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Guaranty Trust Bank
said on Monday it was considering a proposal from the International
Finance Corporation (IFC) to buy up to $30 million worth of new shares
in a private placement. GTB said, in a statement, it was giving
“serious consideration” to the proposal from the IFC, the World Bank’s
private sector lender, and that it would convene a shareholders’
meeting if its board approved the move.

GTB is one of the top five lenders by assets in sub-Saharan Africa’s
second biggest economy and has said it plans to raise capital from time
to time over the next few years to enhance its funding and lending
capabilities. It completed a $90 million naira-denominated bond
placement at the end of 2009, Nigeria’s first corporate debt issue in
years, and successfully issued $350 million of 5-year Eurobonds in
January 2007.

June 25 marked the first year anniversary of
Michael Jackson’s death. Whatever you feel about him, whether you were
one of his legion of fans or just someone who observed him with quiet
interest, there is much to learn from his life, death, and legacy. We
revisit a few lessons from the arrangement Michael Jackson put in place
for the orderly transmission of his assets and how the estate has fared
so far.

Write a will

In spite of his extravagance and extraordinary
lifestyle, Michael Jackson sorted out his estate at age 41, some 10
years before his death. He avoided potential misunderstandings with
siblings and other family members as his will was properly filed, and
specifically cited the names of his beneficiaries, to ensure that his
estate would be divided in the way he wanted; for his children, his
mother, and to charity. Had he not written a will, it would have been
up to the California state laws, to decide what happens to his assets.
The “pour over will” also revealed that assets would be transferred to
a trust upon his demise.

Consider a living trust

Michael Jackson established a revocable living
trust, that allows one, at their death to control transfers to your
designated trustee This estate-planning tool lets you transfer all your
property, including bank accounts, investments, and real estate, into a
separately owned entity whilst you still maintain control as trustee.

Unlike a will, the beauty of a living trust is
that the assets it holds at the time of death, do not pass through the
probate process. This provides privacy for the deceased family and
heirs, and spares them the aggravation of a prolonged and expensive
legal process particularly where assets are scattered across various
states.

Michael Jackson’s eldest child was only 11 years
old when his father died. He and his siblings inherited millions of
dollars through a trust, which is an ideal tool where a large
inheritance is left for minor children. A trust provides professional
management of the assets and keeps them from passing directly to the
children until they are old enough to take responsibility for such huge
sums of money.

Turning over assets to young adults early can have
some harmful outcomes, not only can it place the assets within the
reach of the children’s creditors, it can also jeopardise their sense
of motivation, the drive to work hard, and embarking on pursuits or
careers of their own.

Name a Guardian

If you have minor children, one of the most
important decisions that you will have to make with regard to your
estate plan, is who should take care of your children. .Michael Jackson
was a single parent with minor children, It was rather important that
he nominated an appropriate guardian for them before his passing.
Without this, the state, would have made the decision as to who would
bring up his children, but his will created the appropriate legal
framework to avoid this.

Jackson chose his 79 year-old mother over his
siblings as primary guardian for his children. Some suggest that it
might have been more appropriate for him to choose a younger guardian.
However, his close friend and mentor, Diana Ross, acts as backup,
should his mother be unable to continue in the role. Considerations in
the selection should include, the potential guardian’s family
situation, religious and moral beliefs and values, and the financial
situation of the guardian.

Choose your executors carefully

Choosing who should serve as executor is a
critical part of your estate plan. The last thing you need is the
possibility of an unscrupulous executor who will mismanage the estate.
Ideally you should pick a qualified and experienced professional who
will accept legal responsibility and whom you can trust. Trust
companies are available in Nigeria and offshore that specialise in
trustee services; this is particularly important where a significant
estate is involved.

It is best to assume that your loved ones will
disagree, and perhaps even contest your will unless you have been very
specific and have left little room for ambiguity. Naming multiple
executors to provide checks and balances on the decision-making process
makes sense, but remember that all executors must agree on all
decisions and sign off on all paperwork, which can become cumbersome.

