Nigeria Content Online

Confidence among
South Africa’s consumers slipped in the second quarter as households
took a dim view of their finances, partly owing to worries about their
jobs, a survey showed on Monday.

The survey,
sponsored by First National Bank (FNB) and the Bureau for Economic
Research (BER), showed the consumer confidence index declined to 14 in
the second quarter from 15 in the first quarter when it jumped from 9
in the final three months of 2009 — its biggest rise in five years.

“Slightly fewer
consumers expect an improvement in their own finances over the next 12
months compared to Q1 2010,” the FNB/BER statement said.

BHP Billiton has
signed a $3 billion deal with Liberia to develop a large-scale iron ore
project, an official in the West African country said on Monday. “We
are delighted to have reached this agreement with BHP Billiton
following 18 months of discussions,” National Investment Commission
chairman, Richard Tolbert, said. He added that the MDA was subject to
approval by parliament.

BHP Billiton said the agreement sets out the legal and fiscal
framework to develop the leases, including stabilisation of taxes,
duties, and other trade terms.The company is the latest in a string of
mining firms that have signed deals for iron ore projects in West
Africa.

Mauritius Telecom’s
2009 post-tax profit fell 23.8 per cent to 1.4 billion rupees,
following the introduction of special taxes and a drop in tourism.

Mauritius Telecom,
which dominates the fixed-line and mobile markets and is a leading
Internet service provider on the Indian Ocean island, is due to list on
the nation’s stock exchange.

“The fall in
profits is due to the introduction of a solidarity levy of 1.5 per cent
on turnover and 5 per cent on profits of telecom operators,” Chief
Executive Sarat Lallah told reporters on Monday, adding that Mauritius
Telecom said profits have also been hit by the impact of the global
crisis on the tourism sector.

For seven years
running, the Honda Element Sports Utility Vehicle has always been a
wonder and amazement among its other peers. So is its latest, the 2010
Honda Element, with a boxy design.

The 2010 Honda
Element stands as a good alternative for people in need of good
interior space and design with ultimate comfort. The car offers an easy
to handle driving, but still has an unchanged design with earlier
versions.

Design

The 2010 Honda
Element showcases a boxy outlook, which makes it unique. It is
available in three trim levels which are the LX, EX and SC models. The
LX and EX models have both front-wheel-drive and all-wheel-drive
configurations, while the sport-tuned SC is only with front-wheel drive
only. The SC trim model has a lowered sport suspension and has a custom
grille. It has a piano-black interior with unique and luxurious
fabrics. It’s built with body-colour bumpers and comes with a
monochromatic paint scheme. The Honda Element LX and EX models have 16
inch steel and alloy wheels, while the SC model has 18 inch alloys.

Interior

Interior of the
2010 Honda Element is blessed with a spacious cabin and has easy cargo
loading. With the cargo-van-style doors, loading of bulky cargo comes
simplified and easy. The rear seats of the vehicle can either be
flipped up to the sides or removed completely.

The vehicle
conveniently seats four passengers only. The rear has a theatre seating
style arrangement, which gives passengers at the rear lots of space to
relax. Other interior details which appear with the car are: a urethane
utility floor, height adjustable driver seat, air conditioning, keyless
entry, tilt steering wheel, and a four-speaker CD audio system. The
audio system is also integrated with a seven-speaker audio system with
MP3 capability, an auxiliary input jack and satellite radio. A
three-compartment overhead console and a centre console with removable
storage cooler can be found inside.

Under the hood

The 2010 Honda
Element is powered by a 2.4-litre four-cylinder engine rated at 166
horsepower and 161 pound-feet of torque. It is integrated with a
standard five-speed manual transmission and an optional five-speed
automatic transmission.

Safety

The Element comes
standard with front-seat side impact air bags and full-length side
curtain air bags, stability control, antilock disc brakes with brake
assist and active front head restraints.

Price

The 2010 Honda Element is priced from $20,525 to $23,885, about N3.1 million to N3.5 million, depending on models.

The
Central Bank of Nigeria recently issued a 76-page “Prudential
Guidelines for Deposit Money Banks in Nigeria”. Effective May 1 2010,
the guidelines are a key part of the apex bank’s efforts at
strengthening the financial services industry, in the wake of several
shortcomings that have come to light since the global financial and
economic crisis set in. On one measure, the CBN has made a good first
of this goal. The document replaced by the new rulebook,

“Prudential
Guidelines for Licensed Banks”, was only 10 pages thick. So, in terms
of sheer reading effort, the new guidelines do call for considerable
expenditure. Beyond its heft, though, the new guidelines include
provisions on other dimensions of the industry’s operations (risk
management, corporate governance, anti-money laundering, etc.) that
were not even alluded to previously.

