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As the present
Nigerian government is focused on ensuring that the relevant
infrastructure for stable power supply is in place, since stable and
affordable power supply effectively is the bedrock of the society, let
us this week analyse the role that private business, public sector and
information technology as an enabler need to play in achieving this
objective.

Stable and
affordable electricity which we crave for as a nation can be discussed
under the broad headings: generation of adequate power capacity,
effective distribution/maintenance of the infrastructure, marketing and
sales, and implementing accurate billing/payments mechanism or process.

So in ensuring that
we have stable power supply, it makes sense to rely heavily on the
private sector, since it is a proven fact that when a service is based
on competition, profit making, and investors monies are at stake, the
likelihood of maintaining continuity, reliability and efficiency in the
service provision is more likely to be achieved and the consumer is
better served.

In more advanced
countries, particularly in the United Kingdom, every stage of power
supply is privatised and I accept that this model has inherent
disadvantages, as there is clearly a junior role for the state to play
not only as a regulator but in the crucial role of power generation,
distribution, and maintenance of the underlying transmission
infrastructure.

Generation of adequate power capacity

Since we don’t have
an efficient power infrastructure base in Nigeria it makes sense that
both the state and the private sector are involved as partners in
ensuring the establishment of such infrastructure.

The state or its
agencies steer this partnership in ensuring that the objective is
achieved from a holistic point of view whilst the private sector
organisation whose primary objective is to provide an efficient service
and return profit to its shareholders has no choice than to deliver.

In such an
arrangement, even if it is just one company providing this service such
as is obtained in the UK where the National Grid performs this role, it
is must be target driven and based on clear, enforceable service level
agreements with built in severe monetary penalties.

Distribution and maintenance of the power transmission infrastructure

Again the relevant
infrastructure needs to be implemented and maintained to ensure power
is effectively distributed and clearly managed as a part, private and
public initiative (PPP) for the same reasons highlighted earlier.

The electricity
transmission network which includes cables and poles that ensure that
power is transmitted from where it is generated into our homes,
offices, shops must be maintained and looked after.

Marketing and sale

To ensure that a
competitive service is provided to the consumer, the actual sale of
power to the end user ought to be fully privatised and there should be
a minimum of five companies providing this service, just like in other
developing nations.

The consumer can
decide to choose any supplier based on price, quality of service,
customer service and responsiveness among others. If necessary it may
be best to invite foreign based electricity supply companies to get
involved but with a strict requirement to ensure that Nigerians over a
defined period of time dominate the management cadre and work force of
their organisations.

Implementing accurate billing/payments mechanism

The consumer must
be provided with the confidence that whatever billing process is
implemented is accurate and based on his consumption which will
encourage prompt payment. You are more likely to pay for a service
promptly when you are confident that you are paying the correct amount
for what you have used. The billing process must be transparent to the
consumer (available online) and should be able to withstand any manner
of scrutiny or audit.

Information Technology role

From the power
generation stage, to distribution and sale, accurate computerised meter
reading records need to be maintained, accurate computerised records of
wholesale purchase of power from the generating company by electricity
suppliers, consumer details and monitoring application systems need to
be implemented.

Online billing
systems and connectivity between systems used by competing electricity
supply companies must also be maintained so that a consumer can
seamlessly move over to another supplier based on their preference. All
the mentioned systems need to be in place to ensure that every stage in
the power supply chain is effective, accurate and auditable which will
provide all round confidence on all sides.

Competent IT
literate administrative staff and IT professionals will all be required
to enhance the application systems. For example, Centrica PLC, an
electricity supplier in the UK requires over 500 IT professionals to
support and maintain all the relevant electricity application systems
that automate every stage of the electricity supply process from
purchasing bulk electricity from the National Grid to supplying it to a
consumer, through to billing and receiving payments.

As Information Technology is the enabler of all sectors in our
society, not just the power sector, the better the IT infrastructure in
place and the more computer literate our society becomes, the more
efficient all other sectors can become, certainly in my view.

