The Nation Newspaper

Tag: finance

  • ‘Access to finance major challenge facing MSMEs’

    ‘Access to finance major challenge facing MSMEs’

    What is the major headache of small business?

    Access to finance, according to the head of Department, Business School, University of Stellenbosch, South Africa, Prof Silvanus Ikhide.

    He listed other obsstacles faced by Micro, Small and Medium Enterprises (MSMEs) to include access to power and poor infrastructure.

    Ikehide spoke in Abuja at a conference organised by the group.

    He said other problems included high administrative cost, vague information and lack of collateral to access loans.

    “Our sources of finance, in most cases, are equity and debt; with equity accounting for a greater part of what we have.Micro enterprises depend on micro credit for financing, but researches done have not indicated that micro credit promotes investment,’’ he said.

    Ikhide said micro enterprises in many countries accounted for about 95 per cent of the entire economic activities in the informal sector.He said small enterprises had the potential for expansion in Nigeria, but were limited by their small sizes and poor access to finance.

    “SMEs are very important in job creation in many countries and they have come to about 50 per cent of total employments in these countries. SME finance is a big problem in Nigeria because the sector is small. It accounts for less than 50 per cent of Gross Domestic Product (GDP) compared to what we have in other countries.

    “We believe that a robust SME sector in Nigeria will address the issue of unemployment. This is because we have seen this result in other countries. We believe that if you have a high degree of unemployment of about 70.5 per cent in a country, policy must be focused on SME’s to deal with this issue.

    “Also, the cumbersome application procedure and high interest rate of borrowing in Nigeria should be checked to enable small business owners access funds easily,’’ Ikhide said, adding that the Central Bank of Nigeria (CBN) should balance its role as a regulator, supervisor, guarantor promoter and overseer in assisting small businesses.

    Ikhide also said that micro enterprises were constrained due to lack of information, adding that this could be dealt with by leveraging existing relations.

    Also, the President, Anabel Group Inc., Mr. Nicholas Okoye, said crime, terrorism, lack of education, poor healthcare facilities and unemployment were major challenges that Nigerians face.

    “We need to give young people jobs. We need to do whatever it takes to get young people jobs. If you give people jobs, terrorism, violence, and crimes will become a thing of the past. Job creation is a critical part of economic development,” he said.

  • Finance Houses’ reforms await CBN governor

    Finance Houses’ reforms await CBN governor

    Operators of finance houses are awaiting the resumption of the Central Bank of Nigeria (CBN) Governor designate, Godwin Emefiele, for the conclusion of the subsector’s stalled reforms.

    Sources said the suspended CBN Governor, Sanusi Lamido Sanusi, sent a draft guideline to operators for review. The document, the source said, had been returned to the CBN and was awaiting Sanusi’s consent, before he was suspended.

    A source said the deployment of Deputy Governor, Financial System Stability, Dr. Kingsley Moghalu, to operations, also contributed to the delay.

    The source said the appointment of Adebayo Adelabu as Deputy Governor, Financial System Stability, will speed up the reform process.

    Part of the guidelines obtained by The Nation showed that the apex bank had given the operators 18 months to shore up their capitals to N100 million from N20 million.

    The minimum capital base for the subsector has been under debate between the CBN and operators.

    The sources said there are variousl investors who have carried out due diligence on the strengths and weaknesses of some of the finance houses but could not move in funds because the regulation in the sub-sector remains unclear.

    He said the issue on a new capital base for the subsector remains a critical factor that investors want to be acquainted with before staking their funds. This, he said, would ensure that only seriously minded operators are allowed to carry on the businesses of finance houses in the country.

    The ongoing reform in the subsector is expected to look at regulatory framework that will govern finance lease practice; institutionalise a funding pool to stimulate lending activities; structured programme to address the reputation and poor visibility challenges among other issues.

