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Building a nest egg
for your retirement is only one aspect of retirement planning; this may
well be the easy part. For many people, what is more difficult is
ensuring that those savings you have accumulated over the years,
actually last as long as you do. Indeed, perhaps one of the greatest
challenges to financial security is the transition from earning money
and accumulating assets to spending down those hard-earned assets over
what could end up being almost a third of your lifetime.

The risk of longevity

Over the last 50
years we have seen an extension of life expectancy all over the world;
this has huge implications for retirement planning. ‘Sixty is the new
forty’ and the generation approaching retirement age have to a large
extent redefined the traditional view of retirement; they are radically
reshaping societies views of how ‘older’ people are supposed to act.
From the traditional view of relaxation, leisure, and comfort, it is a
time for renewal, growth, new opportunities, self-fulfillment and
challenge. With medical advances, it is increasingly likely that
today’s healthy 60-year-olds may live well into their 80s or 90s.

Withdrawal risk

Withdrawal risk
keeps many retirees awake at night, as they must determine how much
they can realistically afford to draw down from personal savings and
investments without seriously depleting their capital. The rate at
which you withdraw money from your assets is one of the most important
factors affecting how long they will last.

Several studies
have been carried out using various portfolio compositions to see what
withdrawal rates would leave portfolios with positive values after say
20 years. Some of these scenarios assume 100 per cent cash, 100 per
cent bonds, 100 per cent stocks along with 25/75, 50/50 and 75/25
mixes. For years, financial advisers have presented the 4 per cent
rule, which is a rough guide for portfolio withdrawals in retirement.
The basic premise is that you withdraw a conservative 4 per cent to 5
per cent of your portfolio in the first year of retirement and then
every year afterwards you withdraw the amount you took out the previous
year with an inflation adjustment.

With the help of
simulations of thousands of possible investment and inflation
scenarios, observing decades of stock market returns, William Bengen, a
financial advisor and one of its leading proponents, concluded that a
retiree with a relatively balanced portfolio should draw down a
portfolio by 4 per cent or less per year. He felt that retirees who did
this had a better chance of making their retirement money last a
lifetime whilst those taking more than 5 per cent, increased the
chances of depleting their portfolios during their lifetime.

What’s a safe withdrawal amount?

It is virtually
impossible to give precise guidance as to how much you can afford to
spend from your savings in any given year; no simple solution exists
and investors’ withdrawal rates will vary from person to person and
according to the vagaries of the markets.

Many investors end
up withdrawing well over 10 per cent of their portfolio each year to
support the lifestyle they have become accustomed to. This can rapidly
deplete that portfolio. Others are very pessimistic and scared of the
prospect of being dependent on family in their later years and after
building a portfolio of Certificates of Deposit, Bonds and dividend
yielding stocks only withdraw interest and dividends and are too scared
ever to touch principal or liquidate stocks.

Clearly there is
some compelling research to support the “4 per cent rule” but in
reality there are many considerations to be taken into account
including, your age and health, the overall size and composition of
your retirement portfolio, your objectives, your spending pattern and
lifestyle, and the fluctuation of your investment returns, the impact
of inflation on your assets and cost of living. With the reality of the
extended bear markets, minimal annual stock market gains and sustained
high inflation, retirees must be cautious particularly where portfolios
are not well diversified and investments underperform for long periods
and interest rates remain low.

Seek professional help

Developing a plan
for this spending phase can be difficult, as obviously no one knows how
long he or she might live. It is worth seeking financial advice. A
professional will help you to plan with the timing that makes sense
given your overall goals and your own unique situation.

In the past the
conventional wisdom was to have begun to divest from stocks as one
approached retirement, and then migrate to bonds and cash as safer
guaranteed investments, stocks being volatile in the short term.
Nowadays you might be encouraged to continue to retain stocks and stock
mutual funds in your portfolio so that there is still the prospect of
long -term growth.

An investment
strategy that is too conservative can be just as dangerous as one that
is too aggressive, as it not only exposes your portfolio to the effects
of inflation but also limits the long-term upside potential that stock
market investments offer. On the other hand, being too aggressive can
mean assuming too much risk in volatile markets.

The artificial deadline that retirement appears to present is
becoming less practical and should not be what rigidly drives planning
decisions. What is thus required, is a strategy that seeks to keep the
growth potential for your investments without assuming too much risk.
After an ‘official’ retirement age of 60, there is a real possibility
that you may need 30 more years of retirement income and the ideal
should be to find a balance between growth and preservation.