The idea behind the establishment of the Economic Community of
West African States (ECOWAS) over 30 years ago has not been fulfilled,
Josephine Tapgun, the Minister of State for Commerce and Industry, said
yesterday in Abuja. Ms. Tapgun said the objectives of achieving trade and
economic integration within a borderless sub-region remain largely unfulfilled.

Speaking at the opening of the 3rd West African Monetary Zone
Ministers of Trade Forum in Abuja, Ms. Tapgun stated that external factors have
contributed a great deal to this problem, hence the need for a review of the
existing infrastructural policy of ECOWAS, to increase the volume of trade
across the member nations.

“Issues that need to be addressed urgently include the policy
and regulatory environment that will ensure transparency, predictability, and
business and investment friendly environment,” Ms. Tapgun said.

“There is, therefore, the need to critically examine our
infrastructural policies with a view to enhancing intra-West African Monetary
Zone trade,” she said, insisting that ECOWAS members need to trade more among
themselves to foster economic integration and ensure regional development.

For this to be achieved, she said, member countries have to
demonstrate a strong political will to carry out the necessary social and
economic reforms that will bring about effective regional integration,
socio-economic growth, and development within the sub-region.

Developing the infrastructure both in hard and soft forms is
germane for a credible settlement system. The soft infrastructural challenge is
visible in the fact that dispute resolutions across borders, like payment
problems, are nonexistent and there is no institutional framework for it.

No free movements

Also, capital movements are not free across borders, with all
countries applying exchange controls; membership in monetary groupings and
trade groupings pose problems, as there about 30 such groupings with an average
of each country belonging to about four; markets are restricted to local banks;
while economies of scale from regional single market is not available.

Equally, Temitope Oshikoya, Director General of West African
Monetary Institute, remarked that the institute is assisting some African
countries in developing trade policies, insisting that a good trade policy is
of particular importance to promote trade integration in the region and enhance
economic growth.

“WAMI, with support from its development partner, has developed trade policy
for the Gambia. It is my fervent hope that when fully implemented, business
will expand, jobs created, more revenue for government generated, and greater
income for the people,” Mr. Oshikoya said.

Sanusi-watching has become Nigeria’s most popular spectator
sport. Every other week, the Central Bank governor beams his searchlight at a
dark corner of the banking attic to expose a mangled mass of cobweb. Oddly, his
admission at a seminar last week that the regulator does not know the
identities of owners of significant blocs of shares in ‘a very large number of
financial institutions’ has been received with indifference. In typical
fashion, the gallery has latched on to his other announcement at the same event
that the CBN would limit the tenure of non-executive directors of banks to two
years subject to renewal only at CBN’s instance.

The CBN’s authority to impose a ceiling on non-executive
director tenure and the propriety of announcing a major policy decision at a
public forum aside, I think that companies should applaud Sanusi for
championing transparency in shareholder identification. However, my reasons for
urging their interest diverge sharply from the Central Bank governor’s who
asked ‘Who owns the banks? Are they money launders or drug barons?

In fact, it baffles me that there has never been any public
advocacy on the subject of shareholder identification. There may be a good
reason why it has been kept off the agenda. Could it be because quoted company
boards of directors, stock brokers, issuing houses and registrars are complicit
in freezing the trail that leads to some beneficial owners? Or might it be that
they have been so busy covering up their own tracks that they are missing the
significance of the tracks being laid by non-insider investors? Their covert
ambition has been to ensure that control never slips out of their hands. Did
anyone say ‘hostile takeover’? Not in your dreams, not in my time. They and
their proxies are in firm control. Why would they bother about any shareholder
identification when the free float is laughable and they have a maze of
interlocking ownerships that would make any Byzantine emperor proud? With that
kind of moat, they can flick away any interloper’s unsolicited interest like a
dead insect.