    The CBN in March 2012 gave a 30-day notice to 47 finance houses closed or inactive to submit evidence of their existence and/or operations, or lose their operating licences. The order had expired on Tuesday, April 18, 2012 and the banking watchdog is yet to conclude decision on the matter. The CBN said the affected finance companies had closed shop, ceased to operate, or abandoned finance company business.

    Some of the affected finance houses include Asset Management Group, Cal Finance Investment Limited, Capri Martins Finance Limited, Corporate Finance Group , Equator Capital Assets Management Limited, Eston Funds Limited, First Bond Finance Limited, First Spring Finance and Investment Limited, among others.

  • Nigeria now largest economy in Africa, says Okonjo-Iweala

    Nigeria growing in an unequal manner – Finance Minister

    Nigeria is now the largest economy in Africa and the 26th largest economy in the World.

     This disclosure was made on Sunday in Abuja at a press briefing where the results of the rebasing exercise of the country’s Gross Domestic Product (GDP) was unveiled.
    Speaking on the development, the Coordinating Minister for the Economy and Minister of Finance Dr. Ngozi Okonjo-Iweala stated that with the recent exercise, “Nigeria’s estimated GDP in 2013 is N80.2 trillion or approximately $509.9 billion.”
    As a result, Nigeria she said “has moved to be the largest economy by GDP size in Africa and has moved to be the 26th largest economy in the world, it notched 10 points up. On a per capita basis, Nigeria is number 121 in the world so we have the total GDP size of $2,688 per capita now and moved up from 135.”
    Okonjo-Iweala however cautioned that “even though our GDP size is large in Africa and even to the world where we are number 26, if you divide it by the total number of our population we should not get carried away by the whole exercise.”
    “The share of GDP of some sectors are now quite important. Manufacturing moved from 2 per cent to 7 per cent which is significant and telecommunications moved from a very low number of 1 per cent to 3 per cent. Nollywood moved from zero per cent to 1.2 per cent now and it was not being included in the GDP that was earlier measured as well as a lot of telecommunications services. A whole lot of services in the formal and informal sectors were excluded from our GDP and these have now been brought in in terms of measurement.”
    This rise in services she said is not unusual for any economy and the fact that agriculture is now 22 per cent does not make it any less important. Agriculture she said is “still has a strong share of GDP and that is why we will maintain our focus.”
    What this means Okonjo-Iweala added “is that what Nigerians have been wishing for, that is a more diversified economy is showing up in these numbers, with better information we can see that the economy is more diversified than before.”
    She lamented that the share of oil and gas has dropped to about 15.9 per cent “but it is still an important sector of the economy as any sector with 10 per cent or more of the GDP is considered important to the economy but services is making a bigger mark.”
    Government,  the finance minister said “will need to continue to support diversification of the economy and push harder and we need to continue to support agriculture, manufacturing because we have seen how it has grown with policies.”

  • Missing federation account money: FG to engage forensic auditors

    …To seek legal interpretation of who gets what

    The drama surrounding the whereabouts of un-remitted funds into the federation account has taken a new twist with the federal government now calling for an independent forensic audit of verify the claims of the missing funds.
    Addressing members of the Senate Committee on Finance on Thursday in Abuja, the Minister of finance Dr. Ngozi Okonjo-Iweala stated that “on the $10.8 billion which we had all originally agreed was the shortfall from the NNPC they have produced documents certified by PPPRA with background documentation to back it but we do not feel that the reconciliation committee has the expertise and then we are calling for a forensic audit of these papers in order to lay to rest what the shortfalls may be, what the NNPC owes or does not owe the federation account.”
    On the issue of $20 billion, Okonjo-Iweala noted that “the additional charges made by the CBN the reconciliation committee feels that the matter ranges around legal issues and that it therefore requires legal experts to answer the questions of who owns these proceeds, NNPC or the federation account.”

    However, the finance minister revealed that “as of December 2013, the cumulative unreconciled shortfall from NNPC payments stood at N1.792 trillion.”

