that corporates are already taking initiative by accessing the DCM to channel funds towards infrastructure and other economically stimulating projects. It is expected that many non-sovereign issuers would follow suit in the short to medium term.

Considering the encouraging success of the debut 30-year FGN Bond, the DMO is encouraged to continue to blaze the trail for the markets. The introduction of more diverse bouquet of long-tenored securities such as inflation-linked, floating rate and zero-coupon bonds, will promote better management of realised and real yields among others. This will indeed support the development of the Nigerian economy by further deepening the domestic DCM, making Nigeria a more attractive investment destination.

Source: Business Day

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
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