Nigeria Content Online

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.

‘Climate change is
an issue which raises fundamental questions about the relationship
between companies and society as a whole, and between one generation
and the next.’

Can you guess who
said that? A campaigner for Friends of the Earth? Wrong. That was Lord
John Brown speaking in 2001. At the time, he was the group chief
executive officer of BP, the world’s third largest energy company.
Under his watch, BP was the first oil major to admit a direct link
between global warming and greenhouse gases, which is still a taboo
subject among the Seven Sisters.

A year earlier, the
company had rolled out the most audacious campaign ever conceived by an
energy company. Developed by Ogilvy & Mather Worldwide, the global
advertising and PR agency, the $200 million paradigm bending campaign
would either change the mindset or set it up for a fall.

With two words,
‘beyond petroleum,’ BP effectively told the world, “We are a different
type of energy company and we care about the environment. Really.”

‘Good’ company

According to the
company, “Beyond petroleum’ sums up our brand in the most succinct and
focused way possible. It’s both what we stand for and a practical
description of what we do.’ What the campaign had done was to define BP
as a ‘good’ energy company in a very value-loaded type of way. The
others were ‘bad’ energy companies. In the public mind, that quality of
goodness covered more than BP’s investment in alternative energy
sources.

It extended to its
Safety & Health standards as well as progress with less
environmentally costly Exploration & Production techniques. For
better, for worse, henceforth, the company would be judged by those
standards.

When mishaps like
the March 2006 explosion at the company’s Texas City refinery happened
and later, the August 2006 oil spill in Prudhoe Bay, Alaska occurred,
public anger was directed as much at the jarring dichotomy between what
BP claimed to be in its campaigns and what it really was in its
operations as much as at the physical damage proper.

Last month’s
accident on its Deepwater Horizon rig in the Gulf of Mexico, which has
caused severe destruction of sea life, may well be the straw that
breaks the camel’s back. Can BP still claim to be ‘beyond petroleum’? I
strongly doubt it.

Whatever BP says
about the errors of engineering or placing the blame on its
contractors, one thing is clear: BP’s ‘beyond petroleum’ tag has become
BP’s ‘big problem’ albatross. This time, it will take more than Ogilvy
& Mather to put Humpty Dumpty back together again.

The limits of spin

Spin is a poor
adhesive for fixing cognitive dissonance cracks. John Kenney, an
ex-Ogilvy executive who played a key role in developing the campaign,
has openly questioned BP’s commitment to the ethos of ‘beyond
petroleum.’

He has called on the company to leave the hype and hypocrisy aside and go ‘beyond propaganda.’ Ouch!

I have used BP’s
‘beyond petroleum’ as a type for companies that choose to build their
brands around sympathetic signals. It can have a massive upside, but it
can also be a two edged-sword.

Companies need to
do an honest assessment about whether they can deliver on these
promises before trumpeting them. The challenge for BP is not about
rebuilding confidence in its brand. The crisis on the company’s hands
is about admitting that BP as BP will never be beyond petroleum. Energy
companies will be energy companies in the way boys will be boys.
Resigning itself to this humdrum fate will be the hardest part.
Greencleaning will not wipe the oily slick away.

Maybe this is why
many companies prefer to play it safe with impersonal taglines like
‘Nigeria’s biggest network’ and ‘Africa’s mightiest bank.’

Except for those
who find boasting attractive, these ego-thumping chest-drumming claims
mean little to most people. But change those to the personalised
‘Helping loved ones stay in touch’ or ‘The listening bank that cares’
and the dynamics change greatly. When the same network goes down on
Valentine’s Day or the bank deducts indiscriminate charges, customers
will take a very different view than if they had just stuck with the
prior descriptions.

Do no evil

Google’s ‘Do no
Evil’ and JP Morgan’s ‘At all times doing only first-class business,
and that in a first-class way,’ are two perfect examples of claims
people will scrutinise closely. From him who claims much, much is
expected.

So why should
companies care at all? Here are two reasons why they should. First, the
customer-investor divide has become blurred. The capital markets are
paying more attention to companies’ marketing messages and consumers
are becoming better attuned to what investors feel. The contagion of
distrust in one will contaminate the other.

Second, reputation is an increasingly important factor in investment decision-making.

Those
north-easterly pointing stock price charts are unsustainable if the
brand is living a lie. That should be a no-brainer. To thine own brand
be true.

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

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.

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?

For most banks, the
recently released financial results for the first quarter of this year
have shown that the banking sector is yet to recover from last year’s
crisis making majority of them to post losses in their annual reports.