    The finance minister added that “for the $10.8 billion, this is the shortfall as July 2013 which mirrors the period the CBN originally looked at. Amount withheld for subsidy $8.766 billion; holding cost for strategic reserves $0.499 billion; crude oil and product loses $0.76 billion; pipeline management cost $0.905 billion for a total of slightly more than the $10.8 billion we talked about. The data presented were all certified by PPPRA as being accepted by them and signed upon.”
    On his part, the governor of the CBN Mallan Sanusi Lamido Sanusi noted that the main issue as far CBN is concerned, is that “the reconciliation for us was to determine the value of crude oil that NNPC shipped, how much has come back to the federation account.”
    The CBN he said has “established that NNPC shipped about $67 billion worth of crude and about $47 billion came back into the federation account so there is a $20 billion unremitting shortfall.”
    He added that “the finance minister has explained that out of the $20 billion there is $6 billion that NNPC says it shipped on behalf of NPDC, there is $2 billion third part finance and the balance of $12 billion from our books and from the NNPC submission is what is outstanding from the domestic crude of $28 billion that was exported by NPDC, so as far as the CBN is concerned the most important point to establish is that there is a difference of $20 billion between what NNPC shipped and what it repatriated and we haven’t seen NNPC’s submission but based on public comments they’ve made.”
    In the view of the CBN, Sanusi insisted that there is no subsidy on kerosene and that the payment of kerosene subsidy is in violation of a written presidential directive.”
    The CBN he said has “also asked questions not about the entire $6 billion from NPDC, we asked questions about a specific part relating to oil produced in blocs under Strategic Alliance Agreement with Atlantic Energy. Our concern is to establish if the proceeds transferred to Atlantic Energy belongs to the federation account or not.”
    He agreed with the minister of finance that lawyers can come to proffer legal interpretation, but stated that “we have made no comments about the $2 billion third party financing we have been given no documentation, even the $6 billion for NPDC did not come into any account with the CBN we have not seen it but we have taken the words of NNPC for it for us there is a question mark over that gap.”
    He raised questions concerning the certification of “the actual amount of subsidy the NNPC took and there is the question of whether NNPC should have taken the subsidy for kerosene but for the CBN our task ends with establishing that there is $20 billion unremitted, after that it is up to the committee and the ministry of finance determine if the amount has been properly accounted for or not.”
    On his part Engr. Reginald Stanley Executive Secretary of the PPPRA noted that “it has never been our procedure that whatever we certify be subjected to forensic audit. This document was worked upon by PPPRA, DPR and NNPC.”
    He disclosed that between January 2012 and July 2013 they had have duly certified what was brought in by NNPC on PMS, totaling N813,802,673,022 at (N154.87/$) as what we have duly certified as subsidy on PMS  $5.254 billion. For kerosene we have meticulously gone through documents and came up with N543,890,398,525 or $3.51 billion.”

  • CBN, finance firms bicker over N200m capital base

    Finance House operators have rejected N200 million minimum capital base being proposed by the Central Bank of Nigeria (CBN) to enable it foreclose ongoing reforms in the subsector, The Nation has learnt.

    An insider in the Finance Houses Association of Nigeria (FHAN), who spoke anonymously, said the operators are bent on getting the minimum capital base raised to N100 million instead of the N200 million being proposed by the CBN Board of Governors in the subsectors’ prudential guidelines, now at its final stage. The minimum capital base for the sector stands at N20 million, and approval of the N200 million, would represent 180 per cent raise, the source added.

    It was further leant that other policy issues such as procedures for appointment of managing directors and their tenure limits have already been agreed with the regulator. The source said operators and investors are eagerly awaiting the conclusion of the reforms which started nearly two years ago.

    The source said both local and foreign investors are willing to recapitalise and invest in some of the ailing finance houses but have to await the CBN to specify the guideline.

    He explained that unlike banks, finance companies are not allowed to accept deposits. This limitation means they can only source funds from shareholders, private equity companies, development finance institutions and other institutional investors.