Barth Nnaji,
professor of Robotics engineering and special adviser to the president
on power, in this interview, outlines prospects for the electricity
sector and how he can only promise stable improvement in Nigeria’s
power sector.

Power agenda

A lot is different
this time around. First, this government has produced a holistic plan
on how to drive the reform process to completion. That reform plan
comes from an Act made in 2005 called the Electricity Power Sector
Reform Act of 2005. So government now has a plan for electricity and
the plan includes everything from generation of the power, transmission
of power, to distribution of power, to the regulatory issues
surrounding all these. That is different. Now, as part of the
implementation of the Act, generation and distribution will be private
sector driven from next year. That’s also a major shift because that is
now bringing the will of government to bear on the Act in moving it
forward. So you are going to see actual private sector participation
not just by talking about it, not just by going to various countries of
the world and saying come to our country to invest but actually getting
the private sector to become investors and drivers of the power sector.

Power generation

Currently,
Nigeria’s installed capacity is over 5,000 megawatts while actual
generation is in the neighbourhood of 3,500 but sometimes we get up to
3,800 megawatts. That is available generation. You have installed
capacity, you have available generation capacity, and you have actual
generation capacity. The installed capacity is the amount of power that
the plant is supposed to generate but is not able to generate because
it has one turbine damaged or some equipment damaged. That lowers it.
But what is available for generation is what the plant can actually
generate if everything is okay, in terms of say gas supply. The actual
generation is when for instance you have enough gas to generate and you
can evacuate what you generate as installed generation. Sometimes you
have available generation but you are not able to evacuate it, maybe
due to problems with the transmission network. Sometimes the power
plant can actually generate this but it doesn’t have enough gas. That
is the sort of problems we encounter. So what you end up having is the
actual generation. What we would like to have as government is for the
actual generation to match installed generation. When you have prepared
your plant, you have the gas and you can evacuate what you produce.
Then the actual will match the installed.

Specifics

The country needs
close to $5 billion per year on the average over the next 10 years to
reach where it wants to go for Vision 2020. You are right, we require
foreign investment in this sector but foreign investors are sceptical
as they have all the world to invest in. They look at Nigeria, they
look at Brazil, they look at India, they look at Japan, they look at
China and there are so many other countries. But Nigeria is now saying
we are going to make the various indices for investment such that they
attract what an investor would be looking for internationally. It’s a
different ball game. Part of it is that the tariff for gas should line
up with the tariff for generation of electricity. When you have a whole
value chain incentivised to perform, then investors will be listening.
When you say the regulatory commission is legally constituted and given
authority to perform then something different has happened. When you
say that you are privatising generation and distribution so that
distribution will become credit worthy, then people will begin to
listen to you.

Central Bank Intervention fund

The intervention
fund is a very good one. It is a way of showing that government is
serious and saying I put my money where my mouth is. But of course,
that is a stimulant because we require many times more than what the
CBN is putting down. That amount would not address problems of the
power sector. Don’t forget the amount is for both power and aviation
and it amounts to just about $2 billion. It is good but it is not
enough and it shows the will of government. But there is a lot more the
government is doing in terms of policy approach. All what the
government announced has shown the will of government to tackle the
problem. An example of what government should be doing in the future is
research, to seek ways of improving the sector so that we can help the
private sector to improve this sector because it benefits this country.
Government needs to lead the way in developing renewable energy to
build power plants, nuclear energy, solar, wind and others.

Challenges

The good thing is
that everybody in Nigeria knows that the country does not generate
enough electricity so it does not need a lot of convincing to let
people know that something needs to be done. But what is difficult is
getting them to understand specifically what needs to be done. In that
regard, we have sometimes encountered problems but that is normal. It
is our responsibility to explain clearly and transparently how the
policies would be implemented to achieve the goal and the need for them
to go along with us.

The PHCN workers
have two unions, senior staff union and junior staff union. The senior
staff union is manned by actual workers of PHCN and the junior staff
unions are manned by professional unionists. All in all, the intention
is to listen to what the union officials are saying in order to satisfy
the workers. Government is listening to them. The payment of arrears of
monetised benefits is an indication that government is listening
because for seven years these arrears had remain arrears. But this
present government has found the will and found the money to pay them.

What is
disappointing is that at the point of doing this, the PHCN officials
ordered their workers to go on strike and that was on the day before
the president was to announce the road map.

