Local and foreign stocks: top 5 you need to own
It’s never easy to foresee the local and foreign stock markets, whether you’re a novice or a seasoned investor. As the year draws to a close, it’s critical to invest in and hold the correct equities for the future. The greatest method to hold a stock is to hold it forever, as Warren Buffet, the world’s most famous serial investor, will tell you. Although forever can be a long time, you can still hold certain stocks as part of your long-term investment plans. Here are some local and foreign stocks you should consider holding: Foreign Stocks Apple (AAPL) Since Apple became the first U.S company to reach $1trillion in 2018, its valuation has significantly increased. It is the lead company in the smartphone and tablet market in the US, having 40% and 29.2% shares respectively in both markets as of Q4 2020. Johnson and Johnson (JNJ) Between 1973 to 2020, the New Jersey-based health and pharma giant has seen its cash dividends increase. In the 10 years ending on May 12, 2021, the stock’s split-adjusted return (not including reinvested cash dividends) was 157.24%. Dover (DOV) Dover, like J&J, is a dividend king, with yearly cash dividends climbing year after year from 1973 through 2020. In 2020, Dover, a Chicago-based fluid management, industrial goods, and manufacturing support systems corporation, paid $1.97 per share in quarterly dividends. Microsoft (MSFT) Microsoft has become less reliant on its Office software suite and Windows operating system for revenue, having shifted toward cloud infrastructure and services business. The company’s revenue from commercial cloud services increased 31% year over year in the first quarter of the fiscal year 2021. In the fiscal year 2020, it paid a quarterly dividend of 51 cents per share. For the first three quarters of the fiscal year 2021, the firm paid a dividend of 56 cents per share. Amazon.com (AMZN) In 2020, Amazon, the second-largest retailer in the world, had a total of $232.88 billion in revenue. Amazon is also relying more and more on its cloud computing business to drive revenue and profit gains. The stock’s average annual return from 2016 to 2020 was 38.93%. Amazon was the second company to reach a $1 trillion market cap. Local Stocks Conoil PLC (CONOIL) Compared to the beginning of the year 2021, CONOIL has seen its stock rise by 7.1% moving from 20.85NGN to 22.35NGN. CONOIL is the 87th most-traded stock on the NGX and it has traded a total volume of 6.35 million shares, which were sold in 1,340 deals, at a value of NGN 139 million. CONOIL achieved an all-time high trading volume of 695,146 on August 9. Seplat Energy PLC (SEPLAT) The company began the year with a share price of 402.30NGN and has since increased by 88.8%. SEPLAT is the NGX’s 84th most traded stock, with a total volume of 8.86 million shares moved in 1,238 deals at a total of NGN 6.33 billion. MTN Nigeria (MTNN) MTN share price has increased by 1.53% from an initial price of 172.50NGN. They are 62nd on the NGX where year-to-date performance is concerned. MTN Nigeria is the 37th most-traded share on the NGX and in the past three months, a total volume of 90.3 million shares was traded in 5,621 deals which were valued at a total of NGN 15.1 billion. Zenith Bank Plc (ZENITH BANK) Zenith bank began the year 2021 with a price of 23.80NGN, up 3.23 per cent over the previous year. With a total trading volume of 737 million shares in the last three months, Zenith bank is also the sixth most-traded stock.
The Agriculture Sector: 6 things that need to be fixed
There challenges that rock the growth of a very promising agriculture sector.
These are a few amongst others.
New ideas and more people in the workforce is one direction to look at.