    The subsector offers a variety of services including; funds management, equipment leasing, project financing, local purchase order financing, debts factoring, financial consultancy among others. The subsector also provides financial services for consumers’ industrial, commercial, or agricultural enterprises.

    The execution of reforms in the subsector, the source said is being hindered by government bureaucracies. He said that there are several investors who have carried out due diligence on the strengths and weaknesses of some of the finance houses but cannot move in funds because the regulation in the sub-sector remains unclear.

    He said a new capital base for the subsector remains a critical factor that investors want to be acquainted with before staking their funds. This, he said, will ensure that only seriously minded operators are allowed to carry on the businesses of finance houses in the country.

    The reform is expected to look at regulatory framework that will govern finance lease practice; institutionalise a funding pool to stimulate lending activities; structured programme to address the reputation and poor visibility challenges of the sub-sector among other issues.

    The source said the reforms in the sector would transform, and reposition the finance firms’sub-sector to enable it play increasing role in Nigeria’s financing value chain.

    The CBN had in March 2012 given a 30-day notice to 47 finance houses closed or inactive to submit evidence of their existence and/or operations, or lose their operating licences. The order had expired on Tuesday, April 18 2012 and the banking watchdog is yet to conclude decision on the matter. The CBN said that the affected finance companies had closed shop, ceased to operate, or abandoned finance company business.

     

     

  • How to finance your business

    Money makes your business go, and usually banks make loans only to businesses with operating histories. In this session we will give you some alternatives, strategies, and things to think about in your search for financial help. You will learn how to locate, negotiate for, and maintain sources of money to help you start and expand your business.

    Money makes your business go. But don’t try going to a bank to get it when you’ve just started in business. Banks normally make loans only to businesses with operating histories. This section will give you some alternatives, some strategies and some things to think about as you go about finding the money to make your business work.

    Our first reminder is that personal savings should be considered the primary source of funds for starting a business. If you haven’t started already, start now to begin accumulating cash through personal savings.

    Also, don’t overlook the Small Business Administration (SBA) loan guarantee programs available for start-up businesses. With a SBA guarantee program in hand, your bank will be happy to talk with you! Refer to the Resources section to get more information. How Much Money Do You Need?

    Raising start-up money is one of the great hurdles in starting a business. Would you have any recommendations or some basic Do’s and Don’ts as to how people should go about this great challenge?

    Or, how much can you reasonably expect to get? Don’t get too excited just yet – this is not your chance to ask for a million dollars when you only need $50,000. Refer back to your business plan. If it still doesn’t answer the question, let’s go step-by-step.

    What do you need it for?

    Buying supplies and inventory while waiting to get paid

    Paying payroll and rent

    Buying equipment and fixtures

    Getting a computer

    or

    Buying the business

    Prioritize those areas where your options are limited to paying in cash, and review your alternatives where there may be another way. For example, it is not necessary to pay all cash for a delivery truck when you can rent or lease one. Next review what might serve as collateral for your loans. Some credit is granted on an unsecured basis, such as credit cards, but most small business loans are secured by the assets of your business or your personal assets or both. Unsecured means that there is no collateral granted for the loan. Examples of unsecured are:

    Credit cards

    Unsecured lines of credit (like you get in the mail)

    Friends or relatives

    Secured loans mean that there are assets pledged to secure the payment in the event you are not able to pay. Examples of this are:

    Computer lease

    Home mortgage

    Car loan or lease

    Small Business Adminis-tration loan

    Common types of collateral are equity in your home, accounts receivable, inventory of the business and equipment. Lenders go through an evaluation of the collateral to determine how much they can lend against it. Some key variables as to what kind of loan terms you can get are:

    Number of years in business – This is your track record and is very important. Banks usually require three years while others are less stringent.

    Size of your company and the amount needed – Financing institutions vary in the way they service the public. For example, you would probably not get a car loan and a large corporate loan at the same place. Do your research. Ask around. Get to the right spot.

