The Nation Newspaper

Tag: High cost

  • EFInA laments high cost of banking services

    The Enhancing Financial Innovation and Access (EFInA) has said that high cost of providing banking services, (affordability), institutional exclusion and lack of awareness are the three  biggest obstacles to financial inclusion.

    According to EFInA report, 60.1 million Nigerians do not have/use a bank account, 96.3 million do not have/use mobile money and 97.9 million do not have insurance.

    It explained that on the digital usage in the country, it revealed that mobile money, which was thought to be useful in the financial inclusion drive, was found to only deepen rather than expand financial inclusion. The report therefore revealed that while 35.5 million Nigerians (36.6 per cent of the adult population) use bank accounts only 3.0 million adults have both mobile money and bank accounts, whereas 59.4 million (60 per cent) neither have mobile money nor bank account.

    Similarly, the study showed that while 82 per cent of Nigerian adults, comprising of subsistence farmers and small business owners, receive their income in cash, 10 per cent of those adults receive their own income via mobile money or bank account, while another eight per cent did not receive any income at all.

    It said that savings in the country dropped by 13.3 per cent according to the report, while savings in assets, property, and livestock had risen from 47.4 million to 54.7 million since 2016. Other decrease in respect of this indicator was that of borrowing, which went down by 2.0 per cent and remittances to one per cent.          On financial access by gender, the report indicated that out of 99.6 million adults in the country, 33.5 million male adult Nigerians were financially included compared with 29.4 million female adults.

    This represents a decrease in the exclusion rate of 4.3 per cent and 5.7 per cent in the male and female gender respectively, and a decrease of 4.8 per cent for both gender compared with the 2016 figures.

    On financial access by age groups, the report revealed that Nigerians in the age bracket of 36 to 45 (19.5 million and 30.6 per cent exclusion) have more access to finance than all others. This group was followed by those in the age bracket of 26 to 35 (30.3 million and 31.5 per cent exclusion) and 46 to 55 (10.9 million and 32.4 per cent exclusion).

    The exclusion rate between the urban and rural areas showed that only 21.6 per cent Nigerians in the urban areas were excluded compared with 45.6 per cent Nigerians in the rural areas. The gains recorded on this indicator revealed a decrease of 2.8 per cent  and 6.6 per cent exclusion rate in the urban and rural areas respectively, as well as 4.8 per cent exclusion rate recorded in total since the year 2016.

  • On scarcity, high cost of kerosene

    SIR: In Nigeria, kerosene is known to be the product for the poor as most of the disadvantaged people in the country use it while the rich ones use gas due to the fact that it facilitates and make cooking faster than kerosene. The high cost of kerosene and its unstable price is now a serious issue and something should be done fast to stabilize its price and make it affordable for the sake of the poor in the country, for the sake of change and for the sake of good.

    In most states of the federation, a litre of kerosene currently sells between N220 to N400. Notwithstanding the high cost, it is also unavailable in many places in the country and that has pushed majority of the citizenry into the use of firewood and charcoal to cook their foods.

    It is very unfortunate that kerosene’s price has never been stable even in the previous administrations; what Nigerians are experiencing now in terms of price and unavailability has gone far beyond what was obtainable in the previous regimes. If urgent action is not taken now to deal with the situation, one day, a litre will be sold for (N1000.

    The government should know that Nigerians are going through hard times and anything that can be done to help ease or lessen their burden has to be done in earnest and urgently.  One needs not argue whether or not the Buhari administration mean well for this nation; what is important at the moment is that the nation is not well and the high cost of kerosene and its unavailability has contributed to the ill-health of the nation.

    Any action to help remedy the problem of scarcity and its fluctuating price has become an imperative.  The time to make kerosene affordable is now; the time to make it available is now; the time to ease the sufferings of Nigerians is now. The time to do what can benefits the poor is now; the time to wipe the prolonged tears of the poor is now. The time to start experiencing positive change is now.

     

    • Awunah Pius Terwase,

    Mpape, Abuja.

  • High cost of funds takes toll on firms

    High cost of funds and lack of access to amenable capital are adversely impacting on earnings potential and returns of several companies, reports have shown.

    Early third quarter earnings reports from quoted companies indicate that most firms were constrained by increasing financing charges, otherwise known as interest expenses, leading to steep declines in profits in most cases.

    Not less than 70 per cent of non-financial quoted companies that have so far submitted earnings reports for the period ended September 30, 2015 recorded declines in profits, with more than 80 per cent of the declines in the bottom line directly related to increase in financing charges.