Interest groups

We don’t need to
overemphasise it but these various interest groups incite the union.
Unfortunately, it is not the workers that have this problem. The
workers have been extremely wonderful. All the workers want to earn a
better living and for their interest to be protected. But there are
various interests at work. These interests are yet to get to the
realisation that they can do better by rechanneling their interests
into more productive endeavors in the power sector. The power sector is
opening up. We have so many business opportunities. You don’t have to
be selling generators. You could be selling transformers, capacitors,
switch gears. You could even be manufacturing these things here. There
are many companies now manufacturing transformers in Nigeria. That is
the sort of things we expect. Re-channel your business rather than
cause obstructions. If you are a diesel importer, you could get into
gas production and transportation. These are things that are opening up
now. So there is really no need to hold the country to ransom, or try
to keep us in darkness because of personal interests. There is no
reason for that.

Stable power supply

I will not give you
date but you will begin to see improvement. Going to next year, end of
next year, 2012, we will continue to see improvement. It is better to
see improvement than promise and get disappointed. People have to see
that there is competent management of the power sector and competent
management will translate to better and efficient power with time.

Other sources of power

The government is
doing feasibility studies for eight plants, be it hydro or coal or gas.
Government is doing feasibility study for Mambilla Hydro, for Zungeru
and for Gurara. These are three key power plants that government is
undertaking. In the case of Mambilla, it will be initiated by the
beginning of next year and by the time it is completed in six years
time; it will generate about 2,600 megawatts. The project will consist
of a dam, power plant, high voltage transmission line to substations.
Then you also have the Zungeru power plant which is a 700 megawatt
power plant and Gurara which is 300 megawatts power plant. Then we have
coal-fired power plant which we are beginning to initiate which we hope
will come on in the next five to six years. Then there are plans but
they have to be initiated by the private sector.

Background

It’s because I have
worn the shoes and I know where it pinches. I know what it takes to
conceive, design, construct and operate a power plant. I know about
distribution networks and I know the challenges that the private sector
will encounter when doing this. One of the key challenges, especially
for the private sector is getting money. You can buy anything but
getting the money requires having bankable project and bankable project
means that that thing has to have been worked out to a level that a
lender will give you money or an equity investor will give you money
and it is very challenging. When government is doing it, all it does is
go to the treasury and allocate the money and build. When private
sector person is doing it, he has little money. Every real investor in
power will not use his money but will source for money. For instance,
to build a hundred megawatts power plant costs at least $100 million,
that is about N15 billion. What they do is to put down some equity and
go borrow the rest. And for somebody to get a lender to give you money
many of the things we are doing now have to be in place.

Affordability

That is the whole
idea. Reliable quality electricity that is affordable, to have enough
reliable and affordable supply so that the small entrepreneur, the
urban poor and rural dwellers will be able to have power at the flick
of the switch.

The Federal
Government is responsible for the problems of the pension fund account
of the Nigeria Telecommunications Limited (NITEL) and its mobile
subsidiary, Mobile Telecommunication Limited (MTEL), a senior staff of
the Bureau of Public Enterprises (BPE), disclosed this last Thursday.

The source added
that in 2001, following the first privatisation process, the federal
government ordered that non-core assets of NITEL be transferred to the
pension fund account of the company. Further, in 2009, the federal
government decided to offset outstanding salary arrears of the
NITEL/MTEL workers and mandated an accounting firm, Olusola Adekanola
& Co, the court- appointed NITEL liquidator, to borrow N3 billion
from the accounts of NITEL/MTEL Staff Pension Fund in liquidation and
use it to pay the arrears with the aim of repaying from money realised
from the sale of the national carrier.

The money was meant
to pay five months from the 27 months salary owed the workers. December
last year, the Bureau of Public Enterprises (BPE) said that the money
would be paid to the workers in three tranches with the first tranche
due that month.

This was done, said
the source, but the remaining two tranches are still outstanding till
date. The agreement reached between the parties appeared to have gone
sour leading to the liquidator formally pulling out in February this
year.

In an advertorial
placed in a newspaper last February, Olusola Adekanola, the liquidator
said, “the monies left in the liquidation account are from the sale of
assets whose ownership was being contested by Transcorp, which has so
far refused to hand over the title documents, even though these assets
clearly belong to the NITEL/MTEL Staff Pension Fund (in Liquidation).

“I am not at
liberty to distribute the proceeds of assets whose sale has not been
concluded, as doing so will jeopardise the position of the buyers of
the assets and subject the liquidation process to serious litigations
from these new owners. It is unfortunate that this liquidation process
and welfare of NITEL/MTEL staff have been caught in the crossfire
associated with the privatisation of NITEL and the entire Transcorp
issue.

“I am privileged to
know that the federal government has fully settled all exposures of
Transcorp to a local bank (to the tune of about N45 billion) and I
cannot understand why these 27 months’ salary arrears of NITEL workers
defaulted by Transcorp were not off-set and reconciled before the
bailout,” said Mr. Adekanola.