Consequently,
investors’ confidence in the sector on the Nigerian Stock Exchange
(NSE) has remained on the ebb. The management of the exchange last week
acknowledged that the weak momentum being recorded in the market could
be attributed to “the not too impressive audited results released by
some quoted companies,” especially the banking sector which dominates
about three quarters of the entire market.

Virtually all the
banks declared ‘stress-free’ by the Central Bank of Nigeria last year;
Access Bank, Diamond Bank, Ecobank, United Bank for Africa, and Skye
recorded a huge drop in profit after tax.

However, some
finance experts said the results of these banks are ‘encouraging’ since
the economy itself is yet to recover from the global downturn. They
further noted that the usual trend of doctored financial reporting
common in the banking sector is not likely to resurface again.

Competitive account

Egbo Amaechi, a
finance analyst and an executive member of the Shareholders Association
of Nigeria, said, “The performance of these banks during the first
quarter should be commended going forward, even though investors are
not too happy. Since the results posted to the general public were
approved by the relevant authorities, we have to assume that they are
real.” Commenting on “competitive financial reporting,” Mr. Amaechi
said, “I don’t see banks in that kind of competition again. Don’t
forget that this regulatory regime is quite different from the previous
one. The Central Bank is strict this time.”

Indication of strength

In his opinion,
Rasheed Ola Yussuff, chief executive officer of Trust Yields Securities
Limited, a stock broking firm, said, “Given the scenario of the economy
crisis with a situation where companies are still surviving and making
little profits; while some are also paying dividend and declaring
bonuses, I think most of the released results are encouraging.” “Over
the months, these banks have taken the worst scenario and it can only
be better from there on. Although an investor that is expecting a huge
dividend we look at the result and get angry. That is understandable
because the person is looking at his or her cash flow. But from the
point of view of the company itself, it’s a mark of strength and not
weakness. If you have a reserve that you are keeping aside and you are
still making profit, then it means that you have more money within the
organisation to use,” Mr. Yussuff, a former general manager of the old
Eko International Bank Plc, said.

He, however, said
that the usual trend of all-is-well financial reporting by banks was
one of the reasons why the sector crashed.

“Today, that cannot
happen again. You cannot say because everybody is declaring profit you
want to follow the trend. If your bank is not doing well, your result
will show.” “I think it’s a good thing that the banks are more
transparent now. When a bank says its net profit is this amount, it
means it made more than that but probably had provided for bad loans.
And that should be commended because banks are simply saying we’ve
cleaned up our books and there is no doubt about our health now. I
believe those results are indications of strength. Tomorrow if they
recover some of those bad loans, then it will become surplus for them.
That is why some banks could post positive results in their first
quarter result this year,” Mr. Yussuff said.

Improving
performance Meanwhile, analysts at Financial Derivatives Company
Limited, a business advisory firm, said the capital market “will remain
positive on the strength of better-than-expected corporate
announcements as the reporting season gets under way.” Subsequently,
they added that some profit taking should occur as investors cash-in
recent gains.

The proposed Asset
Management Corporation of Nigeria is expected to further stimulate the
capital market, as loans would be restructured to boost the balance
sheets of banks and enhance the flow of credit to the economy.

The bond market is
also set for a surge in activity, as the Federal Government takes the
lead in financing the N1.5 trillion deficits in the 2010 budget, with
about N800 billion of which is intended to be funded through local bond
issues. Analysts also anticipate an increase in corporate bond issues
in order to increase the tenor of liabilities to better fund longer
term asset.

Shares as collateral

According to the
NSE, another contributory factor for the wobbly performance at the
capital market is “investors’ initial reaction to the Central Bank’s
position on the use of banking shares as collateral for lending.”
However, Rilwan Belo-Osagie, managing director and chief executive
officer of First Securities Discount House Limited, said, “On bank
rejecting shares as collateral, it’s a situation of once beaten twice
shy. We went through an era where shares were readily accepted as
collateral, and there were certain assumptions made by the banks; then
the economic meltdown that crashed the capital market for about two
years. Obviously, a natural reaction is that you first of all shy away
from using shares as collateral.”

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.

Driving can get better with the sleek, portable, and subtle 2010
Honda Civic. The Civic, which is long known as Honda’s smallest car, now comes
with slightly bigger build. The car has a wider and longer front and rear lights.
It seats lower on the ground, while the front grille and Honda logo is
beautifully designed with shiny chrome.