One could quibble
at the fact that a number of the additions to the new-look prudential
guidelines are a re-hash of policies the CBN has enunciated of late in
respect of its concern to ensure that banks in the country are properly
run, i.e. in the interest of depositors’ funds. Besides, if the
assignment of ensuring the safety of depositors’ funds and the
stability of the financial system is constructed narrowly enough, then
the main task for prudential regulation is to set proper limits on the
risk appetites of deposit-taking institutions. And this, the old rules
did with some success. So what new things have the new guidelines put
in place?

Basically, the new
guidelines recognise two loan loss provisioning regimes, where before,
there was just one. The “Other Loans” category essentially replicates
the provisions of the old guidelines, with 90 days remaining the
cut-off period for recognising facilities with unpaid principal and/or
interest. However, the new guidelines ease financing conditions for
specialised lending purposes.

Outstanding
obligations are now expressed as proportions of the amounts due, and
the loan-loss recognition periods have been considerably extended. In
this sense, the CBN has only acted to recognise the peculiar life cycle
of the project types that fall under its specialised lending category –
project, object, SME, agriculture, and mortgage financing. All of these
have long gestation periods between when investments are made, and when
they begin to earn revenue, with which they may rightfully meet their
loan commitments. Incidentally, these are also sectors in which the
country has the greatest need, and whose successful financing could
have the greatest multiplier effect on the economy.

That said, I’m not
quite sure the apex bank intended an additional outcome of the new
prudential rules. It would seem that risk managers in the industry had
hoped to obtain some gain from the new guidelines. This would have
happened, if for instance, the apex bank had extended the period for
recognising loan losses across all risk asset classes. Then, a number
of current provisions done in the spirit of the tougher old rules may
have been written back in aid of banks profits. Given the many comfort
arrangements that the CBN has put in place to help banks’ balance
sheets, and the fact that the industry still labours from a liquidity
glut, this was a fair hope. But it turns out that “specialised loans”
are a small portion of the industry’s current loan portfolio. So, the
hoped for gains from extending the period for recognising impaired
loans would be a lot smaller.

Nonetheless, would
these easier terms, not boost the flow of credit to these sectors of
the economy? A re-balancing of credit in favour of project financing
would be consistent with the economy’s need for new investment in
infrastructure, while better mortgage and agriculture financing should
ultimately address needs that are peculiar to the more vulnerable
segments of the economy. Still, it helps to consider why banks have not
felt a need thus far to put their monies in these very useful sectors
of the economy. When a market fails for the provision of any good or
service, it is often because the neighbourhood effects arising from
investing in the provision of such service or good are too dispersed to
generate useful returns for the investing entity, or that too large a
portion of the externalities arising from the investment are negative.

In this case, we
should worry about two things. A legal and infrastructure environment
that remains unhelpful to business, and the banks’ capacity to lend to
these sectors.

Have you ever thought about raising money from the value of your
property? Many owners are sitting on properties worth far more than
they paid for them. Some have seen a significant appreciation in value
in just a few years that for many, their property is their single most
valuable asset.Equity release schemes are relatively new in Nigeria but
have been in practise for over 30 years in Western markets.

In
these markets, middle aged and retired home owners who may be “asset
rich, yet cash poor” and own their homes outright are able to release
some of the equity in their home in return for income or a combination
of cash and a regular income for the rest of their lives, whilst still
retaining the use of their home.If you own a property that has
appreciated in value since you purchased it and is unencumbered, it is
possible to unlock some of the extra value your property now has.

It
works like this: The bank takes a charge on your property and can lend
you up to 80 per cent of the capital or value of the property; the
funds can be applied to the purchase or development of another
property, or invested in other investment opportunities.Five years ago,
Mr. Taiwo bought a property for N₦15 million in Lekki Peninsular Phase
I. Today, the property is worth over N60 million, and he earns rental
income of N3.5 million per annum from it. Mr. Taiwo is thinking of
borrowing up to N40 million using the property as collateral to take
advantage of new real estate opportunities that has come up. He expects
that this investment over the next five years should yield a higher
return than the 18 per cent per annum he is paying on his loan.

The
risks

Equity release schemes as does all borrowing, come with a degree
of risk and you should fully understand the product terms before
committing.

If the market softens and property prices are
falling and you have borrowed too much based on the valuation of the
property when prices were at their highest, the value of the property
could be less than the amount you initially borrowed.It is a good idea
to borrow only what you need or as much as you intend to spend. An
equity release scheme is best utilised to take advantage of interesting
investment opportunities and not out of a desperate need to free up
cash.

If there are severe cash constrains with little borrowing
capacity, then it may be a better option to sell the property, buy a
cheaper property and release cash in that way. Remember that the lender
has a charge on your property and you must be able to service your
loan; you could lose it if you default on your payments.