Government is holding the papers

However, another
source from the BPE explained that the initial plan of the federal
government was to payoff Transcorp from money that would be realised
from the sale of NITEL and after all debts including workers’ salaries
have been settled.

“You know that the
government was to refund over N63 billion back to Transcorp. I learnt
that the federal government decided to raise a bond to pay back the
banks Transcorp said to have taken loan from to pay for NITEL. However,
I am not sure if that was what the government finally did”.

The source
confirmed the liquidators’ claim that some title papers were still with
the federal government was true and that investigation into the
liquidation of NITEL non-core assets were on.

“The federal
government set up a committee from the technical board to do a review
of the relevant Certificates of Occupancy and reconciliation to
establish those that are missing. Investigation is still going on with
Transcorp management and some of the C of O is with security agencies,”
said the source.

Since 2009,
NITEL/MTEL workers have written letters and carried out protests over
the non-payment of their 27 months arrears. But the question remains
over the fund’s balance and accrued interest, if any. Last week, nobody
was willing to speak at the liquidators office in Opebi, Ikeja, Lagos,
on what has happened to the balance of the N3 billion and how much has
been paid out so far.

“The liquidator is
not in the country to respond to your question. I will inform you when
he is available, so that you can revisit in order for him to grant you
the interview,” said B.O. Ajadi, director of Operation of the firm.

Similarly, Chukwuma
Nwokoh, BPE spokesperson said he does not know the total amount that
was spent by the liquidator to pay the NITEL workers.

“I don’t know about
the total amount that was used by the NITEL liquidator to pay the NITEL
workers their one month salary. So, I don’t know the balance from what
was left from the N3 billion because he did not take the entire N3
billion from the pension fund account, he only paid one month,” said
Mr. Nwokoh.

“What we are
concerned about now is for the presidency to take its decision on how
to settle the workers their arrears,” he added.

Over the last nine
years, controversy has dogged repeated attempts by the government to
get a buyer for the beleaguered telephone company. A report last week
said that the Taskforce on NITEL/MTEL labour restructuring, chaired by
the Minister of Labour and Productivity, Emeka Wogu explained that the
cost of settling outstanding salaries and disengagement entitlements
for NITEL staff is N24.71 billion, while that of MTEL is N4.76 billion
totalling N29.47billion.

In a telephone
interview, Emmanuel Abu, the chairman of Senior Staff Association of
Communications, Transport and Corporations (SSACTAC), NITEL, Abuja,
questioned the rationale for government’s action.

“We wrote to the
presidency on why they had to pay Transcorp N45 billion when the
workers have not been paid and advised that workers arrears for the
period Transcorp was in charge should be deducted from the sum before
paying Transcorp. Whatever the government is doing with the process of
NITEL is not sincere, they should just pay off the workers, so that
Nigerians would know that NITEL no longer exists,” added Mr. Abu.

In February 2010, BPE reported that it had concluded the sale of
NITEL with New Generations Telecommunications Consortium emerging as
the preferred bidder with $2.5 billion for 75 per cent equity of NITEL.
The bid’s fate is unknown as government has been foot-dragging on
handing NITEL over to the firm.

In 2004, as part of
a reform programme embarked upon by President Obasanjo, which included
the liquidation of much of the country’s external debt, a special
account – the Excess Crude Account (ECA) – was created outside
constitutional provisions, for the purpose of saving all oil revenues
in excess of a benchmark price set in the annual budget.

When President
Obasanjo left office in 2007, the account held $20 billion. The funds
stayed intact until the end of 2008. In 2009 alone, $12 billion was
withdrawn. As at August this year, the account held only $460 million.

The bulk of the
withdrawals have been shared amongst the three tiers of government, to
make up for shortfalls in the national budget. The 2010 budget, worth
4.6 trillion naira, a 50 per cent increase on the 2009 figure, is one
whose scale has alarmed analysts.

“Earlier reforms in
Nigeria had helped to establish the country’s reputation for a
substantial saving of its oil windfall, boosting its external
creditworthiness. The 2010 budget, with the magnitude of increased
spending that is envisaged, will go some way towards undoing that
reputation,” Razia Khan, Standard Chartered Bank’s Regional Head of
Research for Africa said in a March 2010 report.

The government’s
defence is that expansionary spending is needed in the light of the
global recession. “The 2010 budget is based on government’s
determination to stimulate the economy out of the recent global
economic crisis through targeted fiscal interventions,” Iyiola Omisore,
Chairman of the Senate Committee on Appropriations announced last
February.

