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It is important that retirees invest in a
diversified manner across all asset classes. By spreading your investments
across various asset classes, you will be less vulnerable where a particular
class underperforms.

Mrs Gomez is 72 years old. She has always been a
diligent, disciplined saver, and planned ahead for a secure and comfortable
retirement. She is a conservative investor and retained most of her savings in
the money market so that she could earn regular income. When the stock market
plummeted in 2008, she sold off the last of her shares, which she had held for
decades and thereafter placed all her hard-earned money in a bank deposit. Her
investments had traditionally earned her about 15% per annum; this made it
possible for her to take care of her monthly expenses.

Everything changed in June this year; Mrs Gomez
received a letter from her bank informing her that the interest rate on her
investment had been reduced to 3%. This came as a huge shock and she wondered
how she would cope with such a drastic reduction in her income. As she is
completely dependant on the interest on her savings, she sees her long-term
capital dwindling and fears that her living standards will soon be affected.
Her worst nightmare is that her money may run out well before she does!

Seek professional advice

It is important to seek professional financial
advice. A financial advisor will take a holistic view of your current financial
circumstances, and then devise an investment strategy that is in line with your
own unique situation. Taking into account your age and lifestyle, it will be
possible to determine how far you can stretch your funds, given certain
assumptions.

Don’t put all your eggs
in one basket

Senior citizens are usually discouraged from
taking risk and are more likely to be advised to hold most of their money in
‘safe’ investments that are capital protected. Cash is a most tempting asset
class, particularly in volatile times, yet it holds little promise of long-term
wealth creation, with inflation eating away at the principal and eroding the
value of their funds. With interest rates this low, it is difficult to earn any
meaningful income from your money without assuming at least some degree of
risk. It is thus important to invest in a diversified manner, spreading your
money across various asset classes. By doing this, you will be less vulnerable
where a particular class underperforms.

Whilst stocks have historically outperformed
other asset classes over the long term, for most old people the priority is to
preserve what they have. Without the advantage of a long period of time,
assuming such risk at this stage may not be appropriate as this is sure to
increase the risk and volatility of your returns over the short and medium
term.

If you are uncomfortable with, or cannot afford
to take any risk whatsoever, then it is important to remain in cash and hope
that rates will eventually recover. In the meantime, you may need to dip into
the principal to tide you over the volatile period, which could well be for an
extended period of time. In this regard, you may need to revisit your lifestyle
requirements, and cut back on your expenses for some time.

Dividend yielding stocks

Dividend yielding stocks, that is, stocks that
provide a decent cash flow, are one of the keys to a successful retirement
portfolio. The inclusion of such stocks can go some way to protect investors
from stockmarket volatility by compensating with dividends. Dividend yields on
some stocks are fairly predictable and can be as high as 5% and more, which is
higher than current money market rates. In addition, the growth prospects of
some of the companies present capital gains.

A cautious investor may prefer to invest in
equity mutual funds, which pool investors’ funds to invest in the stock market.
They are more diversified and as such, not as risky as direct investments in a
handful of individual stocks.

Can bonds help?

Bonds play an important role in any portfolio,
either through the purchase of individual bonds or via bond mutual funds.
‘Laddering’ bonds involves buying an assortment of bonds of various maturities
and then staggering the maturities over say one, two, and three, years. As each
bond matures, it may be re-invested for another period thus helping to set a
base level of income that can be relied upon to support retirement spending
needs.

Consider purchasing an
annuity

Another way to potentially receive regular income
and address the prospect of longevity, is to purchase an annuity from a
leading, reputable insurance company. Insurance companies in exchange for an
amount of money should be able to provide you with guaranteed income for a
specific period of time or sometimes for life. After determining how much
income you will receive from your pension and other investments you might
consider purchasing an annuity to make up the shortfall.

Annuities come with different terms and
conditions and can be quite complex for the lay investor. It is important that
you fully understand the terms and carefully weigh your options to be sure that
the fees and charges are not excessive and remove the advantage of such a
strategy.