Anyone who has followed global markets in the last few years
knows that shareholders can wield influence far in excess of their ownership
stakes. Activist investors with absolutely no interest in taking over the
company have become a fixture of the governance universe. From retail investors
like Eric Jackson who with only 45 shares launched a widely covered shareholder
campaign against the board of Yahoo! using YouTube in 2006 to the Roman
Catholic Sisters of Charity of St. Elizabeth who pushed for the publication of
risk management policies in plain English at Bank of America’s 2010 annual
general meeting and went on to win 39 per cent of votes in support, there is a
trend for proposals to stand on their merit and not on the number of shares
owned by a shareholder.

The bulky ledgers of tiny print with columns of names and
holdings in registrars’ offices contain a wealth of intelligence for every
company’s investor relations (IR) efforts. Companies are fond of mistaking
blasting ego-propping communications of corporate accomplishments to
shareholders as IR. That is mass communications and useful as it may be, it
does not build relationships, which is the operative goal of IR. Boards need to
closely monitor the geographic breakdown, composition, concentration,
investment styles and turnover of their shareholder base to craft effective
investor relations strategies. Anything else is akin to throwing spaghetti on
the wall.

In a paper calling for improved disclosure in shareholder identification,
‘Shareholder ID: The Resounding Silence of Non-disclosure,’ prepared by PR
Newswire’s Disclosure Advisory Board, the writers lamented the ‘thunderous
silence’ on hidden ownership. They argue that it is unfair to demand full
disclosure from companies while permitting investors who may have hidden
agendas from disclosing their interest in a timely fashion. Transparency is a
two-way street.

In banking, there is the policy of Know Your Customer. Companies
must now institute a policy of regular Know Your Shareholder audits. While
board members with vested interests will want to see Mr. Sanusi’s latest
comments as another round of witch-hunting about to begin, he is doing them a
big favour by indirectly fighting for their right to know buyers of their shares.
At least, now the law would ensure that no one comes from behind them to spring
a hostile takeover. However, the whole point of shareholder identification is
not about stealing the company from its owners. It is about giving them an edge
in their capital market relationships.

The writer is the managing
director of a full service investor relations firm based in Lagos.

The decline in the value of equities at the Nigerian Stock
Exchange, yesterday, cuts across all sectors of the market.

The resilient nature noted in sectors like the conglomerates,
breweries, food and beverages in the past week, against the downward trend in
the market, could not be sustained after Thursday’s trading.

The All-Share Index yesterday declined by 0.72 per cent to close
at 27,227.26 basis points compared with the marginal decline of 0.05 per cent
recorded the previous day to close at 27,424.47. Market capitalisation also
followed with N44.611 billion losses to close at N6.622 trillion against the
N3.107 billion losses recorded yesterday to close at N6.667 trillion.

The number of gainers, at the close of trading session, dropped
to 23 from 33 gainers of yesterday .The numbers of losers on the other hand
closed at 58 compared with 59 of the previous trading day.

‘Sell pressures’

Analysing yesterday’s performance, equity research analysts at
Proshare Nigeria Limited, an investment advisory firm, in a statement, said the
decline recorded cut across all the sectors in the market.

“This was evident in the bearish outlook recorded in all the NSE
sectoral indices with the highest decline recorded in the Oil and Gas sector.
Massive sell pressures were also more pronounced in the Insurance and
Food/Beverages sectors,” they said.

The analysts added that notwithstanding the current downturn of
the market, “investors are enjoined to look out for the valued stocks whose
prices have declined as the present negative outlook in the market may not
last, most especially considering some of the positive developments in the
market.” All the four sectoral indices declined at the close of trading
session. The Exchange’s Food and Beverages index declined by 1.14 per cent to
close at 860.64; the Oil and Gas index dropped by2.61 per cent to close at 405.71;
the Banking index shed weight by 0.68 per cent; the Insurance also declined by
1.20 per cent to close at 197.73.

The banking sector was the most traded sector yesterday with
139.016 million units valued at N1.333 billion. Transactions in the shares of First
Bank Nigeria, Zenith Bank and Access Bank largely contributed to the volume
traded in the sector.