The Excess Crude
Account, into which the windfall that Ms. Khan alludes to went, is now
at the centre of heated debate about the management of the country’s
wealth, the bulk of which is derived from oil and gas revenues.

“The excess crude
revenue has been used over the years for different reasons that hardly
served the nation’s interest,” Minister of Finance Olusegun Aganga
admitted in July, while canvassing for the establishment of a Sovereign
Wealth Fund in line with global best practices.

In May, when it
became obvious that the government had to depend on the Excess Crude
Account to fund the monthly allocations to the states and local
governments, the Minister of State for Finance, Remi Babalola,
described Nigeria’s expenditure plans for 2010 as “unsustainable.”

“We may thus be
constrained to consider amending the revenue profile of the 2010 budget
or re-negotiate with all relevant stakeholders the monthly
distributable amount pending improvements in the budgeted revenue
profile,” Mr Babalola said.

Since then the
government has asked ministries and agencies to cut their 2010 budgets
by almost fifty percent. But even that has not made a significant dent
on the projected expenditures. “In spite of the recent budget cuts,
capital expenditure for this year still comes in at about N1.5
trillion, which is more than double what was spent last year,” Mr.
Aganga told NEXT on Wednesday.

The size of the budget means that Nigeria is projected to record a budget deficit of more than 5 percent of GDP for 2010.

Quantity versus quality

Bismarck Rewane,
analyst and CEO of Financial Derivatives, a Lagos-based economic
research consultancy, says that a deficit is not the problem. “The
strategy to get out of a recession is to have a deficit budget,” Mr.
Rewane said, adding that the global recession means that most countries
have to resort to deficit budgets until the economic climate improves.

He added that the
real issue is not so much the “quantity of spending” as the “quality”,
and that the question that should be asked is “What have we achieved
with our spending?”

Echoing this view
is Olufemi Awoyemi, financial analyst and Managing Director of
Proshare, an investment advisory consultancy. For Mr. Awoyemi, the
crucial question is: “How much is going [towards] infrastructure?”

Those arguments are
in line with statements made by Mr. Aganga during his screening by the
Senate. “I know there has been an increase of about 50 per cent in the
budget and we are running a budget deficit of between 5-6 percent of
GDP,” he told the Senate. “That in itself is not necessarily a bad
thing. What is more significant is that money is allocated to projects
that will deliver strong social and economic returns which means that
the emphasis is going to be now on implementation, making sure that the
quality and efficiencies of spending are looked at strictly.”

Nigeria is not broke

Analysts say that
national insolvency – as in the case of Greece – is closely tied to
debt levels and the ability to meet interest payments and that
Nigeria’s current debt levels do not warrant the level of alarm about
its financial situation, especially bearing in mind foreign reserves of
$36 billion ($5 billion less than a year ago).

Mr. Rewane insists
that the issue of the management of Nigeria’s finances should not be
sensationalised, and that there is no evidence that the country is
broke. “I think we should be cautious about jumping to conclusions,” he
said.

“Nigeria is not
broke in the sense in which it is being described,” says Mr Awoyemi. “I
have never heard the Minister of Finance say that Nigeria is broke.” He
says the country actually deserves credit for “[doing] better than most
in dealing with the global recession.”

He however
highlights two major problems in the way the Nigerian economy is
currently being managed: a challenge “in terms of (spending)
prioritisation” and the fact that the country “does not have a budget
plan that goes beyond twelve months.”

Commenting on the
implications of the depletion of the Excess Crude Account, Obadiah
Mailafia, a former Deputy Governor of the Central Bank, said: “If there
were to be any sudden external shock in terms of petroleum prices, on
which we depend for much of our earnings, it means we’d have no
cushion.” He added that the depletion of the Excess Crude Account may
negatively affect the country’s credit rating.

A lengthy shopping list

The latest of the
disbursements from the Excess Crude Account was $2 billion withdrawn in
July and shared to the three tiers of government. Before this was the
$4.8 billion withdrawal for the same purpose in March, while President
Jonathan was still Acting President.

Of the almost $20
billion in withdrawals since 2007, only a quarter has gone on specific
infrastructure projects: $5.34 billion withdrawn in 2009 to fund the
construction of new power plants as well as a transmission and
distribution system. The rest has been shared by the Federal, State and
Local governments.