Design

The 2010 Honda Civic’s structure has been built to offer maximum
comfort both exterior and interior.

The interior has a unique design, with its digital speedometer
and gas gauge located underneath the windshield. The analog tachometer is
located at its standard position, behind the steering wheel.

The car comes in two basic body types; the sedan and coupe. Both
types are available in five line-up models which are the DX, LX, EX, EX-L and
Si. All versions are lined up in different grades, which are distinguished by
slight differences with both exterior and interior.

The DX type steps on 15-inch steel wheels and are fitted with
power windows, but doesn’t come with a stereo except for the DX sedan optional
with a four speaker CD/MP3 audio system.

The LX type steps on 16-inch wheels and features keyless entry,
cruise control and sliding armrest.

The EX type is endowed with a sub woofer six-speaker sound
system and steering-wheel-mounted audio control.

The EX-L type comes with leather upholstery seats and heated
front seats, while the Si type steps on 17-inch alloy wheels, a higher power
and sports tuned performance.

The 2010 Honda Civic sedan also comes with three special
versions, which are the LX-S sedan type with rear spoilers and alloy wheels;
The GX type with similar features to the LX; and then Hybrid model with
automatic climate control and similar features to the EX.

Engine Power

The Civic is powered by varying engine types and transmissions.
The DX, LX and EX models are powered with a 1.8 litre four-cylinder engine that
produces 140 horsepower and 128 pound-feet of torque.

The car comes mated with a standard five-speed manual transmission
and an optional five-speed automatic transmission.

The Hybrid type uses a gasoline/electric hybrid power train to
maximise fuel economy. The Civic Si type is powered by a 2.0 litre engine and
integrated with a six-speed manual transmission.

Safety

The 2010 Honda Civic comes with side curtain and front seat air
bags. It is also built with antilock brakes and active front head restraints.

Some models come with specifics like four-wheel disc brakes
present only in the EX and Si and stability control in the EX-L, Si and Hybrid
type.

Price

The 2010 Honda Civic ranges in price from $16,000 to $ 22,000
depending on the model of the car.

Insurance
firms that enlisted to participate in a group life assurance scheme
initiated in 2008 for all federal government civil servants have raised
alarm over series of anomalies uncovered under the programme.

The policy was supposed to start in 2004 under the Pensions Act, but did not due to the lack of experienced personnel.

In
a petition to the Acting President, Goodluck Jonathan, and the
leadership of the National Assembly, a copy of which was obtained by
NEXT, on Monday in Abuja, the aggrieved workers alleged, among others;
that the managers of the scheme compelled them to swear to an oath of
secrecy not to reveal the anomalies before enlistment into the scheme
for the year 2010.

The
insurers, comprising 26 underwriters and 109 brokers, are demanding
from government; the outstanding N2 billion premium for 2009 business
year, which they claimed had been diverted by Steve Oronsaye, the Head
of Service, into the settlement of the current year’s premium.

The
letter, signed by John Fidelis and Mike Olumoran, under the aegis of
2008/2009 Head of Service Group Life Assurance Consortium also alleged
that Mr. Oronsaye, who claimed that the government was misled on the
2008/2009 business by the lead broker, Leverage Insurance Broker, again
appointed the same broker as part of the advisors on the current 2010
scheme.

Oath of secrecy

The
insurers, who also forwarded copies of the signed agreement and the
list of insurers with the protest letter to buttress their claim, said
they were afraid to talk publicly about the decision because of the
oath they were compelled to take.

“Having
diligently carried out the assignment in line with the agreement, we
have been expecting the payment of our premium and commissions for
services rendered, but, contrary to the advice given to the Head of
Service for the payment of premium, Mr. Oronsaye withheld the N2
billion until last March 16, only to direct the AGF (Accountant General
of the Federation) to pay the premium to the newly appointed
underwriters and brokers for 2010 programme for the job they have not
done,” stated the petition.

The
insurers said they were unaware of how the balance of the money for the
2008 premium was spent when the complete records of all civil servants
that died during the year are yet to be given to them.

“About
N5 billion was approved as premium for 2008 for the group life scheme,
while another N1 billion was set aside for settlement for deaths during
the transition period of the group life between June 2004 and July
2007. Till date no account has been rendered to the consortium by the
lead broker, Leverage Insurance Broker and the lead underwriter,
Capital Express. Besides, our remuneration as underwriters and brokers
was based on N4 billion, instead of N5 billion,” they said in the
protest letter.