    A review of the reports showed that while other macroeconomic conditions, especially slowdown in top-lines due to decline in purchasing power and increase in costs of sales due to exchange rate depreciation, contributed to low performances by companies, high cost of funds was the major factor that wiped off positive trading and operating profit performance to undermine pre-tax profit.

    For the nine-month period, Mobil Oil Nigeria Plc reported that financial charges rose by 50 per cent while its pre-tax profit dropped by the same margin. Nigeria’s second most capitalised quoted company, Nigerian Breweries, also reported that financial charges jumped by 53.6 per cent just as pre-tax profit declined by 11.8 per cent. Transnational Corporation of Nigeria (Transcorp) Plc’s financing charges rose by 42.6 per cent while its profit before tax dropped by 26 per cent.Another downstream oil company, Forte Oil, recorded a modest increase of 1.63 per cent growth in pre-tax profit against the background of 16.8 per cent increase in interest expenses.

    Also, Courteville Business Solutions Plc’s financing charges jumped by 207 per cent, which contributed to 18 per cent decline in pre-tax profit. First Aluminium Nigeria Plc witnessed 14 per cent increase in interest expense, which also contributed to 26 per cent decline in pre-tax profit of the struggling company.

    Financing cost, which rose by 200.8 per cent, contributed significantly to N38.58 billion loss recorded by Oando Plc in the first half ended June 30 this year according to report released at the weekend. Oando’s financial charges for the six-month period had risen to N26.65 billion this year as against N13.27 billion recorded in comparable period of last year, compounding the slowdown in sales and foreign exchange challenges. The integrated energy group had recorded profit before tax of N8.57 billion in comparable period of last year.

    Many top management sources said their inability to source new equity capital due to the meltdown at the capital market had forced them to continue relying on high-interest bank loans. Many had suspended or slowed down considerably their long-term corporate growth plans due to paucity of funds.

    Head, financial advisory group, GTI Capital Limited, Mr. Hassan Kehinde, said the inability of companies to raise funds locally through the capital market had forced them to opt for foreign loans, which initially were obtained at relatively cheaper rates but subsequently became serious burden due to devaluation of naira.

    Citing several companies in the fast-moving consumer goods industry and oil and gas sector, Kehinde said the apathy in the primary market of the Nigerian capital market was partly responsible for undue financial leverage noticed in the accounts of many companies.

    He added that besides the risk of high interest expense due to tightened banking operating environment at home and the foreign exchange risk associated with foreign loans, financial mismatch might further undermine the performance of several companies as they had been forced to use short-term banking loans to finance unsuitable relatively longer projects.

    Companies that had recently launched bids to raise new capital have demurred from furthering the issuance process as share prices continued to fall at the Nigerian Stock Exchange (NSE). Flour Mills of Nigeria Plc, which recently submitted application for regulatory approval to raise N30.25 billion through a proposed rights issue, opens today below the proposed offer price at N21. Flour Mills had planned to offer 1.09 billion ordinary shares of 50 kobo each to existing shareholders at N27.50 per share. Another company, May and Baker Nigeria Plc, which had announced plan to float a rights issue, opens at N1.22, a price the promoters of the issue considered to be below the intrinsic value of the company with World Health Organisation (WHO)-certified manufacturing complex.

    A management source in one of the prospective issuers had told The Nation that they were reconsidering their new issue plan and would likely opt for private placement on concerns that the company might not get the right value for its shares through the open offer and investors might shun the issue.

    Companies that had floated new issues in recent period largely fell below their offer targets. All the companies have also been trading below their offer price, putting subscribers to the issues in losses.  Access Bank, which had offered about 7.63 billion ordinary shares of 50 kobo each at N6.90 to existing shareholders, recorded 79.4 per cent success rate.

  • Farmers lament high cost of production

    The high prices of farming input are negatively affecting the capacity of small farmers to prepare adequately for the cropping season.

    The Programme Coorodinator, Farmers Development Union (FADU), Mr Victor Olowe, told The Nation that input financing has become a problem yearly, as the government’s efforts have failed to address the issue even with the promise of subsiding farmers costs by 50 per cent.

    High transportation costs and market access are two key issues faced by vegetable and root crop farmers. While many farmers were productive and harvested their produce in commercial quantities, the unavailability of markets was a big drawback.

    Another challenge was the high cost of transportation of having to spend at least two to three days in urban areas waiting for their produce to be sold and in the process, some of the ripe tomatos get spoilt.