You
must be able to service the loan or run the risk of losing your home
Seek professional advice Your financial advisor will look at your
overall financial situation to ascertain that an equity release scheme
is indeed the best option for you.

Product features including
the amount of money you can access, and documentation requirements are
similar to those required for mortgage applications; these vary from
lender to lender and are influenced as much by the value of your
property as by your age.

Interest rates

Naturally, property owners will
look to release equity when interest rates are low, and house prices
are stable or rising.Look critically at the interest rates;
differences of 1 per cent to 2 per cent may not seem like a lot but
they can make a big difference over a long period. Interest can quickly
mount up so be conscious of freeing up equity only where the return on
the investment more than compensates you for what can be significant
interest costs.

Estate planning Any home equity loan will have an
impact on any assets you were expecting to bequeath to your loved ones
and will directly reduce what they will inherit unless the loan is
fully paid off before you die. Review your will, and if appropriate,
consider discussing the scheme with close family members who may be
living in a particular property.

Remember that if the loan is
not fully paid for, the house will be sold and if it has been a family
home, family members may suffer much distress if they are forced to
move suddenly. Ideally this scheme should be applied to investment
properties and not the family home.It is always worth considering your
other assets to determine whether there are alternative yet affordable
ways of raising the money you need.

Have a clear idea of your
key objectives, your personal priorities, risk appetite, and views on
the direction of property market as this should influence your decision
as to whether or not this product is appropriate for you.

The Asset
Management Corporation of Nigeria (AMCON) will ease current credit
crunch but it may also trigger inflation in the economy. Experts who
reviewed the situation insist that unless the Central Bank comes up
with adequate measures to check the increase in money supply that will
follow, the economy may be faced with cost-push inflation in the
immediate term.

The AMCON Bill,
which has been passed by the National Assembly and is awaiting
presidential assent before it becomes operational, is expected to buy
the toxic debt of banks and free up their books and encourage lending.
The company will start with a minimum of N20 billion capital.

Currency in
circulation which has been on a steady decline in the last six months
is expected to rise with the floating of the AMCON. Currency in
circulation which peaked at N1.18 trillion in December 2009 dropped by
N1.05 trillion in May 2010, a decline of over 11 per cent.

Money supply

Razia Khan,
regional head of research, Africa, Standard Chartered Bank in a recent
paper entitled “Nigeria – Assessing Inflation Risks” said AMCON
creation and plans for increased government spending ahead of elections
in 2011 will both add to money supply which may trigger inflation.

Ms. Khan noted
however that with growth below potential output, inflation risks are
unlikely to be as magnified as they would be in a healthier growth
scenario.

“Of course, for
Nigerian inflation, structural bottlenecks remain important. The extent
to which reform is successful in relieving structural bottlenecks will
determine the extent to which favourable liquidity adds to growth,
rather than merely feeding through into higher prices,” She favoured a
deliberate firming of the naira as a guard against inflationary trends
that might follow. In an email response to further questions, Ms Khan
said efforts to improve the value of the naira remain the best
safeguard when it comes to keeping inflationary pressure in check. “It
is more a question of whether the CBN can commit to strengthening the
naira (if that is what it takes) to keep inflation under control,
without running down FX reserves.”

It may become worse

Felix Oboagwina,
director of publicity of the Democratic Peoples Alliance (DPA), said
the situation could become worse as the National Assembly members are
currently demanding for a rise in their allowance. According to him,
the demands of the law makers are not realistic.

“What they are
asking for and the manner these funds will eventually be spent will
have consequences on the economy. It means we will have a lot of money
chasing limited goods and this can lead to hyperinflation. Are these
demands realistic, from N27 million quarterly allowance to N40 million
in a country where minimum wage is N7, 500.” Mr Oboagwina said the
problem is not the amount of money that would be released into the
system but the fact that this will be at the expense of the real sector
of the economy. “The real sector has been dwarfed by the activities of
these politicians and so we have seen a total collapse of the middle
class.” He added that beyond the effort of the CBN to control the
situation, there was need for the National Assembly, governors and the
presidency to come together to look at some of these social issues that
have led to the rising unemployment and crime in the country.

The Central Bank raised similar concern in its communiqué at the end of the May 2010 Monetary Policy Committee (MPC) meeting.

The communiqué which was signed by Lamido Sanusi, CBN governor,
noted that monetary expansion in the next quarter may be driven by
increased government spending, the purchase of toxic assets by the
AMCON and recapitalization of distressed banks. “These expansions may
translate into the risk of higher inflation, asset price bubbles or
pressure on exchange rate and foreign reserves,” he said.