“A significant part
of our budget is going into wasteful expenditure,” Awoyemi says.
Prominent on the government’s expenditure list for 2010 are 50th
anniversary celebrations, the purchase of three new jets for the
presidential fleet, and the conduct of the 2011 elections. Close to $1
billion dollars will be spent on these projects alone. A salary
increase for civil servants and the military and police will cost the
government 267 billion naira this year. Federal legislators are also
seeking doubling of their quarterly allowances. In July the Senate
passed a supplementary budget worth $4.3 billion, from which the wage
increase will be funded.

To meet the persistent shortfalls in distributable oil revenues the
government has, apart from the Excess Crude Account, also turned to the
international markets for borrowings. More than $5 billion dollars of
foreign debt will be taken on this year, more than doubling the current
debt level, apart from a $500 million international bond that will be
launched before the end of the year.

The latest Corolla
from Toyota does more than generally getting the job done. It is
meticulously built to provide users the extra mile. The new king of
smooth ride for 2010 comes packed with newer technologies and design,
capable of leaving riders breathless.

Ever since the
Corolla’s debut in 1966, it has showcased consistency in high standard
and this is what the 2010 Toyota Corolla offers.

Design

The new car is
showcased in five trim levels of the base, LE, S XLE and XRS Model. The
XRS is the highest model range among all types and comes with a larger
engine compared to other models. It also steps with 17-inch alloy
wheels for good balance and speed and is mainly distinguished from
other models with its steering cruise control, rear deck spoilers, and
chrome trims.

The XLE model
stands a step before the XRS model. It comes with 16 inch wheels. Other
minor abilities it packs are variable intermittent wipers, keyless
entry, centre armrest. The Base Corolla model comes standard with
15-inch wheels.

Other enjoyable
qualities riders get to derive from the car are solid sound system with
satellite radio and Bluetooth connectivity, power windows, telescopic
steering wheels, and Navigation system for location finding. Its
control layout is intuitive.

Inside the latest
Corolla is plenty of space to conveniently seat five adults with driver
inclusive. It is built with a double glove box which increases its
storage capacity in front.

Engine Power

Apart from the XRS
Model whose engine built comes with a 2.4 litre four cylinder packs and
an output of 158 horsepower of 162 Ib-ft of torque. Other models are
built with a 1.8 litre four cylinder engine rated with output of 132
horsepower and 128 pound feet of torque.

The engine is fully
integrated with a standard five-speed manual transmission and an
optional four speed automatic. The XRS model muscles up with both five
speed manual and automatic transmission.

The 1.8 litre
engine of the Corolla covers 0-60 mph in 10 seconds, while XRS model
with 2.4 litre engine covers 0-60 mph in 9.1 seconds.

Safety

The 2010 Corolla is
built with standard safety features like antilock brakes, stability
control, front-seat side airbags, full-length side curtain airbags and
active front head restraints. The XRS model features four-wheel disc
brake while other Corollas have rear drums.

Price

Prices vary
according to models. The Corolla standard goes for $15,450 (about N2.3
million)The LE goes for $16,850 (about N2.5 million) XLE goes $17,750
(about N2.66 million) while the S model and XRS model goes for $16,520
(about N2.48 million) and $18,960 (about N2.8 million).

Nigeria’s
microfinance sector has failed to make the expected impact on the
economy due to misconception by the operators, but this will soon
change.

Lamido Sanusi, the
Central Bank governor, said the bank will come up with a reviewed
policy framework in order to make it more effective.

Akintunde Sowunmi,
deputy director, development finance, who represented Mr. Sanusi at a
conference organised by Credit Awareness yesterday in Lagos said less
than three percent of the rural population of Nigeria have access to
microfinance services.

Mr. Sowunmi said
one of the challenges is to create awareness about credit acquisition
in order to make more people interested in accessing it.

“Despite the
importance and benefits of credit, there are socio-economic barriers
inhibiting access to financial services such as education, gender, age,
irregular income, poor infrastructure, and even geographical location,”
he said.

He said after five
years of operating the current microfinance policy, there was an urgent
need to make it more effective. Some of the concerns that would be
addressed in the revised framework are the location as well as the high
profile exhibited by operators.

“They are
urban-biased and many of them are not in the rural areas, which they
are supposed to serve. It will actually take a while for a paradigm
shift. That is why the CBN has taken the initiative five years after to
do a total review of the policy, to see the challenges and the reality
on the ground,” he stated.

Credit must be generated locally

Ismail Ridwan, a
senior economist with the World Bank, said the amount of credit needed
to take Nigeria into the top 20 economies by the year 2020 would have
to be generated internally.

Mr. Ridwan hinged
the amount on five pillars: improvement in banking supervision,
improved credit information, and conventional banks diversifying by
introducing new products, credit guarantee schemes, and business
development services to scale up business training for entrepreneurs.