    One of the worst mistakes you can make is to ask for more money than you can afford to repay.

    You are most likely familiar with a straight loan (debt) where the lender gets an interest rate and fees.

    Equity is where the money raised gives the investor an ownership interest. This is common in the sale of stock to a limited number of investors or participation by venture capitalists. The sale of stock is highly regulated by state and federal agencies and you will need the help of a corporate lawyer. Normally the initial sale of stock to the public (initial public offering or IPO) is deferred until an earnings history is established.

    Sometimes such a discussion arises with friends and family who want to be your partner. Consider this carefully because they will then participate in the increased value of the business and have voting rights.

    It is well beyond the scope of this discussion to cover all the aspects of debt and equity. Just be careful! Your lawyer and accountant would be appropriate sources for more information on this subject.

    The chart below will show some differences between some of the types of lenders. Terms will vary considerably from lender to lender; the summaries in the chart are only meant to be representative and give you an idea of what to expect when seeking money from different sources. Important issues to consider:

    Cost

    Payback program

    Loan size

    Some of the pros and cons of the different lenders are briefly listed below. There will likely be one common characteristic among them all. As an entrepreneur, you will be legally obligated to have individual responsibility for the credit obligation of your business. Regardless of legal organization (covered in Session 4), lenders will have documentation to circumvent the organizational structure. This is usually called a personal guarantee. Don’t panic! It is very common.

    Accessible through dealer, who is motivated to make sale of equipment or business; payback terms more favorable than bank

    Longest payback for other than real estate loan

    Step two is to be ready to answer questions about your business, and be ready to highlight your financial performance both in the past and in the future. You will be more impressive if you have carefully thought-out and become familiar with your plan. Bring your accountant if you need help.

    Be prepared to tell them why you need the money. “I just need the money,” does not inspire confidence or the fact that you have thought it through. Earlier in this session you studied a number of different purposes. Give them some detail.

    Propose a repayment plan. Examples of different structures are:

    A line of credit, payable at your discretion but subject to renewal annually by the bank

    Term loan payable monthly over ___ years starting on ____ date

    Most places have some flexibility. Potential lenders appreciate that you are thinking about paying them back instead of just getting the money.

    Other tips to keep in mind:

    Needless to say, being well dressed and neat in appearance at bank meetings will reflect positively.

    Source: SMEToolkit

  • ‘States may run into financial crisis this year’

    Many states may run into financial crisis this year, should the revenue accruable to the federation account suffers same draught like last year, Niger State Commissioner for Finance, Alhaji Kpako Bello has stated.

    The commissioner, who spoke Thursday in Minna during the media highlight of the state 2014 budget presided over by Commissioner for Economic Planning, Alhaji Yahaya Dansalau, said some states may find difficult to pick their bills in the new year if federal receipts continue to dwindle.

    Citing the state, the Commissioner said that with 82.4 % of the state Budgetary projection fund from the federation account allocation “it will be difficult to survive should anything go wrong with the inflow of revenue from the center”.

    He further said that aside from the 11.3 percent to be raised from bonds, the state internal generated revenue is 6.3 percent which cannot sustain the state for a month.

    The Commissioner explained that if care is not taken this year, many states would be thrown into unprecedented economic crisis as a result of the failure of federal government revenue agencies to remit revenue to FAAC for sharing to the three tiers of government.

    “The last three months of last year were really turbulent for states because most times, we gather in Abuja for days without anything to share.

    “If we are not careful in the next few months, we will not get anything to share, we were in Abuja two to three days ago but there was no money.”

    He however said that the state is puting in place policies aimed at cushioning the effect of any distortion of the revenue flow from the centre this year, “Last year, we never envisage the kind of crisis that happened.”

    Bello blamed the drop in the income of the national tresury majorly to Oil thief, which he said now carried out in large scale” at source, thief at point of sale as well as after sales of the Oil”.