Whilst low interest rates are generally viewed as
being detrimental to savings and of concern to those that rely on fixed income,
a low interest rate regime is expected to spur economic growth. In an ideal
world, companies and businesses should be able to borrow at affordable rates,
thus lowering their costs of production contributing to their profit margins.
As they invest in new factories and plants, and production increases, they hire
more workers with a reduction in unemployment. Consumers can also borrow at
cheaper rates than they ordinarily could and are able to reduce their personal
debt.

As a retiree focused on capital preservation and income generation, it is
easy to ignore the possibility of bonds, high-quality, dividend yielding
stocks, and other asset classes in a portfolio. Yet, there is the increasing
prospect of having to fund a 20-year post retirement period. By regularly
reviewing your retirement strategy, and ensuring diversification and exposure
to the various asset classes, you should be in a better position to navigate
market volatility and ensure your capital lasts for the rest of your life.

The NITEL, Ikeja territorial district at Cappa, Oshodi, Lagos,
was once the training school of NITEL in the early 1980’s. In 2007, the NITEL
training school was handed over to the Nigerian Communications Commission (NCC)
to manage, under the name of Digital Bridge Institute (DBI).

Some of the unused office space has been transformed into living
quarters by some NITEL workers due to non-payment of salaries for over two
years.

Nasah-Palan Fagwam, a NITEL staff (works in the Customering
Engineering Department), said he has been living in one of the NITEL offices
since April 2009 because he was driven out from his previous apartment after it
was handled over to the commission, along with the training school.

“In April, 2009, I moved into this room. We were initially
allowed to stay here for three months, pending when our salaries would have
been paid to enable us get accommodation outside the office.

“As you can see, the space is so small; because of that, I had
to move my wife and children to Plateau State, where my wife is also schooling.
Things have been difficult for us. If you look around, so many workers live
here with their families in the same tiny room like mine. Some have been here
longer than I have been, and some workers have divided their family amongst
extended families and friends,” said Mr. Fagwam.

When NEXT visited the NITEL office, a storey building of about
twenty-four office spaces are occupied by the workers as homes, and the only
kitchen in the block has been constructed into a room. Wood planks are used to
make rooms along the path way of the building. Each room has their kitchen on a
table outside their rooms, and the occupants share just two bathrooms and eight
toilets on that building.

According to some workers, NITEL staff houses were sold to the
workers in 2007 and they were given 60 days to pay particular amounts to the
NITEL Pension Fund, controlled by Olushola Adekanola & Co., while others
were evicted from their houses, as these were also handed over to the NCC along
with the training school.

Another worker, Henry, said the archives that were in the
building had to be moved to another office space that has not been opened for
years.

Mr Henry said the situation of the workers living in the NITEL
office is the same other workers face in their various homes. He added that
some of the workers live off their wives in order for them to stay alive.

“This is just not only happening here. Some workers have divided
their families, some have moved into smaller places, just to have a place to
lay their heads. We now live off our wives’ businesses; we do chores at home in
order for us to get transport fees to come to work. This morning, I had washed
clothes and plates in my house before coming to work and I only come to work
when my wife gives me money to leave the house,” Mr Henry said.

The cry of the women

According to Rosemary Emmanuel, a NITEL casual worker, the
hardship they are going through is unimaginable.

“We are suffering here; government should pay us and our
husbands their salaries. You cannot even imagine your enemy to be in this situation;
this hardship is too much.”

Ms Emmanuel said that her late husband worked for NITEL and
passed on in February, 2000 and she has seven children, who all live with her
in a room at the NITEL office, Cappa. She said she got appointed as a cleaner in
NITEL after she lost her husband. She added that her first child is nineteen,
while the last is eleven, and none of them attends any school.

“You see this fish (she held up a tilapia fish) and this guinea
corn with so many weevils in it, is what I want to cook to feed my seven
children. We are suffering, our children are suffering, no money to train them
or feed,” said Ms Emmanuel.

“See my body, you think that I am old, which is not true but
because there is no money for me to take care of myself, wear good clothes or
make my hair, so I look older than my age. We live in fear here as snakes and
scorpions always enter our rooms. The government should please pay us our money
so that we can leave this place and get a better life,” added Ms Emmanuel.