New listing

The management of the Exchange, on Thursday, listed Sun
International Limited’s 634,585,472 ordinary shares of 50k at N3.79 each on the
official list of the exchange. It also marked down the share price of Berger
Paints Plc for a dividend of 50k per share declared recently by the company’s
board of directors. The share price of Oando Plc was also marked down for 1 for
2 bonus declared.

Transportation costs in West Africa are among the highest in the
world only East Africa is higher, according to a study of one of the primary
trade corridors in West Africa.

The route connecting Tema Port in Ghana to Ouagadougou, Burkina
Faso was used for the study. The study, centred on the reason for the high cost
of transportation and what can be done to reduce it, the organisation concluded
that reducing transportation cost will result in the increase of export and job
creation.

For instance, a study of the cost of transportation along the
Tema- Ouagadougou corridor shows that it cost $4,800 (about N710, 400) to
transport a container and it takes 13 to 22 days to transport container across
the route while in comparison, it cost $650 (about N96, 200)to move a container
the same distance within the United States and it takes only five days.

Joe Lamport, Communications and Outreach Coordinator of West
Africa Trade Hub, a USAID funded project that promotes trade across West Africa
carried out the study alluded to a Food and Agricultural Organisation (FAO)
report that said that West Africans spend almost 80 per cent of their income on
food and much of it is spent on imported products: powdered and concentrated
milk, rice, tomato paste among others and so if trucking costs were half what
they are now for imports, consumer prices will likely be lower.

Reasons for high costs

While stating that the bottleneck and the cumbersome documentation
process in the ports are veritable reasons for this high cost of
transportation, the organisation also highlighted retrogressive regulation as
another factor responsible for the hike in the cost of transportation.

West African Trade Hub identified the “one-third two-third rule”
between Burkina Faso and Ghana as one of such regulatory hindrances.

“The rule stipulates that two-thirds of the cargo should be
carried by Burkinabe trucks while one-third can be transported by Ghanaian
trucks”, said Mr. Lamport.

Experts have warned that regulations like these kill
competitions and competition to clear goods at the port is a factor in the
reduction of cost.

The report also pointed at the stripping of containers as
another hiccup militating against the prompt clearance of goods at the ports.
The delay trucker experience on the way to delivering their consignment often
means that they sometimes might miss the ship meant to carry the goods and sure
delays automatically means added cost due to damaged goods and additional port
charges.

Cutting the cost

Lowering West Africa’s transport costs – among the highest in
the world – is critical to poverty alleviation and food security.

“High transport costs ultimately mean consumers pay more for
goods at market,” said Trade Hub Director Vanessa Adams. “High transport costs
make it hard for exporting companies to compete in world markets. When they
cannot compete, they do not create the jobs that West Africans need.” The
statement further suggested that implementation of the ECOWAS integrated
regional market, the elimination of truck queuing rules as well as the
elimination of excessive documentation for importing and exporting and the
streamlining of procedures to reduce delays will reduce the transportation cost
to the level that will spur economic activities leading to the reduction of
poverty.

South Africa’s economic outlook has improved, although growth
should stay below potential output for “some time”, posing little threat to
domestic inflation, its central bank said on Thursday.

Developments in the euro area – a major trading partner where
sovereign debt worries are growing, sparking global risk aversion – are a risk
to growth and may also hit the rand currency, the Reserve Bank (SARB) added in
its latest Monetary Policy Review.

Africa’s biggest economy pulled out of recession in the third
quarter of last year and the recovery appears to be gathering pace, with data
this week showing annual retail sales rose for the first time in more than a
year, signaling households are starting to spend again.

Consumer spending was the main driver of average 5 percent
annual growth in the five years before the credit crisis, but it has been the
slowest to rebound as banks cut lending and more than one million jobs were
lost, hurting households’ finances.

The central bank said in the review – released twice a year –
that domestic expenditure appeared to be recovering, while manufacturing output
continued to improve.

This, though, did not pose a threat to inflation, as firms
continue to produce below maximum capacity.

“Despite the more favourable growth outlook, the output gap is
expected to remain positive for some time,” it said. The bank has in the past
estimated potential growth at 4.5 percent.