He said the World
Bank was convinced that the intervention by the Central Bank in the
banking sector last year was necessary in order to save an already bad
situation.

“We went to the
Central Bank two years ago and we had done a diagnostics of the banking
industry, which revealed lots of issues with banks’ portfolio. We are
glad that the Central Bank has gone ahead to remove some of the bank
chiefs,” Mr. Ridwan said.

He explained that it is worrisome that less than one percent of small companies in Nigeria have access to credit.

“Small companies
have the biggest obstacle in terms of access and cost. Nigeria is
behind Ghana in terms of access to credit,” he said.

Rilwan Akiolu, Oba
of Lagos, said the level of poverty in the country is unacceptably
high, blaming it on bad leadership and bad management.

“Only ungodly people will condemn CBN reforms,” he said.

Alabi McFoy, Lagos
State Microfinance Initiative (LASMI) chairman, said the state was in
support of creating awareness about availability of credit so that more
poor people can have access to it.

“So far, Lagos
State has disbursed over N1.3 billion through microfinance banks in
Nigeria and will inject more so that more people can benefit,” he said.

Africa offers among
the world’s best investment prospects as emerging markets grow ever
more important, although its economies risk being destabilised by the
slew of capital they stand to attract in coming years.

Energy-producing
continental giant Nigeria was identified as a top pick by some of the
most influential figures in emerging markets finance who spoke to the
Reuters Emerging Markets Summit in Sao Paulo last week.

Africa withstood
the financial crisis better than many predicted, and the region’s
economic growth is forecast at 4.75 percent in 2010. Next year, half of
the world’s 10 fastest growing economies are expected to be in Africa,
and it is now attracting more than just the most intrepid investors.

“The latent
interest in Africa is enormous,” said Stephen Jennings, chief executive
of Russian investment bank Renaissance Capital, speaking to the Reuters
meeting by video link from Moscow.

“Before the crisis
there were probably 40 people or groups establishing Africa funds. In
3-4 years you’ll have 100 Africa funds and the biggest one won’t be $2
billion, it’ll be $20 billion.”

Fund tracker EPFR
reports 43 consecutive weeks of net inflows to Africa equities funds,
reaching $484 million in the first half of 2010 – nearly double those
to India over the same period.

Africa’s advocates
say the inflows stand to accelerate rapidly as a dearth of attractive
returns in the developed world pulls investors in while a more stable
political and economic environment indicates diminishing risks.

BRIC links

A shift of global
economic power to emerging giants such as Brazil, Russia, India and
China – known collectively as the BRICs – benefits Africa as surging
economies seek its resources and push up commodity prices and
investment.

Brazil, Russia and
India still trail China, which last year became Africa’s biggest trade
partner, but they have been rapidly expanding trade and putting more
money into Africa.

“What’s absolutely
striking is how much change there’s been between the BRIC countries and
Africa,” said Jacko Maree, chief executive of South Africa’s Standard
Bank, which is Africa’s biggest.

“We like to think
that the whole story has only just begun.” Brazilian firms with a large
African presence may soon issue bonds in South African rand to seize on
growing interest, said Standard Bank’s chief executive in the Americas,
Eduardo Centola.

Nigeria top pick

Nigeria’s market of
about 140 million people – nearly three times bigger than South
Africa’s – as well as its energy resources and bigger, more liquid
markets, makes it the top choice for many eyeing Africa.

On the Goldman
Sachs’ growth-environment index, which measures a mixture of economic
and social development indicators, Nigeria’s score has nearly doubled
over the past decade.

“If it were to show
the same increase in its growth-environment score over the next decade,
many investors will look back and say why the hell didn’t I invest in
Nigeria,” said Goldman Sachs’ global head of economic research Jim
O’Neill, who coined the term BRICs.

Ethiopia and Rwanda
are among the smaller African economies seen as promising. They show
how previously ignored countries scarred by war are emerging as
possible investment magnets alongside those such as Ghana, a relatively
stable democracy which is soon to become an oil producer.

There are risks, though, with concerns over political stability even in bigger economies such as Nigeria and Kenya.

Africa experts
underline the fact that new mineral riches have rarely been shared
widely, and suggest reliance on such income for national coffers could
discourage establishing tax bases that would put states on a sounder
footing.

“Where I think the
real caution has to come in is the quality of the growth,” said Patrick
Smith of the Africa Confidential newsletter. “It would be pretty silly
to say success is certain.”

A big influx of
investment funds could in itself pose a problem for African countries
less prepared to cope than those in other rapidly growing regions that
have felt the pain of such flows in the past.