How to Invest in a Mutual fund
Mutual fund investors pool funds together to purchase a broad range of stocks, bonds and other assets mostly through a company. Mutual fund investors don’t directly own the stock in the companies the fund purchases, but they do share equally in the profits or losses of the fund’s total holdings — hence the “mutual” in mutual funds. There are thousands of mutual funds available that pursue a very wide variety of different investing strategies. This can make understanding the space challenging for new mutual fund investors. Here are steps you can take to help you get started when investing in mutual funds. Decide on your mutual fund investment goal Just like any other investment, before you invest your money in mutual funds make sure you have a clear investment goal. It could be long term or short term. This gives you clarity on the type of mutual fund you should go for. Long-term goals like retirement and college funds should drive you towards stock-based mutual funds. With this option, you have time to go through the ups and downs of the stock market. Mutual funds offer a safer option compared to others because you invest in a range of companies and debt. If your goal is mid-term, between 5 to 10 years, you should opt for a balanced mutual fund. It invests in both stock and bonds, offsetting some of the risk associated with stocks. A money-market mutual fund or government bond fund might be a good option if you have a short-term goal, like buying a car or a home. Research potential mutual funds A Tool like mutual funds observer is great for researching potential mutual funds to invest in. They provide detailed information on different mutual funds in multiple categories. These are factors to consider, that will help you create your list of mutual funds choices: Past performance: A fund’s past performance is an indicator of how well the fund is meeting its stated goals. However, this does not guarantee its future success. Compare past performance to similar mutual funds. Expense Ratios: These are annual fees that compensate the fund’s manager and cover the cost of buying the fund’s investments. It is important to pay attention to the expense ratio, whether it is less than 1% or 2% because they can impact your money’s growth over time. Load fees: The commissions charged by the broker who sells you a mutual fund is referred to as the load fees. While some mutual funds have them others don’t. For a beginner, you should aim for one that doesn’t have them. Management: Decide if you want your mutual funds to be actively managed or passively managed. Actively managed mutual funds aim to beat the performance of an underlying index. They usually charge higher fees and offer the potential for richer returns. Passively managed mutual funds—or index funds—aim to duplicate the performance of an underlying index. They typically charge lower fees than actively managed funds. Historically, passively managed index funds have outperformed actively managed funds over the long term. Open an investment account If you already have an employer-sponsored retirement plan you already have access to mutual funds. Most employer-sponsored plans direct your funds towards mutual funds rather than investing directly in stocks or bonds. If you don’t have access to an employer-sponsored retirement account or are investing for a goal outside of retirement, you can invest in mutual funds by opening a brokerage account on your own and investing in the following plans: Individual retirement accounts: An IRA account is a tax-advantaged investment account that helps invest in mutual funds for retirement. Taxable brokerage accounts: This account is suited for goals you want to achieve before retirement, although they lack the tax benefits of an IRA, you can make withdrawals at any time without paying penalties. Education savings accounts: This account enables you to plan for university education for your children. You can invest in mutual funds in the long-term to help you achieve this. Purchase shares of mutual fund After you open your investment account, the next step is to fund it with just enough to meet the minimum entry fund for your mutual fund investment. Although the minimum entry fund for some mutual funds might be higher than other asset options like stocks and ETFs, it still offers the option of buying fractional shares of the mutual fund. It is also suitable for long-term investments. Set up a plan to keep investing regularly To be able to reach your goals and grow wealth then you should establish a plan to help you keep investing. Your brokerage trading platform can help you set up recurring investments on a daily, weekly or monthly basis so you don’t have to remember to deposit money into your account every time you want to invest. This helps you pay less per share over time and helps you reduce the risk of buying a lot of mutual fund shares when prices are extremely high. This also offers you the opportunity to buy more shares when prices are low. You should also set up a plan to check in on your investments at least once a quarter, this will give you the chance to rebalance your portfolio and makes sure that its asset classes still match the level of risk you want to take to meet your goals. If this is daunting for you, you can join our community by joining our mailing list to learn more about how our services can help you achieve your goals. Consider an exit strategy When you meet your investment goal or retirement, you’ll want to sell your shares or make withdrawals. You’ll have to make a plan to help you minimize the taxes you owe especially if you’ve not held your investment in an IRA. Speaking to a financial advisor or tax professional is one way to help you create a good exit strategy.