The SARB forecast the economy would grow by 3.7 percent
quarter-on-quarter and annualised in the first three months of this year, and
by 3.2 percent in the second quarter.

It recently raised it prediction for expansion in 2010 to 2.7
percent from 2.6 percent – roughly in line with economists’ expectations.
Statistics South Africa is scheduled to publish first quarter growth data on
Tuesday.

Euro risks

The bank warned the recovery could be damaged by the debt
problems in the euro zone, with austerity measures dampening growth in some
economies and, ultimately, trade.

“The growth performance will also be affected by the performance
of the global economy and the risks posed by developments in the euro area,” it
said.

Another global crisis, and accompanying risk aversion, may hit
the rand, lessening the impact its relative strength has had on containing
inflation.

The central bank said its policy committee had considered the
rand a major contributor to the favourable outlook for inflation, but
recognised it was volatile and subject to external factors, such as risk
appetite.

“The reaction of the rand to the developments in the euro area
demonstrated that the positive impact of the rand on the inflation outlook was
contingent on developments in the euro area and general risk aversion,” the
central bank said in the review.

The rand had held onto last year’s nearly 30 percent gain
against the dollar, supported by strong gold and platinum prices and the lure
of high interest rates. It has weakened sharply this month as fears Greece’s
sovereign debt woes may spread to other European countries prompted investors
to cut back on riskier investments in emerging markets.

The rand fell to 8.0806 versus the dollar on Thursday, a
six-month low and a fall of almost 4 percent, compared with around 7.30 in
early May. At the height of the global financial turmoil in late 2008, it fell
to 11.88 to the dollar.

The SARB reiterated its favourable outlook for inflation, forecasting
targeted CPI to trough at 4.7 percent in the third quarter, and stay inside the
3 to 6 percent band until the end of 2012, when it is seen at 5.3 percent.

International Data
Corporation (IDC), a market research organisation, in information
technology and worldwide phone tracking has announced the top five
selling mobile phones in the first quarter of year.

The phones are,
Nokia, Samsung, LG, occupying the top three positions, while RIM
(Research in Motion) makers of Blackberry replaced Motorola to tie with
Sony Ericsson in the fourth position. Motorola and the Apple iphone did
not make the list.

Motorola formerly
held the number two spot and finished fifth last year, but is now out
of the list. The surprise breakthrough by RIM was considered as a
result of growing demand for Smartphone’s in the global market. The
Blackberry features as a high-end Smartphone device and RIM shipped
10.6 million units of mobile phones in the first quarter of the year.

“The entrance of
RIM into the top five underscores the sustained Smartphone growth trend
that is driving the global mobile phone market recovery. This is also
the first time a vendor has dropped out of the top 5 since the second
quarter of 2005, when Sony Ericsson grabbed the number 5 spot from BenQ
Siemens,” said Kevin Restivo, a senior research analyst with IDC’s
Worldwide Mobile Phone Tracker.

Interestingly the
much hyped iPhone from Apple Inc didn’t make the list, even though it
officially stands as the highest selling phone in the U.S with 8.8
million units sold in first quarter of 2010 as opposed to Motorola
which sold 8.5 million units (According to Forbes).

According to IDC
the overall global phone market grew 21.7 per cent in first quarter of
2010, thus showing positive signs in phone market for the rest of the
year in contrast to the market reduction in first quarter of 2009.
Demand for Smartphone’s served as catalyst to the market growth.

Their reports said a total of 294.9 million units of mobile phones
were shipped in first quarter of 2010 compared to 242.4 million units
in first quarter of 2009.

The naira weakened to 152.40 to the U.S dollar on Tuesday,
from 151.75 previously, in the interbank market after heady buying of
dollars by some banks, traders said.

“A couple of banks are buying
up dollars for reasons we don’t know and this has driven the rate
beyond market resistance level,” one dealer said.

“We are completely in the dark on the basis for the prevailing exchange rate at the interbank.”