    He said the food system is highly fuel and transport dependent. This makes the production system less secure and food less affordable.

    Meanwhile, many poor farmers who cannot afford machinery, fuels and commercial farm inputs find themselves at a disadvantage in the food economy.

    As a result, thousands of farmers suffer great losses.

    Olowe said farmers have to slash labour costs dramatically to have any chance of saving operations.

    He said labour costs was affecting farming operations nationwide.

    Early this year, fish farmers decried the continuous increase in cost of fish feeds in the market while the market price of fish falls yearly, leading to exit of many fish farms.

    According to them, the dependence on imported feeds has stimulated wide price fluctuation, leading to price inflation of feedstuff.

    At present, a bag of Coppen feeds, an imported feed, costs between N4,000 and N5,200 per bag as compared to the price of a live fish, sold for about N480.

    The government only regulates the commodity markets through import controls and price support through subsidies or direct government purchases and other policy instruments designed to support the feed manufacturing industry.

    Under the Industrial Development (Income Tax Relief) Act, the manufacture of animal feeds was placed on the list of pioneer industries; this ensures a five-year tax holiday to new feed millers entering the industry and aimed at stimulating investment in the animal feed mill industry.

    Prices are fairly consistent with product quality and for some items pegged to those specifications that are most likely to vary, for instance the moisture levels for grains or crude protein levels for fish meals.

    The larger feed mills maintain laboratories that check raw material quality and monitor the feed manufacturing process, to help maintain the quality of feedstuff.

    Importation of feeds, according to fish farmers, is the major cause of the increasing price of fish feeds in the market, whereas importers of feeds attribute the price increase to the corrupt nature of law enforcement agents.

    President, Lagos State Catfish Association of Nigeria, Rotimi Omodehin, said the high cost of feeds have hindered many farming business and closed many farming enterprises.

    He urged the government to invest in animal feeds to help improve the productivity level of farmers.

    “Building of feeds mill will help the farmers, and farmers are willing to patronise government feeds because individual retailer’s price is killing the farmers,” he said.

    He reiterated that subsidy in agriculture is very important and removal by the government is to the detriment of the average farmer.

    A livestock farmer, Temitope Odetola, said the government had neglected livestock farming and little or no funds were made available for the farmers.

    He added that the small-scale farmers find it hard to get capital and bank loan is out-of-reach for them.

  • High cost of running for public office

    SIR: The cost of running for a political office in Nigeria makes the race unwinnable to a candidate with good intentions. Many are liquidated from pursuing their chance of a moment in the sun. At the end of the day, they become cynical. The physical, ethical and financial cost of running for a political office will make a wise man ask, what is the trouble? Politics should be a game of wits and not a battle with the beast.

    Power is intoxicating and many people are willing to get drunk on the juice of politics. A candidate squanders all of his or her wealth, and goes borrowing to finance his campaign. He hopes to buy people’s loyalty. He is praised and assured direct access to the office of his aspiration by his purchased audience. He rambles on day in and day out like a wino on his promises of a better time to the suffering citizens. The wind of reality becomes toxic to his or her skin and a honest opinion is repelled like a plague. The shout of sycophants turns to a sweet melody in his ears.

    It will not be scandalous to compare politicians to prostitutes. They both clamour for public attention. Excessive desire for entertainment and sexual looseness appear to be the stimulants propelling their ambition. Politicians seem to have the stamina of a thorough-bred horse when it comes to gallivanting to showcase themselves as champions of the masses. Give them a crowd, turn on the microphone and they will shine their winning smile. Just to please an audience, they will kiss a clown. Dining with a monster becomes a part of the protocol.

    The willingness of politicians to expend so much energy, money and morals is motivated by their vision of unlimited celebration when they get into office. They spend so much money to buy peoples conscience. They habitually lie to win ones intelligence. It is like tango with a monkey holding down a politician to his words. Every other value they have is lavished on reckless wantonness. They close their eyes on the groovy ride. They are convinced all the way that the hand of God is manifest in their mandate.

    Politicians are like every one of us except one is inclined to believe they are made of a different breed. The marginal pulse that creates political visionaries, when it is off, produces imbeciles. If one is not made of steel or money, one should not aspire to a successful political career in Nigeria. Leave the bone in the paws of dogs and watch their encounter with the evil spirit. The high cost of politics makes a good man shy away.

     

    • Pius Okaneme

    Umuoji, Anambra State.