How to Attract Investors
The dream of every small business is to grow into a big firm and it is important to know that no matter how great your business idea is, without finance there is little or nothing that could be achieved. However, it Is a well-known fact that attracting investors can be incredibly difficult and time-consuming. Here are a few ways you can attract investors. Outline your business plan It is very important to have a credible and realistic business plan, especially for the goals for the first five years. Focus on the details for the first year. Understand that investors are busy people so make sure the business plan is concise (straight to the point, with facts, numbers and predictions). You can read our blog post on how to create a business plan to learn more. Have a good financial model Describe your revenue model in detail. Outline the expected cost, and give realistic predictions based on market research. Do a month to month forecast of expenses and revenue for at least three years. Also, ensure that your plan enables the investors to make money. Do market research It’s a well-known fact that there are no new business ideas, so it is important to have a “competitive advantage”. This simply means something unique that makes your product or service different from your competitors. This will serve as your selling point to both customers and potential investors. It will make them believe in your dream and vision. Practice your pitch The ability to sell your business proposal is also key in attracting investors. “An elevator pitch” would be the most effective tool at this stage because it is an attention grabber. When meeting with a potential investor be professional, polite, credible and confident. A wise investor can read through a person because an investor does not only invest in a business but also the owners of the business. Focus on why they would want to invest in you. Do your research on investors and think like an investor while preparing for a meeting. Ask yourself questions you would want to know if the roles were reversed. Establish a solid brand This is a very important factor in attracting investors. This simply means letting your work speak for you, focusing on quality and personality instead of quantity. Understanding that people are watching is very crucial. Every smart investor wants to put money where they can get value for the money. Leverage social media As we all know, technology and innovation are a big trend in the business world today. The world as we know is a global village and social media is a great place to help with brand positioning. This is a platform that can be used to show the world what you do. The publicity can create awareness and also attract investors.
How to Pick A Business Partner
Starting a business can sometimes be compared to having a new baby. It is usually an exciting time, presenting different opportunities and risks as you nurture it to grow. This is why it is important, as a small business owner, to choose the right partner when you are starting or expanding your business. A lot has to be considered when making the decision, from the ability to raise additional capital, to new and complementary business skills, enthusiasm, commitment, and also if they share the same philosophies with you in terms of business parenting. This article highlights key factors every entrepreneur should consider when evaluating potential partners because business partnerships can pose their own challenges. Experience in your industry Positive experience in a similar or related industry is just as important as the skills a potential partner has developed. This is because it makes your business more attractive to investors. When you and your partner have a track record of success, it breeds confidence. Complementary Skill and Strength No one has mastery in every aspect of a business. It’s important to pick a business partner that possesses skill and strength in areas where you’re not particularly efficient. If you have better quantitative skills, you can bring in someone with strong marketing or networking skills. The more skills you and your partner bring to the business together the easier it will be to start, plan, grow, and run your business. Similarity in Values and Vision This might be one of the most important factors you should consider because you need your values to align to be able to achieve your goals. You will need to be able to communicate effectively with your partner to make decisions, set goals, and drive the business forward. If there are a lot of opposing views and disagreements then the partnership and business will not move forward. Picking the wrong person as a partner, opens your business to a lot of vulnerability, they could steal the business, break laws and get destroy the entire business. Financial stability and responsibility Your partner should have a good financial record, one without blemishes, this has nothing to do with their financial contribution to the business. How they manage their finances says a lot about how much they can contribute to the business. Money, asset, and time management skills are critical for small business entrepreneurs, and someone who has grossly mismanaged their personal or