Dealers said a lack of dollar
inflows from sources other than the central bank and the need by some
businesses to buy dollars to meet their immediate obligations also
helped weaken the naira.

The naira also depreciated at
the official window after the central bank failed to supply all $530
million demanded at its auction on Monday.

The regulator sold $450 million
at N148.85 to the dollar compared to $250 million it sold at
N148.81 per dollar at last Wednesday’s auction.

Traders said the bulk of demand at the auction came from local fuel importers.

“I don’t see the naira falling
further because the rate at the interbank is already 2.0 naira above
the official rate and there will be another auction on Wednesday,”
another dealer said.

Nigerian banks are not allowed
to trade the dollars they purchase at the central bank’s bi-weekly
auction among themselves. Lenders in sub-Saharan Africa’s
second-biggest economy can only trade dollars they purchase from oil
majors and other importers.

The one thing that
can be said about the meeting, last week, of the central bank’s rate
setting committee is that it was finally brave enough to apportion
responsibility for the management of the different departments of the
economy. Not too long ago, the apex bank had argued the strength of the
domestic economy in the face of rising contagion from the global
financial and economic crisis. And for good reasons too. For beginning
in 2003, the second term of the Olusegun Obasanjo administration
embarked on the path towards fiscal responsibility: due process; excess
crude accounting; the fiscal responsibility act; etc. Because of this,
the economy entered the current crisis by far stronger than it had ever
approached any other downturn in its recent history. But vulnerable it
remained. And when the hot money that had driven the rapid rise in
prices on the stock market began to flee in response to a drop in
investors’ risk appetite for emerging market instruments, it was
inevitable that the system that had provided most of the credit that
drove local purchases of equities was going to suffer.

Almost a year ago,
the central bank commenced its most aggressive intervention in the
banking sub-sector. Its efforts at repairing the financial sector
focused on removing inefficiencies in the market, and addressing
failures in the regulatory and supervisory framework. Banks,
thereafter, had to provide fully for their portfolio of non-performing
assets, the previously stratospheric growth in gross earnings and
profits reversed almost overnight, and the credit taps were turned off.
Now, some recollect this sequence of events a lot differently.
According to the new narrative, the CBN’s intervention precipitated the
credit crisis. The CBN either through its incompetence, or through the
pursuit of a pre-scripted agenda concealed behind the fancy rhetoric of
its new governor, had hurt the economy badly. At the heart of this
latter day narrative is a sense of the apex bank’s over-riding
responsibility for the fortunes of the domestic economy.

The last rate
committee meeting set itself squarely against this reading, by
reminding as many who cared to read its communiqué that the main
mandate of the CBN is to ensure price and financial stability within
the economy. It almost did not matter that members of the rate-setting
committee were chuffed at the relative success achieved in the pursuit
of this goal, as “reflected in relatively stable exchange rates,
interest rates, and moderating inflation”. More important is the fact
that this new reading necessarily casts a number of moot points in a
different light. Thus, rather than being designed to foul up the
economy, the central bank’s recent intervention in the banks was
designed to “improve the supply side (of the credit market) through the
various reform measures to strengthen the DMBs’ balance sheets, remove
toxic assets, and generally repair the financial system to promote the
flow of credit”.

If all this has
happened, it is only proper to ask why private sector credit growth is
dwindling. We all know that credit is material to a recovery in final
domestic demand. Moreover, with the market for long-term fixed-income
securities long exhausted, bank credit might just be as important as
captains of industry regularly make out. Now, the rate committee tells
us that “credit growth is a function of demand and supply factors”.
Apparently, the problem with the economy might be the result not of
CBN-induced impediments to the banks’ ability to create risk assets,
but the consequence of a collapse in demand for credit. What to do
about this then? If the central bank is to be trusted on this question,
recovery in the demand for credit “would necessarily require critical
reforms in the real sector, particularly power, energy, and key
infrastructure to reduce the cost of doing business and improve
investment climate to generate bankable projects”.