    His words, ”  We have reasons to believe what the Governor of Central Bank, Lamido Sanusi said over some missing money but its just that we were not bold enough to come out and support him. The figures may even be more than what he said was missing because oil theft is now carried out from source, at the point of and after sale”.

  • Finance ministry delays Keshi, others salaries

    Finance ministry delays Keshi, others salaries

    Frantic attempts by officials of the National Sports Commission(NSC) and the Nigeria Football Federation (NFF) to pay all the national teams’ coaches their outstanding salaries suffered a setback due to administrative bottleneck in the Federal Ministry of Finance in Abuja.

    SportingLife gathered that a top official in the NSC spent hours in the finance ministry on Wednesday trying to get the voucher amounting to N200m, which was approved by President Goodluck Jonathan, following appeals to him by the sports minister, Bolaji Abdullahi to settle the bill.

    At the close of business in the finance ministry, the NSC chief left for the office to meet with NFF president, Aminu Maigari, where both men verified the amount due each of the coaches.

    SportingLife’s source reveals that the coaches will be paid on Tuesday next week insisting that: “We may have to settle the coaches’ pay from NSC’s subvention and then decuct at source, when we formally get the N200m that was approved by President Goodluck Jonathan.”

  • Nigeria eyes $1.4tr Islamic finance market

    Nigeria eyes $1.4tr Islamic finance market

    Despite the global economic crisis and pressure on conventional banking in Western countries, Islamic finance is doing well. Nigeria is eyeing this booming global financing system, COLLINS NWEZE  reports.

    Undeterred by the uncertain recovery elsewhere in the world’s financial markets, global growth of Islamic finance market has continued unabated this year.

    The Shariah-compliant assets of the finance model are estimated at over $1.4 trillion and it is likely to sustain the double-digit growth in the coming two to three years.

    Central Bank of Nigeria (CBN) Governor, Sanusi Lamido Sanusi said the country should not ignore Islamic finance which has become a household name in Europe and America. He cited the United Kingdom’s Prime Minister, Mr. David Cameron recent resolve to make London the global hub of Islamic finance adding that Nigeria should wake up to opportunities presented by the the finance system.

    According to Standard & Poor’s (S&P), Islamic finance remained a demand-driven market, with scarce supply, still hampered by a limited range of Islamic financial centres and their various regulatory frameworks.

    The rating agency said it believed that regulatory efforts to accommodate Islamic finance and the establishment of additional industry bodies at national levels will take centre-stage starting next year. Interestingly, newcomers in the industry — such as Oman, Turkey, and Nigeria, for instance — have started to trace the footsteps of fast-growing pioneers, such as Malaysia.

    “Right behind the newcomers, a long line of countries is aspiring to enter the market, with the continent of Africa in the forefront,” it said.

     

    Nigeria’s perspective

    Nigeria’s profile as Africa’s most liquid debt market after South Africa has been rising since JP Morgan and Barclays included its bonds in their sovereign bond indices in the last year, encouraging greater foreign participation in its debt market.

    The use of Islamic finance in Africa could grow further as several north and sub-Saharan African countries, including Morocco, Tunisia, South Africa and Kenya are laying the legal groundwork to issue sukuk, an Islamic finance bond.

    In Nigeria, Osun State recently floated the country’s first Islamic bond, taking a major step towards developing an Islamic finance industry in the country. Analysts said the Sharia-compliant bond, while relatively small at $62 million, signaled the start of a trend.

    The Sukuk is based on an Ijara structure, a common leasing arrangement in Islamic finance, which bans payment of interest. Sukuk have become an increasingly popular investment globally, particularly among cash-rich funds in the Gulf and Southeast Asia.

    Also, the Islamic Development Bank also is lending $150 million through Sharia-compliant facilities for the new Lekki port in Lagos.

    Sanusi said Islamic finance products also have the capacity to ensure financial inclusion of significant segment of the population. He stated that when properly harnessed, Islamic finance could contribute significantly in turning the country into a major international financial centre.

