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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

Fidelity Bank signs $50m financing agreement with AFDB

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

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

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

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

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

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

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

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

Source: By  Elizabeth Adegbesan

CBN Moves To Halt $4bn Capital Flight In Textile Sector

The Central Bank of Nigeria (CBN) yesterday took bold steps to reverse the $4billion Nigeria spends annually on imported textiles and ready-made clothing by kicking off the distribution of cotton seeds and other inputs to farmers in Katsina State.

CBN governor, Mr. Godwin Emefiele, who flagged-off the distribution of cotton seeds and other inputs to 100,000 farmers in Katsina State for the 2019 farming season under the CBN-Anchor Borrower Programme, said that the gesture was aimed at reviving the country’s moribund cotton, textile and garment sector. He noted that the past 20 years had been very difficult for the cotton, textile and garment sector resulting in 130 firms in the industry being shut down.

To sanitise the system, the apex bank threatened to blacklist individuals, banks and companies involved in illegal textile importation so that the local players can survive and remain in business.

Emefiele said: “Farmers and processors have had to deal with low-quality seeds, rising operating cost and weak sales due to high energy cost of running factories, smuggling of textile goods and poor access to finance. Smuggling of textile goods alone is also estimated to have cost the nation over $2.2billion.’’

According to him, Nigeria was home to African largest textile industry with over 180 textiles mills in operation, which employed close to 250,000 people but “only 25 textile factories are operating today, and the workforce stands at less than 20, 000 people.”

He explained that the CBN resolved to initiate support measures that would drive productivity in the critical sectors of the economy following the over 60 per cent drop in crude oil prices from 2015 to 2017 and its attendant effects on economic growth, inflation and the nation’s external reserves.

The distribution of the cotton seeds to farmers is targeted at improving the commodity’s production from 80,000 tonnes in 2018 to over 300,000 tonnes by 2020 and reviving Nigeria’s cotton, textiles and garments sector.

Emefiele who reiterated that the foreign exchange restriction on finished textiles and other 42 items remained in force noted that the smuggling of textile goods alone was also estimated to cost Nigeria over $2.2 billion annually.

The CBN governor said that the measures taken by the apex bank were yielding results and had helped in driving interest by potential investors who are seeking to make investments to support improved production of textiles in Nigeria.

To curb smuggling, Emefiele said that the CBN was gathering data about and investigating the accounts of individuals and corporate entities involved in smuggling and dumping textile materials in Nigeria with a view to blacklisting them, adding that all banks in Nigeria would be barred from conducting any banking business with such companies, their owners and top management.

He further said that the CBN had identified insufficient cotton seeds as one of the major challenges facing Nigerian farmers, hence the apex bank sought to change the narrative on the cotton and textile industry through the distribution of high yielding cotton seeds to the beneficiaries.

The provision of the seedlings to more than 100,000 farmers cultivating over 200,000 hectares of farmland, along with extensive training on proper farming techniques, Emefiele said would boost the production of high grade cotton lint at much-improved yields of up to four tonnes per hectare, from the current cultivation rate of less than one tonne per hectare. He added that the move would also reduce the amount spent by Nigeria on imported textiles and ready-made clothing estimated at about $4billion annually. Nigeria in the 1970s and early 1980s was home to Africa’s largest textile industry, with over 180 textile mills which employed over 450,000 people, representing about 25 per cent of the workforce in the manufacturing sector.

Emefiele recalled that the industry was supported by the production of cotton by 600,000 local farmers across 30 of the 36 states of the federation, thousands of ginnery workers who processed the cotton from farmers, and a large number of distributors who sold the finished cloths to consumers.

He, however, expressed regrets that the farmers and processors had to deal with low-quality seeds, rising operating cost and weak sales due to high energy cost of running the factories, poor access to finance and smuggling of textile goods, which he estimated cost Nigeria over $2.2 billion annually.