Government, what is going
on?

NITEL workers say they do not understand why the federal
government has failed to pay them over 27 months arrears.

Kenneth Joshua, another NITEL staff, said, “Honestly, we don’t
even understand the situation any longer and what is really happening now.
Since after the sale of NITEL, government has not really come out to say their
own part of the issue. All we hear is that they are working toward paying the
workers. There have been so many panels or committees set up to looking into the
workers’ issues, but still, nothing has come out of it,” he said.

Mr Joshua added that because of his financial situation, his
father still contributes to his family’s upkeep.

“It is sad to say that my father still sends me money and some
friends always help me out with money too. In order to still stay in my house,
I had to get a lawyer and my pastor to write to my landlord assuring him that
once government pays me, I would not owe him one kobo and that I would pay my
rent and not run away.”

However, NITEL management said that they are not aware that the
some workers live in the office premises.

In a telephone interview, Sule Shedu, the spokesperson of NITEL,
said, “I am just hearing about this development. I need to find out from the
zonal public relations officer in Lagos. I do not know anything about this
development because I have never heard about it. The NITEL management is not
aware that some workers live in the NITEL offices. I am just hearing this for
the first time”.

However, Mr Fagwam said that the workers were given permission
to live in the offices by Engineer Kamalu, the former general manager of NITEL,
Lagos zone, who retired in July, 2010.

The many controversies of
NITEL

NITEL, the nation’s commmunications agency, has become synonymous
with many controversial issues resulting from mismanagement and fraud. The
federal government, potential bidders, NITEL management, and workers are the
key players in the whole saga.

Since 2001, the federal government has made a fifth attempt to sell
off NITEL and has failed to keep the establishment operational.

On February 16, 2010, the Bureau of Public Enterprises (BPE)
released a NITEL bid result that New Generations Telecommunications Consortium
had bided $2.5 billion for 75% percent equity of NITEL to emerge as the
preferred bidder.

Few days after the result was announced, China Unicom Limited, a
member of the New Generations Telecommunication Consortium, denied any
involvement with the bid of NITEL. In March, 2010, the federal government set
up a committee to investigate the NITEL bid, said to have been concluded by the
BPE.

As at the time of this report, the bid result of NITEL has not
been approved by the National Council on Privatization (NCP) and is still under
investigations.

However, some workers are hoping that the federal government
pays all outstanding arrears before October 1, 2010, as they have threatened to
disrupt Nigeria’s 50th Independence celebration if government fails.

Some finance experts have said that until the Nigerian
government is serious about the war against corruption, the country may never
see significant development in the years to come.

Akinbade Ibisiola, head, research team, at Resource Cap Company,
a portfolio management firm, said corruption is the only “cancer” that is
eating the development status Nigeria should have attained.

“I see no reason why Nigeria at 50 years old cannot achieve some
serious level of developments like other nations, since we have both human and
natural resources,” Mr Ibisiola said.

“The only problem here is that a country like ours, where
different governments keep awarding the same project at different cost, can
never see significant improvement in infrastructure, the basic tool for any
economic development,” he said.

Afrinvest West Africa Limited, an investment management company,
in a report last month, also noted that the past government seemed to have lost
its grip on Nigeria’s anti-corruption war, as the successes achieved by the
Economic and Financial Crimes Commission (EFCC) have been eroded.

“Prior to Ribadu’s removal, the fear of arrest and conviction by
the EFCC was an ever growing consciousness in the minds of Nigerians,
especially within the political class. Under his leadership, the
anti-corruption war led to the prosecution of several high profile individuals
including former state governors, cabinet ministers, and senators, a scenario
that was hitherto unprecedented,” the report said, adding that despite
criticism that the EFCC was selective in its approach to fighting corruption,
there was noticeable change in the conduct of public officials.

“Nigeria made such significant strides in the war against
corruption that it climbed out of the bottom of global rankings in the
corruption perception index,” the report said.

Hopeless case?