Michael Jackson relied on professionals to ensure that his wishes and intentions would be carried out.

He chose a top lawyer and a business executive, as
co-executors whom he felt had the necessary expertise and whom he felt
would act in the best interest of his beneficiaries. Indeed, estate
co-executors John Branca and John McClain have dramatically turned
around the estates finances. An empire that was reportedly on the verge
of collapse and in debt to the tune of over $500 is now earning
significant income.

It is reported that Michael Jackson’s estate has
earned more than $250 million in the past year, paying off some $70
million in debt, including the $5 million mortgage on the Jackson
family’s Los Angeles home. Interest is serviced with a steady flow of
cash.

The film “This Is It,” based on his final concert
rehearsal footage, is said to have grossed $252 million worldwide. The
estate earned $60 million in advance from Sony, with more expected from
DVD sales. A posthumous deal to sell unreleased Jackson recordings with
Sony Music guarantees $200 million over seven years and has already
brought $125 million to the estate.

Revisit your estate plan periodically

Michael Jackson wrote his will in 2001 when he was
41 years old. Within a 10-year period, those named as executors and
guardians may no longer be appropriate, either because they have become
too old or because your relationship with them has changed. Further,
assets may have increased significantly or the level of financial
sophistication required for managing them may be beyond the ability of
the team in place.

Whilst his estate plan may not be perfect, it has
certainly gone some way to protect his loved ones. It is suggested that
only a tiny percentage of Nigerians have written a will, which is the
most basic estate-planning tool. It is important to ensure that your
loved ones are provided for, should anything happen to you.

Drop us an email at personalfinance@234next.com
with your questions, experiences, successes and challenges. All letters
will be considered for publication, and if selected, may be edited. We
would love to hear from you.

Some finance
experts have commended the Central Bank in releasing its updated
prudential guidelines for banks in Nigeria, released last week.

The new prudential
guidelines were issued about a month after a revised one was posted on
the Central Bank’s website. The experts said there were issues that
needed to be addressed in the revised version, as some of the demands
of the guidelines were contested by the banks as not achievable.

Renaissance
Capital, an investment banking firm, said the move by the bank shows
its attitude towards banks is changing, and it seems to be showing
signs of improvement in listening to Nigerians concerns.

“This is very
important to highlight that the action of the Central Bank demonstrates
just how much the Central Bank’s attitude towards the banks has
changed. The Central Bank is clearly listening now and wants to do
everything to support the banks in their recovery. With the full
support of the CBN, the recovery process will happen, there can surely
be no doubting this,” the firm said.

In the Central
Bank’s statement, it said that the Nigerian banking sector witnessed
dramatic growth post consolidation (2005) and the developments posed a
lot of challenges for the industry and regulation.

“The initial
perceptions that the Nigerian banking system was sound and insulated
from global financial crisis were misplaced. The factors that led to
creation of extremely fragile financial system that was tipped into
crisis by the global financial meltdown.”

It said such
factors include macro-economic instability caused by large and sudden
capital outflows, major failures in corporate governance at banks, lack
of investor and consumer sophistication, inadequate disclosure and
transparency about financial position of banks, critical gaps in
prudential guidelines – current prudential guidelines was issued in
1990 – and uneven supervision and enforcement.

In addressing these
challenges, the Central Bank said it introduced a four pillar reform
programme in 2010 tailored towards enhancing the quality of banks,
establishing financial stability, enabling healthy financial sector
evolution, and ensuring the financial sector contributes to the real
economy.

As part of the
initiative to enhance the quality of the banks, the Central Bank said
it undertook a review of the prudential guidelines. “In this regard,
the revised Prudential Guidelines aim to address various aspects of
banks’ operations, such as risk management, corporate governance, ‘know
your customer’, anti-money laundering/counter financing of terrorism,
and loan loss provisioning. The guidelines also aim to address the
peculiarities of different loan types and financing to different
sectors.”

Watch yourselves

The Central Bank,
however, urged the banks to put into operations stricter policies to
address risks, and not rely solely on its guidelines.