The
insurers also claimed there was no transparency in the process that
attended the appointment of five advisors for the 2010 scheme, who were
given the lion’s share of the business, leaving others to scramble for
a share of the balance of N1.2 billion of the premium.

Inflated premium

During
his meeting with the Nigerian Council of Registered Insurance Brokers
early this year, Mr. Oronsaye had alleged that the industry inflated
the premium for the scheme as a way of saving money for government,
claiming payment was made only for 2008 out of the two year contract
for 2008/2009 due to the high rate.

“They
(workers) took a cover for two years -2008/2009, and the premium was
paid for 2008, though we took out N1 billion to pay claims for people
that had died between 2004 and 2007 when the scheme ought to have
commenced,” he said. “Last year, they put pressure on me to pay the
2009 premium, and I said, ‘Pay what premium?’

You have given a rate of 6.5 per mille for poor civil servants, and
I asked them how they arrived at 6.5 per mille premiums, because I
wanted to know the rate of death and the rate of birth. Birth rate is
less than 3 percent and death rate is about 3.5 percent. So we are
paying triple if we are 6.5 per mille,” he added.

When you are in your 20s and 30s, retirement may be the last thing on your mind. Many of us don’t like to face the fact that we are getting on and it is easy to put off taking concrete steps as retirement still seems so far away.

Ideally, you should start planning for retirement as soon as you start your first job. Those who start saving for retirement in their 20s have a better chance of building a large nest egg. Saving even a small amount on a regular basis can add up to a tidy sum over a long period of time and this will enable you to maintain the standard of living that you would have become accustomed to by the time you retire.

The Pension Reform Act 2004

Most people are not saving, or certainly not saving enough for retirement. Thanks to the Pensions Reform Act, 2004, we have all become aware of pensions, and retirement planning. Don’t just brush it aside and think it doesn’t apply to you. It may be one of the most important financial decisions you will make this year.

In a nut shell, the key objectives of the new scheme are to ensure that all employees in the Federal Public Service, the FCT and the private sector where the institution has 5 or more employees, receives his or her retirement benefits as and when due. It is largely voluntary for other categories of employees. It also assists improvident individuals by ensuring that they save to cater for their livelihood during old age.

A fully funded contributory system

Under the pension scheme, which is contributory and fully funded, employees and employers contributes a minimum of 15 per cent of the employees’ total emoluments (basic salary, housing and transport allowances). An employer may choose to bear the full contribution subject to a minimum of 15 per cent of the employees’ monthly emolument. Employees may opt to make additional voluntary contributions to augment their retirement savings. Both contribution and retirement benefits are tax-exempt.

The contributions are deducted at source from the salary of the individual and transferred to the relevant Retirement Savings Account (“RSA”). When you are handed your first pay slip, the deductions may seem alarming, but do remember that a few years down the line, they may represent significant savings that many of us lack the discipline to accumulate on our own.

Carefully select a Pension Fund Administrator (“PFA”)

You are responsible for selecting your Pension Fund Administrator (“PFA”) and this decision is of immense importance as the accumulated balance in your RSA largely depends on how well your PFA invests your contributions; the PFA’s job is to administer the contributions and invest in a manner that should safely ensure reasonable returns.

Your PFA will select an asset allocation mix that may include mutual funds, stocks, bonds, money market, or other investment instruments. The National Pensions Commission (“PenCom”) ensures the prudent management of pension assets through supervision and regulation.

Choose a PFA with an experienced investment management team; a sound parent company with a strong performance track record gives additional comfort. Other important issues include a large network of branch offices, outstanding customer service and retirement planning advice, and its application of state-of-the-art information and communication technology.

Your Retirement Savings Account

As an employee you are expected to open a Retirement Savings Account with a PFA. Your RSA belongs to you throughout your life, and is protected with the use of usernames, passwords and PIN numbers. Your RSA is portable so can be moved from one job to another and should you be dissatisfied with the level of service or investment returns that your PFA provides, you may opt to switch houses.

How do you make withdrawals from your RSA?

You can make a lump sum withdrawal from your RSA at age 50 or upon retirement whichever is later, provided that what is left is enough to procure an annuity from a life insurance company or fund a programmed withdrawal that will generate at least 50 per cent of your last monthly salary at retirement. Voluntary Contributions can be withdrawn as a lump sum at any time.

Three months ago, Titi was affected by a restructuring exercise carried out by her company. She is not yet 50 years old and so is not entitled to a lump sum payment. She needs some money to tide her over so contacts her PFA.