From this vantage,
the apex bank and its most important committee could not have put the
crisis facing the economy in better perspective. It clearly does not
matter how much liquidity domestic banks are currently sitting on.
Someone has to need the money in order to close the loop. But even if
you have credit in this economy, what do you do with it?

If your way of
dealing with debt problems is to ignore them or wish them away,
remember that inaction will only make things worse

Are you facing money problems? Some of the early warning signs are usually clear and may include the following:

• You are completely broke long before payday

• You are missing debt payments

• You are regularly borrowing from friends and relations just to make ends meet

• You are coming under pressure from lenders

• Your money worries are keeping you awake at night

So how did you get
to this point? Was it your lifestyle? Are you extravagant? Did you make
poor spending decisions? Were you trying to keep up socially? Perhaps
you are just not earning enough to fund your lifestyle and obligations.
There are so many reasons for money problems but the good news is that
it is possible to turn your financial life around. By recognizing and
acknowledging the fact that there is indeed a problem, you can start to
take the necessary steps to address it.

Your attitude to
your debt problems can hinder your financial recovery. If your way of
dealing with it is to wish it away, remember that inaction will only
make things worse. With interest, late payment penalty charges, and the
attendant fees and charges you will find that almost all your money
goes towards debt service. It is important to get your debt under
control and aim to clear or at least reduce it significantly.

Make a list of all your debts

To get a true
picture of what you owe, list all your debt – in no particular order at
this stage. You can list them according to size, due dates, interest
rates, by whom you owe – it doesn’t really matter. It is important to
know how much you owe if you are going to get out of it.

Be sure that you
are current with the minimum payments on all your debt. If you are not,
contact your creditors to discuss your payments. It may be possible to
restructure the debt in a way that enables you repay at amounts you can
afford. Staying away will only make things worse and your loans will be
called in with dire consequences.

Create a Budget

Track your expenses
for a month to determine exactly what comes in and what you are
spending it on. Determine how much you need to spend on food,
transport, clothing, school fees, entertainment, and set strict
spending limits. There is usually some waste lurking in the monthly
budget; be realistic and honest with yourself, as you must find a way
to cut back. If you can find just that little bit of extra money after
budgeting for your essential expenses, then you can use this towards
reducing your debt.

Make every effort
to stop the bleed. Try not to incur any additional debt. It is tempting
to continue to use your card to make more payments but even the
smallest payments add up and increase your debt. Naturally you may have
to live below your comfort level for a time and will certainly have to
do without some luxuries, but it will be well worth it in the end.

Prioritise your debt

Put your debt in
the order in which you want to pay it off. Ideally it should be
organised according to interest rate. It makes sense to pay off high
interest debt first as this will maximise your debt payments and reduce
the amount of overall interest that you pay. Ultimately, the higher the
rate, the more you’re paying beyond your actual principal. Some people
prefer to start by paying off their smallest debt first as this quickly
gives a sense of achievement and can provide a significant boost as you
systematically pay down your debt.

Bear in mind that
the most important debts aren’t necessarily the largest. These are the
ones where serious action can be taken against you if you don’t pay
what you owe, such as rent or mortgage repayments, secured loans and
utility bills. If you don’t sort these out, you could be disconnected
from utilities, have problems with your landlord or even face a
repossession of your home.

Make extra payments

As you start to
tackle your “priority” debt, you will need to determine how much extra
you can afford to pay every month over and above the minimum monthly
repayments. If your first debt has a minimum payment of N100,000 per
month, and you have freed up N20,000 in your budget for an extra
payment, your total payment is N120,000. Continue making minimum
payments on your other debts and then move on to the next debt on the
priority list. The idea is that every time you pay off some debt, you
are in effect “freeing” up some cash to tackle the next one.

Debt has become a
necessary part of life for some. When applied properly, it should
provide greater opportunities and enhance the quality of life. For
others who have borrowed excessively and for the wrong reasons, they
could face distressing consequences. With careful planning, and a more
disciplined and systematic approach to money management, you can take
control of your finances and deal with your debt.