business finances may not have the skills or discipline to make a business partnership work. Personal and Business Ethics Trust is key in anything we do and that should also be carried into our business and in choosing a partner as well. Only go into business with someone who values honesty and practices good personal and business ethics. Picking the wrong person as a partner, opens your business to a lot of vulnerability, they could steal the business, break laws and get destroy the entire business. Responsibility, Valuation and Contract Deciding on who does what and who is responsible for what is key, this is to avoid conflict and build individual confidence. Also, decide on a formula to determine the value of the company to avoid disagreements if one partner decides to leave. Buy/Sell agreements are incredibly useful for discussing all possibilities and how they will be handled before they become a reality. Partner, employee or consultant Lastly, it is important to know who fits as a partner, employee or consultant. Don’t make someone partner because you can’t afford to hire them. It is better to hire them as a consultant than give them a part of your company. To be part of our community and get updates and other relevant market info, sign-up for our newsletter (Volition Insight), here
How To Manage Crisis As A Small Business
How to manage crisis, explains some key steps that can be taken by a small business owner when handling crisis. In business, crisis is certain and most small businesses tend to forget that it doesn’t just happen to the big corporations. Crisis can occur as a result of theft, ailments, injury, loss of major customers etc. This can result in a decrease in revenue generation and possible loss, and can render whatever strategy and plan a business owner has futile. This article covers some very key steps one must take, and the mindset any small business owner must have in dealing with crisis before it grounds your business. Positivity Is Key Your business should always be conducted ethically, from your planning to your business activities. This is important in gaining the trust of your clients and customers. It shows a positive mindset. When confronted by the media to ascertain what happened in case of a crisis, do well to always express positivity about what happened. Your organizational mission and vision statement should always drive inspiration. “Your values and vision are very important towards carrying out your business ethically” Identifying and accepting that a problem exists is key to crisis management. A crisis cannot be dealt with effectively if there is dishonesty about the problem affecting your business. Admitting and dealing with the problem when it’s small prevents it from escalating into a bigger situation. Always believe in your capacity to deal with whatever crisis hits your business. Whatever the issue is, especially if it requires a professional hand, kindly get one and let them deal with it with some finesse. Denying a problem exists will never solve the situation. The only thing that solves the situation is taking the right action. Having your core values clearly stated is very important. Your values and vision are very important towards carrying out your business ethically. This is the basic guideline for doing your business and as such will help keep your focus when managing crises. Going back to the basics and restructuring your plans to match your goals and vision is one way to go in managing a crisis. Take corrective action. Admitting you have a problem is one thing, identifying the issue is another. Without doing that you cannot take corrective action. Cutting expenses is corrective action. Withholding or discontinuing a project is also a clear corrective action. Even the big corporations stop multi-million dollar projects to save billions. This is to save expenses and meet their organizational goals. Downsize and work with your best talents. Hard times require us to make hard decisions. As a business owner, you have to optimize your workforce by taking out anyone who doesn’t add value. This is irrespective of the relationship, as they could be family or friends. About 20% of revenue generated goes into employee salaries, and during critical times you need to downsize to cut down expenses. Another reason is to increase the efficiency of business operations. It is better to increase wages in an optimized work environment to improve efficiency. Cope with Problems and be ready to learn. Every crisis presents a learning curve. It presents you with an opportunity to amplify your skills and find new solutions. Breaking out of your comfort zone will help your business reach its full potential. It teaches you how to deal with issues like non-productive employees, unprofitable projects and huge expenses. Controlling your emotions and applying emotional intelligence especially when dealing with your team is important. Think proactively and strategically; this will help you to become a leader that controls circumstances. Key takeaways from the article are: Positivity Is Key Be honest about the problem. Your core values should be well defined. Take corrective action. Downsize and work with your best talents. Cope with Problems and be ready to learn.