“Africa has no
experience of huge capital inflows,” said Renaissance’s Jennings.
“Under the scenario I’m painting, the capital inflows will be way above
and beyond the ability of those countries to absorb them.” Most African
countries have small, illiquid markets and little financial
infrastructure, raising the chances of economic distortions and asset
bubbles that could lead to currency crises and long-term damage.

“People look at how
certain African economies have been getting their act together and
there is a risk you will get significant capital inflows,” said Mohamed
El-Erian, chief executive of PIMCO, the world’s largest bond investor.

“That will provide quite a challenge to policy makers.”

We Chuanzhoug, Chinese minister of quality supervision, inspection and quarantine, on Monday said that Nigerian and Chinese businessmen have been colluding to import substandard products from China.

Mr. We said this when he visited Josephine Tapgun, minister of state for commerce and industry, at her office in Abuja. He said the Chinese government is already inspecting some markets in Nigeria to ascertain the level of substandard products imported from China. He said a high-level discussion is already on between the two governments to fine-tune ways of curbing the menace.

“The impact of the influx of substandard products from China to Nigeria has become a disturbing practice to the Chinese government,” he said.

Obstacles

“There are grey areas which both countries have to address before signing the agreement,” said Mr. We. He urged the ministry to set up a technical working group to look into the terms of the agreement and harmonize them for endorsement.

Ms. Tapgun said the ministry is working towards improving the trade relationship between the two countries.

She noted that a few months ago, President Goodluck Jonathan approved the signing of a Memorandum of Understanding (MoU) with the Chinese government in relation to product quality assurance.

She commended the visiting Chinese delegates for their efforts in ascertaining the level and impact of the menace themselves, “We urge that you step up the supervision and monitoring of the market, and by the time that is done, the result will yield a better insight into the origin of the problems and how quickly they can be addressed,” she said.

The Chinese have already signed a similar agreement with countries such as Ethiopia and Egypt, with impressive results said Mr. We.

The federal government on Monday announced plans to create a certification system for unskilled labour in Nigeria. Musa Abdullahi, chairman of the National Board for Technical Education (NBTE), made the announcement at a meeting on the National Vocational Qualification Framework. Mr. Abdullahi said the traditional system of qualification does not appropriately address the informal sector, though most jobs and vocational trainings were located there.

“National recognition is not given to the skills and competencies acquired in this important sector,” he said. “The system does not allow individuals who might not have any certificates, but have gained useful relevant experience or competence, to secure formal qualification for additional improvement.”

Lifelong learning

Mr. Abdullahi said the framework will improve vocational education and training while providing incentives to individuals to continue learning through life.

“This implies that mechanics, vulcanizers, carpenters, caterers, tailors, will be tested based on their competencies and issued certificates by the federal government which they can use even outside Nigeria to get jobs, when the relevant legislative procedures are in place.” He added that Nigeria needed skilled craftsmen, technicians and technologists in large numbers, if the country was to be one of the top 20 economies of the world by 2020.

Ade Aimola, acting executive secretary of NBTE, said that, “the education system is facing a lot of challenges, chief among which are quantity, quality and relevance of training and training opportunities in both formal and non-formal sector.” It is against this backdrop that the National Board for Technical Education is seeking to introduce and develop the national vocational qualification framework,” Mr. Aimola said.

Need for the system

The framework has to do with the development, classification and recognition of skills, knowledge and competencies acquired by individuals irrespective of where and how the training or skill was acquired.

“The system gives a clear statement of what the learner must know to be able or be able to do whether the learning took place in a classroom, on-the-job, or less formally. The framework indicates comparability of different qualifications and how one can progress from one level to another.” Mohammed Aminu, a director at Industrial Training Fund, said there was a need to certify artisans in the country, because this lack of certification has deprived them of certain privileges. “This framework meeting is timely. It is going to help not only the Fund but other organizations and help for the development of the country,” Mr. Aminu said.

An official of the
Alliance for Green Revolution (AGRA) has called on governments in
Africa to put in more efforts toward sustaining agriculture.

Akin Adeshina, vice
president, policy and partnership, AGRA, in Accra, on Wednesday, said
that there were many investment opportunities in agriculture, but these
could only be harnessed if comprehensive changes in its development
were made.

Mr. Adeshina said
every operator must realise that African agriculture could not be
sustained without “introducing technology, providing solutions to the
agricultural modernisation challenges, and seizing all emerging
opportunities.”

AGRA was
established in 2006 to achieve a smallholder-based African Green
Revolution, transform African agriculture into a highly productive and
sustainable system, and ensure food security in Africa.