“The issued
guidelines should be regarded as minimum requirements and licensed
banks are encouraged to implement more stringent policies and practices
to enhance mitigation of risks,” said Samuel Oni, the Central Bank’s
director of banking supervision said.

“Banks should pay
special attention to all complex, unusually large transactions, and all
unusual patterns of transactions, which have no apparent economic or
visible lawful purpose. The background and purpose of such transactions
should, as far as possible, be examined, the findings established in
writing, and be available to help the relevant authorities in
inspection and investigation.

“Banks should put
in place effective internal policies, systems and controls to identify,
measure, monitor, and control their credit risk concentrations. The
policies should be approved by the Board of Directors and should cover
the different forms of credit risk concentrations to which a bank may
be exposed,” the CBN said.

The Central Bank
also said that banks should make general loan loss provisions of at
least two percent of loan portfolio not specifically provided for, in
addition to specific provisions, to provide against the unidentified
losses which are known to exist in any portfolio, using a systematic
method which should be consistently followed from period to period.

Ciuci Consulting, a
management consulting firm, said banks should cooperate with the
Central Bank for the successful implementation of the ongoing reforms
in the industry.

“Given the changes
in the agenda of the regulators, the Nigerian banking landscape will
dramatically evolve in the coming months. Evidence of this lies in the
Central Bank’s focus, which essentially is designed to improve the
quality of banks, restore financial stability, enable a healthy
financial sector, and ensure that the financial sector contributes to
the real economy.

“Banks that accept
the future for what it is, as laid out by the regulator, will be
partnering with the Central Bank to work towards achieving these
objectives. It is in the interest of the Central Bank that banks are
supported in their endeavours, that necessary rule and regulations are
designed such that banks can thrive.

“In addition to strategic renewal and operational transformation,
implementation of rules and regulations at the banks will come at a
cost. However, this cost is necessary to come to a more solid,
efficient, effective and lasting banking system,” the firm said in a
report titled ‘What Nigerian Banks should become’.

The Bank of Ghana
on Friday cut its policy rate by a further 150 basis points to 13.5 per
cent, citing stable inflation prospects as grounds for pushing the key
rate down to its lowest level since January 2008.

The move was deeper
than market expectations and analysts were divided on whether one of
Africa’s leading investment destinations — which has seen a total 500
basis points of rate cuts since last November — would cut further.

“The anticipated
continued slowdown in inflation in the medium term, together with the
need to restore the growth process, provides scope for monetary policy
easing,” Bank of Ghana Governor Kwesi Amissah-Arthur told a news
conference.

Amissah-Arthur said
he expected inflation, which last month fell into single digits for the
first time in over four years, to remain around the Bank’s central
target of 9.2 per cent.

“Early indications
suggest that the pace of economic activity may have bottomed out and
has begun showing signs of picking up, an early indication of the
restoration of the growth process,” he added.

“The 150 basis
points is much more than we anticipated and we now think that the
easing cycle has come to its end. This should provide further stimulus
to the economy,” said Ridle Markus of Absa Capital.

However, Razia Kahn at Standard Chartered suggested further cuts were possible.

“One hundred and
fifty basis points when there was room to do more clearly signals a
more cautious approach … Markets may now move to price in the
likelihood of further, albeit moderate easing, as this remains a
possibility if inflation does not spike higher in the coming months,”
she noted.

Markus Schneider at
UBA Capital expected inflation to creep up from 9.52 percent in June to
11-12 percent by the end of the year, making further cuts “increasingly
unlikely, while Business Monitor’s Lisa Lewin said the Bank would
reverse some of the latest rate cut with a rate hike by end-2010.

Watershed

Several months
before it sees its first oil output from the Jubilee offshore field,
the Ghanaian economy may have reached a watershed after weak growth,
fiscal consolidation and a strong cedi currency have all firmly kept
the lid on inflation.