Tito will be able to access her RSA if she is not able to gain employment within six months from the day she left the company. She will be entitled to 25 per cent of her RSA as a lump sum while the balance will be paid to her as a programmed withdrawal over her life time when she attains the age of 50 years.

The rationale is that retirement benefits are to cater for your life in old age when you can no longer work, so paying out all of it before you are 50 years old may affect you in your old age.

Will your pension be enough?

Do bear in mind that pensions, whilst they are an important part of your retirement income, are not intended to meet all your retirement needs. Even though both your pension contribution and retirement benefits are tax-exempt, you should spread your retirement savings across deposits, bonds, stocks and property. It is important that investment choices at least keep pace with inflation.

After several years of hard work, raising a family, and hopefully, building your nest egg, your retirement years should be one of the most rewarding of life’s stages. The responsibility for building your nest egg and ensuring that it supports you for the rest of your life lies with you. Make saving for retirement a priority and start now, whatever your age.

The stock market ended the past week in the green zone with
gains that are mostly attributed to buying pressure of investors. The activity
during the three days of trading in the week was a continuation of the market’s
adopted pattern since the beginning of the year, as trades were dominated by
speculations that were followed by quick profit reaping transactions.

Last week was particularly eventful following the death of
President Musa Yar’Adua, as Goodluck Jonathan became the nation’s substantive
president. Also, the Asset Management Company (AMC) Bill was passed by the
Senate on Wednesday. The bill is expected to unburden banks from toxic waste
and free their balance sheet through purchase of the bad loans, thereby
enabling banks to play their financial intermediation role effectively. With
this new development, we expect further stability in the capital market.

Market review

Activities in the stock market have been upbeat since the
beginning of the year as investors renewed optimism in the equity market due
largely to hopes that recent measures by Central Bank of Nigeria (CBN) and
other market regulatory bodies would sustain market recovery.

Positive earnings results of companies as released last week
reaffirmed hope for a sustained rebound, even as more investors had reasons to
turn positive and put money into the market.

In the past week, the NSE All-share index rose by 103 basis
points to close the week at 27,503.36 points.

Since the beginning of 2010, the market capitalisation has
gained more than 30 per cent. It closed on Friday at N6.65 trillion. Stocks
edged higher on Friday as investors looked to extend a strong run that has left
major indices up 0.38 per cent for the week. The current bullish trend should
continue in the months ahead. However, investors should exercise caution as the
market may witness minor correction phase.

During the week, both the market capitalisation and the NSE AS
Index gained 0.38 per cent respectively. So far, the market has recorded a
YTD-high market capitalisation of N6.78 trillion, representing a YTD yield of
33.33 per cent. Overall, the market traded a total of 1.75 billion units of
shares, valued at N17.11 billion in 25,710 deals.

The Banking sub-sector remains the most active (measured in
terms of traded volume) as it recorded 836.56 million shares valued at N9.42
billion exchanged in 11,033 deals while the Insurance sub-sector was second
with traded volume of 389.61 million shares valued at N349.39 million in 1,802
deals.

Corporate actions and
results

In the past week, ECOBANK Nigeria Plc released its full year
trading result to the floor of the Nigerian Stock Exchange. The company
declared a Gross Earnings of N59.864 billion representing an increase of 8.54
per cent from previous year’s trading result. The company also posted a Loss
After Tax of N4.588 billion.

Furthermore, ECOBANK also released its interim report for the
period ended 31st March, 2010 (First Quarter). A Gross Earnings of N13.703
billion was recorded, while a Profit After Tax of N1.071 billion was declared.

JULIUS BERGER Plc also released its interim report for the
period ended 31st March, 2010 (First Quarter) to the floor of the Nigerian
Stock Exchange. Julius Berger, which has 1.2 billion units of shares
outstanding, declared a Turnover of N31.414 billion and a Profit After Tax of
N780.959 million.

Similarly, JAPAUL Oil & Maritime Services Plc released its
interim report for the period ended 31st March, 2010 (First Quarter) to the
floor of the Nigerian Stock Exchange. The company, declared a Turnover of
N1.615 billion and a Profit After Tax of N425.515 million. The table below
shows full details of companies’ results and performances released during the
week.

Market outlook

Earnings projections of companies suggest that earnings should
continue to improve over the next couple of quarters. Earnings that exceed
expectations have been shown to be conducive to higher equity prices.

Given extremely low levels of interest rates, stock market activities will
surge higher, thereby creating more bullish sentiment.