He lamented that only 25 textile factories were currently operating in Nigeria with a workforce of less than 20,000 people, stressing that a large proportion of clothing materials were being imported from China and European countries Emefiele disclosed that no fewer than 130 textile companies had closed shop in the country in recent times due to various constraints.

He told Governor Masari that ‘‘textile industries used to be the largest employers of labour in Nigeria after the public service but due to certain constraints, such as smuggling, dumping, lack of access to finance and issue bordering on power, over 130 textile companies have so far perished. Today, we are complaining about insecurity and kidnapping, the reasons for these are joblessness and hopelessness; so, we need to do something about it.

We must revitalise the textile industry to be the largest employer of labour, we feel that we will set the stage rolling, we must come to Katsina State which is the largest producer of cotton to begin a process.’’ He said that the CBN has held a lot of meetings with the farmers and other people on the value chain on how to achieve the desired success and urged Nigerians to stop smuggling and dumping of cotton and textile materials in order to revive the industry. In his remarks, Masari said that agriculture was the next sector that the state government accorded priority after education.

He said that reviving the textile industry was the biggest and quickest way of solving unemployment in the country and commended the CBN for its efforts in that direction. Masari, however, urged the apex bank to review the procedures for accessing loan facilities by the farmers.

Masari insisted that agricultural revival was akin to breathing life into the people of Katsina State, adding that if the sector was provided with the necessary support, it could employ over 80 per cent of Nigerians.

“The best and quickest way to fight poverty is through agriculture because investment in agriculture will start yielding dividends only after six months and in every planting season and with so many dams around the country, we can produce 12 months in a year,” Masari said. Welcoming the stakeholders, the deputy governor, who doubles as the commissioner for Agriculture, Alhaji Mannir Yakubu, said that about N19 billion had been spent on agriculture by the Masari-led administration in the past three and a half years.

He said: “The funds released for the implementation of the agricultural activities are aimed at boosting agricultural production and the provision of employment to our teeming population particularly the youths. It is in the light of this that the state government has provided facilities, incentives and enabling environment to ensure small-scale farmers in the state are engaged massively all the year round,” he added.

The minister of Agriculture and Rural Development, Chief Audu Ogbeh, said that the reforms initiated by the Emefiele-led CBN had helped Nigeria to escape the economic crisis far worse than the situation in Venezuela today. Ogbeh, who led the apex bank’s chief executive on the courtesy call on Governor Masari, commended the courage of Emefiele in initiating the Anchor Borrowers Programme at one digit interest rate.

He said: “It’s one of the greatest things that has ever happened in this country in the last 40 years and I am in a position to say so because I have been around in the system.

I want to commend you, the CBN governor, for being so tenacious in following this up.” Ogbeh continued: “If this CBN administration had not decided to invest in this method of bypassing the obstacle and mountains standing in the way of agricultural development, by now this country would have been in far worse than the situation in Venezuela because accessing the credit had always been the problem.”

The minister stressed that the revival of the cotton industry remained imperative to stem the collapse of the industry and its implications for the economy in terms of job loss and taxes.

Source: By ANDY ASEMOTA & BUKOLA IDOWU

N2.15bn currency in circulation in March – CBN

The Central Bank of Nigeria yesterday put the total value currency in circulation as of March this year at N2.15 billon. Mrs Eli Kwaghe of the Currency Operation Department of the CBN disclosed at a two-day CBN fair in Makurdi in Benue State.

She said: “8.88 billion pieces valued at N2.15 billion currency in circulation as at March 2019 ending.

” Earlier the branch controller of the CBN in Makurdi, Abba Bulus Ibrahim, said the bank’s mandate could only be achieved when everybody partnered with it in line.

The coordinator of the fair, Sam Okogbue, said the CBN had further interventions to make the country’s economy grow so that people would come out of poverty by improving their living standard in all ramifications.

Source: By Hope Abah Emmanuel

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