    Sanusi said: “Islamic finance has shown its potential in achieving financial inclusion in many economies by bringing in large under-banked populations, especially Muslims, into the urbanised financial sector.

    “We have so far registered Jaiz bank, and we have given a licence to Stanbic IBTC Bank to operate some window. We have given an approval in principle to Sterling Bank to operate an Islamic window and a microfinance bank that has applied for Islamic banking licence.

    “This is in addition to the work being done by National Insurance Commission to promote Takaful, an Islamic insurance product.”

    He said many Islamic financial markets had established their presence in all the major financial centres and were playing key roles in deepening the financial markets with products across the globe.

    “In the face of the growing interconnec-tedness of the global financial system and its integration, it is thus unrealistic for any existing or aspiring financial centre to be oblivious of this development.

    “Prime Minister David Cameron announced his government’s plan to make London a capital for Islamic finance to the Western world. He said it would stand alongside Dubai and Kuala Lumpur as one of the great capital of Islamic finance. The UK is embarking on this plan, despite the fact that it is a non-Islamic country,” Sanusi argued.

    Chairman, Advisory Committee of Experts on Non-Interest Banking, Sterling Bank Plc, Sheik Abdulkader Thomas said deposits from non-interest banking could be deployed into infrastructure funding and other developmental projects.

    Thomas, who is an American living in Kuwait, described Nigeria as a huge market for non-interest banking given its large population base. He said the banking concept is a viable means of gathering huge deposits, adding that although Nigeria’s infrastructure is seen as weak, deposits from non-interest banking could be used to fix it.

    He said: “We have to look at a country like Nigeria from a different perspective. Kuwait has small population, with very high wealth. But Nigeria has very large population. We believe that non-interest banking will be very important to gather savings from the grassroots population.”

    According to him, the billions of dollars in the non-interest banking accounts globally cannot find its way into Nigeria, rather, the country should generate its own funds to finance key projects and create wealth for its citizens.

    Islamic banking is growing at a fast pace around the world. It is asserting itself as a key player in the global financial system with its global assets currently stood at $1.3 trillion, he added.

    The CBN guidelines on non-interest banking put the minimum capital base of N10 billion for National Islamic Banks and N5 billion for regional Islamic Banks. However, CBN allows deposit money banks to offer non-interest banking products, using existing structure such as the branches, even manpower.

     

    African Development Bank

    According to African Development Bank (AfDB), improving Nigeria’s infrastructure could boost the country’s Gross Domestic Product (GDP) by about four per cent. Some of the sectors that require attention include power, road, rail, information communications technology (ICT) and transportation. However, access to finance, to fund the development of most of these critical sectors has remained a challenge.

    According to the AfDB, Nigeria has an infrastructure deficit of $360 billion and Islamic finance can be of great help in fixing the infrastructure gap.

    It said banks will require a substantially larger annual level of investment in infrastructure, a significant increase in annual allocations for routine and periodic maintenance to ensure reliable infrastructure services, and increased attention to the institutional arrangements that support the infrastructure network of the country and the related services.

     

    Debt position

    With Nigeria’s total debt stock at N8.32 trillion as at September 30, 2013, analysts have warned that the growing domestic debt may result to a debt crisis if not checked. Others have advised the government to look for cheaper alternatives to finance infrastructure development. One of the cheaper alternatives is Islamic finance, which is interest free. While regular bonds are essentially debts to be repaid at a future date, with Islamic bonds, that is not the case.

    In essence, Islamic finance can be described as finance under Islamic law. Islamic finance being an emerging sector of the overall economic system is rapidly expanding.

    The Islamic model uses money as a measuring tool for value and not as an asset in itself, so income is not received from money as this is seen as exploitative and usurious. Investment vehicles through the Islamic finance structure are based on shared business risk.

    The growth of Islamic finance globally also means there is an increasing demand for new ways of identifying Islamic compliant business activities. Presently, the London Stock Exchange is working on the creation of new indices. This means the creation of a new way of identifying Islamic finance opportunities – a world-leading Islamic Market Index.