Recent cedi falls,
government spending and an expected take-off in growth from around five
percent this year to double digits in 2011 could combine with utility
tariff hikes and public sector wage increases to reverse that trend.

While the impact of
the initial production of 120,000 barrels per day from Jubilee is
likely to be modest, some Ghanaian officials see growth taking off to
20 per cent in 2011, one of the highest rates seen in the world.

Yet the figure is
being taken with a degree of caution, not least because a statistical
rebasing of the economy due to come into effect by year-end to reflect
the growing importance of high-growth sectors is also likely to affect
the figures.

Some analysts say the rebasing could lead to gross domestic product being revised upwards by as much as 50 per cent.

For
the Nigerian economy to reach its potentials, attention must be paid to
the improvement of small and medium scale enterprises (SME) in the
country, some business operators in the United Kingdom (UK) have said.

Stephaney
Andre, operational manager of One Pound Shop, a supermarket in
Manchester, told NEXT that small scale businesses will help any economy
to achieve productivity and industrial growth. “The growth in the
economy of the UK could be attributed to the productive activities of
small and medium scale businesses, which was made possible because the
UK provides favourable environment for businesses to thrive,” Ms. Andre
said. She said developing countries, like Nigeria, only need to focus
on the basic services that small scale businesses need to survive to
achieve productivity.

National shame

A
Nigerian, Toks Adeola, who owns a local food shop at the UK Open
Market, in East London, said the lack of basic infrastructural
facilities in Nigeria is what is “destroying the country’s economy.”
“It’s a shame that Nigerian government cannot provide stable power and
water supply at 50 (years of independence),” he said. “Good roads and
transportation are nothing to write home about. Here (in the UK), small
businesses are the main driver of the economy because the environment
is good for our businesses.” He said irrespective of the taxes business
operators pay in the UK, “we still make gains from the investment,”
adding that Nigeria needs a “real political commitment and drive” to
achieve stable economy.

A
survey, in the UK, of 406 business owner-managers canvassed on behalf
of QBE, a specialist business insurer, revealed that SME dictates the
economic health of the nation. Terry Whittaker, managing director of
distribution at QBE European Operations, recently said, “Small to
medium-sized enterprises form a crucial section of UK business and it
is important that their collective voices is heard on the future of our
economy, because they have a key role to play in its recovery.”

Beyond oil

Obiageli
Ezekwesili, World Bank Vice-President for the Africa Region, said it is
necessary that the Nigerian government move beyond the oil sector. She
said presently “the energy sector stands in the way of the development
of the small and medium scale enterprises.” Mrs. Ezekwesili said that
in developed countries “it is not the large companies that dictate the
momentum of those nations.” She said Nigeria need small scale
businesses to grow. This according to her, “requires improving the
infrastructural facilities for businesses to thrive because government
organizations cannot build the economy alone.”

Asked
if the economy situation in Nigerian is attractive to foreign
investors, Mrs. Ezekwesili, said, “I think one thing that has become
clear is that foreign investors are always on the lookout for
democratic stability. So nations that understand this are paying a lot
of attention to building political systems that are credible,
legitimate and very accountable to citizens. Nigerian government needs
to pay attention to those kinds of issues; not just to foreign direct
investors but to domestic investors.” She added that “democratic
institutions enable you to improve on the rule of law and it provides
predictable environment for policies that are pro-business friendly.”

Stephen O’Brien, Parliamentary Under Secretary of State for
International Development, said, “It is the private sector that create
jobs and gives the opportunity for all to prosper, which directly boost
any nation’s economy.” Mr. O’Brien added that business success can only
be built on the right environment, which many African nations are yet
to achieve. According to him, “transport costs in Southern Africa are
on the average 75 per cent than in Europe and 40 per cent more from any
of the rest of the countries.”

Industry regulators
and finance experts have said that though it is a laudable step that
Nigerian banks should adopt the International Financial Reporting
Standards, it is not an end in itself and cannot take the place of good
corporate governance.