How to create a business plan – dos, don’ts and extra
Last year, we wrote to you about how you can position your startup for funding. We noted that most startups fail. Failure is more frequent than success in that startup life. It is difficult to run a startup, but it is also rewarding. We therefore offered a guide that detailed how to position yourself for funding. We began with creating a detailed business plan. Today, we will expatiate. Why is a business plan important? Typically, a business plan will help you get funding or bring on new partners. Investors want to see your business plan so that they are confident about returns on their investments. In this regard, a business plan should convince people that working with you or investing in your company is a smart choice. However, a business plan can also guide you through each stage of starting and managing your business. It should remind you of the key elements of your venture, and serves as a roadmap for how to structure, run and grow your business. What are the important considerations for your business plan? What are the points that serious investors will objectively consider? First, your management. Investors want to know how much experience the manager/management possesses, their educational background and track record. Second, what problems are you trying to solve? What is your unique, sustainable solution? Uniqueness is important because it determines how competitive your market will be. Importantly, ROI. How much return on investments are you promising and how long will it take before you become profitable? Also, can your business scale up? Can your business expand? Can it cater for a larger pool of customers? Can your process be replicated? Is your structure entirely fixed on you? Finally, what is the exit plan? Private equity investors, especially, do not want to get stuck. They want to provide capital and support for your company, then sell out to other investors. This is why your business must be attractive to other potential investors. Forms of business plan Most business plans are either traditional or lean. Traditional business plans are more common – they use a standard structure and encourage going into details. Traditional business plans require more work and can be dozens of pages long. While lean startup business plans still use a standard structure, they summarize only the most important points and are typically one page. Parts of a business plan When you write a business plan, you are not expected to stick to an exact outline. Instead, use the sections that make the most sense for your business, your business and your needs. Most business plans, however, contain the following, necessary parts. The executive summary In the executive summary, briefly tell your reader what your business is and why it exists. You should include your mission statement, product or service, and basic information about your leadership, staff and location. If you plan to ask for funding, you may also include financial information. Company description Here, you may go into details about your company – the problems your business solves. List out the consumers, organization or business your company plans to serve. You may thereafter explain the competitive advantages that will make your business a success. Use your company description to boast about your strengths. Market analysis You would need to show a good understanding of your industry and target market. What are other businesses doing, what are their strengths and weaknesses? What are the trends, themes, best practices? What can you do better? Now is the time to answer these questions. Organization and management Describe the legal structure of your business. You should state whether it has been registered as a legal entity and the form it was registered as. You should also include an organizational chart to portray the organizational structure – who is in charge, who else is involved and how everyone’s unique experience will contribute to the success of your business. You may also include resumes of key members of your team. Service or product line Explain the product you sell or the service you provide. Explain how it benefits your customers and what your product lifecycle looks like. Marketing and sales In this section, describe how you will attract and retain customers. What is your marketing strategy and how does it fit your unique needs? How exact will a sale happen? Funding request If you are asking for funding, you would need to outline your funding requirements. Here, your objective would be to clearly explain how much funding you would need over a specific period and what you would use it for. Would you buy equipment or materials, pay salaries or cover other running costs? Specify whether you want debt or equity, the length of time and the terms of the investments. Financial projections Your most important goal is to convince your reader that your business will be a financial success. You would therefore need to accompany your funding request with financial projections. If your business already exists, include income statements, balance sheets and cash flow statements for the last three to five years. Provide a prospective financial outlook for the next five years. Include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. Endeavor to explain your projections and match them to your funding requests. You may employ the use of graphs and charts to tell an intriguing story. Appendix Finally, use an appendix to provide supporting documents or other materials that were requested. This is all we can take for now. If you are growing African business looking to expand through venture funding, we’d love to hear from you. Simply fill our contact form. Thank you.