     

    Lessons from London

    Speaking at the World Islamic Economic Forum, Cameron, expressed his desire for London to be one of the greatest capital of Islamic finance. According to him, steps had already been taken to open up London for more Islamic financing activities.

    “Already London is the biggest centre for Islamic finance outside the Islamic world. “But today our ambition is to go further still. I want London to stand alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic finance anywhere in the world.

    “And we are already taking big steps to open up the City of London to more Islamic finance. Today we have more banks compliant with the principles of Islamic finance than any other Western country.

    “We have over 25 law firms supplying services in Islamic finance and 16 universities or business schools offering MBAs or similar qualifications in Islamic finance, including the new programme for senior executives announced by Cambridge University last week,” he explained.

    He said the move was to attract more investment into London. The UK prime minister noted that Islamic finance was growing at 50 per cent faster than traditional banking, adding that global Islamic investments was set to grow to £1.3 trillion by next year. As a result of this, he expressed his preparedness to make sure that a large proportion of that investment would be in Britain, adding that some of the infrastructure in Britain were developed through Islamic finance.

    Cameron said: “Britain is a country ready to welcome your investment, a country that values your friendship and a country which will never exclude anyone because of their race, religion, colour or creed. But if investing in London is good for you, then opening up London to your investment is just as vital for our own success here in Britain.

    “We are backing our businesses, seeking new markets and banging the drum for Britain to show we are a first class destination for trade and investment. Islamic investment is already fundamental to our success.

    “But we’re not going to sit here and rest on our laurels. We know there is much more to do for London to reach its full potential as a great world centre of Islamic finance.

    “This government wants Britain to become the first sovereign outside the Islamic world to issue an Islamic bond. So the Treasury is working on the practicalities of issuing a bond-like Sukuk worth around £200 million and we very much welcome the involvement of industry in developing this initiative which we hope to launch as early as next year.”

     

  • Rivers got N56.2bn from Excess Crude Account, says Finance Ministry

    The federal ministry of finance has described as false allegations by Governor Rotimi Amaechi of Rivers States that $5 billion is missing from the Excess Crude Account (ECA).
    A statement from the ministry said “Governor Amaechi cannot credibly deny knowledge of the status of the ECA. He has been closely involved and actively participated in making requests to the Presidency for the ECA to be shared for the purpose of augmenting the regular allocations from the Federation Account whenever there is a shortfall.”
    The federal ministry of finance noted that the $5 billion in the ECA which Governor Amaechi referred to “has been shared to the three tiers of government to make up for the revenue shortfalls during the Federation Accounts Allocation Committee process.”
    Part of this fund the ministry said “also went for SURE-P payments and the balance for subsidy payments to oil marketers.”
    To buttress its argument, the office of the Coordinating Minister for the Economy and Minister of Finance Mrs. Ngozi  Okonjo-Iweala  released the statement attached a table showing that Rivers State received N56.2 billion, the second highest share among the states, for January to September 2013 from the Excess Crude Account.
    This amount the ministry added “includes N43 billion for shortfalls plus N12 billion released for SURE-P.”
    Okonjo-Iweala and her team added that “earlier this month (November 2013) Rivers State along with other states, benefitted from the sharing of $1 billion from the ECA to augment the allocations.”
    It then described as curious claims by Governor Amaechi denying knowledge of the whereabouts of the N56.2 billion which Rivers State has received from the ECA this year.
    With regards to claims that Okonjo-Iweala has refused to sign the African Development Bank (ADB) loan for a water project in Port Harcourt,the ministry denied the allegation as wrong.
    The loan in question the ministry said “has been appraised but it is yet to be negotiated. Before the minister can sign it, it has to go through the negotiation process and be considered and cleared by both the Board of the African Development Bank and the Federal Executive Council. So the issue of the minister refusing to sign it simply does not arise.”