The Central Bank
governor, Sanusi Lamido Sanusi, said that other issues would need to be
put in place to achieve the results of improving the industry’s
reporting standards. “No accounting/reporting standards can take the
place of good corporate governance,” he said, during the International
Financial Reporting Standards (IFRS) conference organised by Access
Bank last Monday.

He urged banks to
henceforth ensure that they report their numbers correctly, adding that
they should learn from their past mistakes, which led to the challenges
the banks faced last year.

The International
Financial Reporting Standards (IFRS) are accounting standards and
framework adopted by the International Accounting Standards Boards
(IASB), which is now becoming the global standard for the preparation
of public quoted companies’ financial statements.

IFRS reporting
demands that Nigerian banks must give a true and fair view of their
financial accounts. Experts say banks’ books, which averagely stands at
about 30 pages, would be increased to about 90 pages.

The CBN governor
said it would boost investor confidence through full disclosure, lower
the cost of investment capital, develop a more efficient capital
market, aid a robust regulation and supervision, and aid the
availability of useful data, among others.

Other participants
from finance regulatory bodies said major issues such as reporting the
right figures in the first place need to be addressed by the banks
before they can enjoy the benefits of improving their reporting
standards, as the regulators are not expected to do everything for them.

The 2009 audit of
the Central Bank revealed significant corporate governance failures and
lax risk management in several banks, despite the attempts made by the
regulators towards improving the quality of corporate governance.

Lax risk management

According to
analysts from Ciuci consulting, a management consulting firm that
provides business improvement solutions to its clients, “it was
discovered that chief executives of several banks occasionally flouted
laws by approving loans without recourse to laid down loan approval
processes. They also allocated funds to projects without proper
consultation with their boards and other stakeholders.

In some cases,
boards were found to be complicit in these malpractices, as personal
interests were put ahead of the interests of stakeholders.
Consequently, the issue remains how to ensure that banks adhere to best
practices in corporate governance in order to safeguard the investments
of shareholders and enhance the value creation process.”

Weak governance,
inappropriate incentive structures, and poor risk management systems
were among some of the main causes of the collapse of the global
financial system. Nigerian banks were not left out as most of them
failed to adhere to established risk management procedures, resulting
in massive loan losses.

Reports from the
consulting firm stated that the Central Bank’s special audit report
indicated that the total deposit liability of the eight affected banks
stood at 3 trillion, while aggregate non-performing loans stood at over
1.5 trillion, representing 61 percent of industry total. The full
disclosure revealed huge losses of unprecedented proportions in the
history of Nigerian banking.

Finance experts say
risk management failures are generally attributed to frameworks and
technologies adopted by the banks, but are actually largely affected
more so by the executives at the helm of affairs. The average
non-performing ratio for the 24 banks in 2009 stood at 34.4 percent
against the 2008 figures, which stood at 5.6 percent.

They also say for a
risk management structure to be effective in delivering its benefits,
it requires the full involvement and ownership of the executives and
must begin with a genuine determination by the leadership to comply
with risk management policies and procedures, as well as letting their
decisions and actions be driven by the interest and safety of all
stakeholders.

The consulting firm
urged that limits and other controls must be respected by top
management of any bank, if risk management is to be given its rightful
place.

In addition to
strategic renewal and operational transformation, implementation of
rules and regulations at the banks will come at a cost. However, this
cost is necessary to come to a more solid, efficient, effective and
lasting banking system.

Clearing the mess

The governor of the
Central bank of Nigeria has stated that the Asset Management
Corporation (AMCON) is set up to do three major things: it would
purchase non-performing loans, after buying the loans, the rescued
banks remain largely undercapitalised; it would also be in a position
to inject capital into these banks for ordinary shares (ownership), and
also manage the loans for recovery post capital injection.

AMCON would be a
permanent structure with a life span for 10 years. It would remain a
part of CBN regulatory infrastructure, going forward to reduce
non-performing loans levels in banks. For capital market operations,
experts say the AMCON is going to take over these loans, while some
operators may be given debt forgiveness, except there is evidence of
fraud or industry malpractice.