According to the report, the current state of affairs in Nigeria
is “extremely disheartening” and leaves one with a feeling of hopelessness.

“Where an agency of government loses direction, following a
change of guard, shows inherent weaknesses in the nation’s governance and
institutional structures. A situation in which a contract for the construction
of a second runway at the Abuja international airport was awarded at the sum of
N64 billion ($400m) indicates a brazen proclivity towards misappropriation of
funds.Though this contract was only recently revoked, it is indicative of the scale
of abuse present within all three tiers of government across the nation,” it
said.

The report said the 48.4 percent in the 2010 budget over 2009,
which, according to government figures, was only 39 percent implemented, also
follows a similar trend of gross inflationary provisions for both recurring and
capital expenditure, without sufficient justifiable explanation.

Experts said for the government to deliver its goals of vision
2020 projects, making Nigeria one of the developed countries, President Goodluck
Jonathan has to find the political will to fight corruption headlong, as the
obvious slide down the corruption perception index will continue to impede
Nigeria’s quest for sustained economic growth.

On banking reform

In the same development, Kingsley Moghalu, Central Bank’s deputy
governor on financial system stability, recently said Nigeria has a lot to
learn from the developed nations, especially on the reformation of the banking
industry.

Citing an example, Mr. Moghalu said Nigeria needs to learn from
the new financial law, the Dodd-Frank Wall Street Reform Consumer Act, which
has just been signed into law by President Barrack Obama in the United States
(US).

“That Act is very important because of the dominant position of
the US in global finance. The banking reform exercise in Nigeria has some
similar characteristics with the Dodd-Frank Act,” he said, adding that “when
you see the characteristics, you’ll discover that there are strong parallels in
what is happening in Nigeria today and what the Central Bank is trying to do.
That makes it very clear that the reforms the CBN is setting out are not just
isolated idiosyncratic reaction to financial crisis, but are part of global
best practice adapted to the Nigerian condition,” he said.

Mr. Moghalu said one of the characteristics of the Act is that
it increases the authority of regulators to resolve systemic threats.
“Regulators can now break up threat financial firms whose capital collapsed and
has negative system life implication,” he added.

He also said that the Dodd-Frank Act contains the Volcker Rule,
which is important to the Nigerian economy.

“The Volcker Rule prohibits large banks from making speculative
propriety trades with their own funds. It limits banks, investment of banking,
edge funds and private equity funds to a maximum of three percent of every bank
capital, and it requires banks to spinoff non-core banking businesses and
financial derivatives.

“I think this is exactly what is happening in Nigeria. We have come to see
that it is time to split core banking out of non-banking business. We have our
own Volcker Rule, and it will be coming out very shortly,” he said.

When Eunice Okeke bought shares of MTech Plc in July, 2009,
through her stockbroker, she thought she was making a worthy investment. The
shares had been listed by introduction on the daily official list of the
Nigerian Stock Exchange (NSE), under the information and communication
technology subsector, at N2.50 a few weeks earlier. At that point, investors
who had participated in its private placement barely a year before at the price
of N1.50, had already reaped a handsome 66.7 percent returns on their
investment.

MTech Communications had, in May 2008, raised N3.5 billion by
offering to prospective investors 2,333,333,334 ordinary shares of N1.00 each
at N1.50 per share. The offer was fully subscribed, proceeds of which was to
expand its business and enhance returns to its shareholders.

It was the hope of such returns that prompted Mrs Okeke to
invest in the firm, which was the first Value Added Services (VAS) company to
be listed on the exchange. On June 9, 2009, a total of 4,966,666,668 ordinary
shares of 50 kobo each were offered at N2.50 kobo per share, bringing its
market capitalisation to N12.42 billion. Chika Nwobi, cofounder and managing
director of the company, said of the listing, “we decided to list by
introduction so that those who have invested in the business can have an option
of liquidity.”

Unfortunately, the listing was done at a time when the stock
market was in turmoil due to the global financial meltdown, which had began to
take its toll on the Nigerian economy. By November 23, the share price had
slipped to 91 kobo, a depreciation of over 63 percent. Initial investors were
already making profit.

False declaration

However, any further hope that the shares would appreciate
according to the dynamics of market forces were dashed finally when, on
December 14, the NSE council suspended trading on the shares in order to
protect the investing public. In a letter dated December 11, 2009, and signed
by the former director general of the stock exchange, Ndi Okereke-Onyiuke, the
council accused some parties in the offer of tampering with the register of
members, overstating of the share capital of the company, as well as false
declaration of compliance filed with the exchange prior to listing of the company.

The letter, which was copied to the CBN governor, managing
directors of the Central Securities Clearing System, Platinum Capital,
Greenwich Trust, and MTech, stated, “We are aware that the Securities and
Exchange Commission and the Central Bank of Nigeria are considering matters
arising from the dispute between MTech Communications Plc and members of the
Bank PHB Group.”

The letter was in reaction to an earlier communication by MTech
to the exchange to the effect that these discrepancies had occurred. “Upon the
conclusion of action by the commission on the matter, the exchange proposes a
comprehensive review of the listing status of the company with a view to
delisting it from the official list.”

Sola Oni, spokesperson of the NSE, said MTech had some challenges
with Bank PHB over its private placement.

“Upon listing of the company, there were some discrepancies in
the register of shareholders and the council decided that until they make
clarifications, the shares may be placed on full suspension,” he said, saying
although the exchange did not give the parties a deadline to respond, it did
not also foreclose further investigation as the issues involved borders on
criminal intent. “We should get to the bridge before we cross it. For now, we
have not received any response from them,” he said.

Indebtedness

However, NEXT investigation revealed that directors of Mtech
were indebted to Bank PHB, through its subsidiary, PHB Asset Management Company
Limited. A source in the company, who spoke off record, said the directors of
the bank who were involved in the transactions had been relieved of their
employment, following the intervention by the Central Bank of Nigeria in the
troubled bank last year. Bank PHB is owed a total of N170.1 billion by 149
individuals and firms.

According to the source, at the conclusion of MTech’s private
placement in 2008, which was fully subscribed, Bank PHB failed to remit the
full N3.5 billion. The bank instead opted to deduct the amount owed it by the
directors and remit the balance. MTech is refusing to accept this arrangement,
as it was outside the terms of the placement agreement.

Kayode Falowo, managing director of Greenwich Trust, which acted
as stockbroking to the listing, said his firm was not involved in the
discrepancies mentioned. “I have repeatedly said that we are not involved with
these accusations. We wish to reemphasis that Greenwich is not involved with
the falsification of figures or tampering with shareholders register,” he said
in a text message.

MTech reported

Efforts to speak with Mr Nwobi was unsuccessful, as he refused
to respond to calls to his mobile. A source close to the company, however, said
it was the company that discovered the discrepancy and decided to notify the
regulators. In addition, the MTech had taken the PHB Group to court alleging
that its register of shareholders had been tampered with. The company insisted
that it reported the case to SEC and CBN and sought protection for its
shareholders by requesting the suspension of trading in its shares from the
NSE, pending resolution of the matter.

“MTECH’s directors have not been involved in (1) falsification
of figures (2) tampering with shareholders register. The directors and MTECH
Plc do have a dispute with BankPHB, PHB Asset Management, and PHB Capital and
Trust over irregularities in the handling of MTECH’s private placement and
listing,” a statement from MTech said. “The matter is before the Federal High
Court so no further comment can be made on it.”

An insider to the transactions, however, said MTech was being
economical with the truth. He said the directors, who were indebted to Bank
PHB, were looking for ways not to pay back their loans.

“We gave some individuals loans. They have not paid. If they say
we tampered with their register of members, there are documents, signed off by
MTech, which is still available. We have the list of people that subscribed to
the private placement. So when the time comes, there are documents to show the
true position of things,” she said.

However, while this corporate battle lingers, hapless shareholders of the
company are left in the lurch. They cannot get value for their investment for
all they are worth. When the shares are eventually delisted by the NSE, the
shareholders would have recorded a loss of about half the value of their
initial investment as at the time the shares were listed.