How to save money – tips for the second half of 2021
Life is hard, but it can be much harder without savings. This is Nigeria, so you are only one disaster away from needing urgent funds. Also, the only way to become wealthy is by saving and investing. And saving comes before investing. Do you ever feel like it is impossible to save no matter how hard you try? You try to spend less and stash funds, but something always comes up. Life just gets in the way. In Professor’s master plan, this is where Volition comes in. We have compiled tested and trusted tips to get your spending on track and help you save some money. Now, relax and pay attention. Make money Durggh. To save, you need to make money. First, you need to make enough money. If what you make barely covers your essentials, then you cannot save. You should not. To earn more than you already do, you need to improve your skills or seek better opportunities. Second, you need to make money consistently. To save, you need to be fairly certain of how much you will make during a period. At least, the least you will make. So, consider a job or business that is sure to pay you monthly. Spend less than you earn To be wealthy, you need to invest. To invest, you need to save. To save, you need to live below your means. It is the only way you will have money left. It is impossible to save if you spend all the money you make. Spending more than you earn is even worse. It is important to live within your means so you would not rely on loans to pay your bills. This is tied to the next tip. Get out of debt This one sounds like “aspire to inspire”. Easier said than done eh? However, to improve your chances of saving, you would need more of your money. You don’t want your paycheck to be gone before you even receive it. To get out of debt, cut your expenses, work to increase your income, and make a consistent repayment plan. Budget! A budget will help you remain intentional, so you don’t spend more than you earn. You will find out how much you can save each month. You can make a zero-based budget – give every single naira a name – or assign it a job to do – before you save or spend it. Go a step further by documenting your expenses periodically. Find out where your money went today or this week. How much did that Uber cost? How much is your rent? Write these things down. Your memory is not as good as you think it is. Have a goal and stick with it If you do not have a savings goal, you will easily spend your money. To save successfully, you need to set a clear goal and draw up a plausible plan. What are you saving for? Is it an expense or an investment? For how long will you save? How much will you save per year, month, week, day? It doesn’t matter what we write though, you would still need the discipline to achieve your goals. Once you set up savings towards a goal, try to keep your hands off of the savings till you achieve your goal. Finally, try rewarding yourself for reaching small milestones. Pay yourself first Paying yourself first means separating your savings as soon as you get your paycheck, and then living off the rest. If you only pay yourself after your bills and expenses are taken care of, you run the risk of never saving enough. You can save money without thinking about it. You can set up your bank account to automatically transfer funds to a savings/investment plan. Saving automatically is especially imperative for people who spend whatever they see! Spend extra or unexpected income wisely Now and then, you will find N500 in your jeans. Or your uncle will give you N50k. Or you will see N500 million in a Ghana-must-go on the floor (that comes with a “you will not turn to a goat” tag). What should you do then? When you make unexpected income, you must put it to good use. You will get lucky. Everyone does. So, have a plan for where “lucky money” is supposed to go. Mind your expenses If you put yourself on a zero-based budget, you are more likely to do away with discretionary spending. This way, you must question every item on your list. Do you really need this and that? Take a few minutes to make a list of your monthly expenses. Identify your needs, and distinguish them from your wants. You may sort your needs immediately and purchase them in bulk. For your wants, wait! Particularly, think about non-essential items for a long time. Consider the 30-day savings rule. This involves waiting for 30 days before you purchase a non-essential item. This way, you are more likely to take emotions out of your spending. The 30 days savings rule will stop you from spending money impulsively on things that don’t serve any real purpose. Reduce costs There are many ways to drive your monthly costs down – some are interesting and some are just obvious. Reduce the luxury. First, buy generic. A lot of times, the only thing that is better about brand-name products is the marketing. Meanwhile, generic brands cost less but work as well too. Second, end your addiction to new stuff. If your old possessions still serve their purpose, why replace them? Cancel any subscriptions you don’t use regularly, and make sure you turn off auto-renew when you make a purchase. If you cancel it and decide you can’t go without it, subscribe again—but only if it fits into your new and improved budget. Also, consider sharing memberships with some family and friends. Consider energy costs – electricity and gas. Consider reducing your electricity bill. Which lights need to go off? Do you
Behind Nigeria’s Inflation
Inflation reduces the purchasing power of currency, which leads to increases in the prices of goods and services. Inflation can occur when demand outpaces supply for goods and services. As the demand for a particular good or service increases, the available supply decreases. Few items are left to match many wants. Buyers may then want the product so much that they are willing to pay higher prices. This is called demand-pull inflation. Inflation can also occur when prices due to increases in production costs, such as raw materials and wages. As a result, the added costs of production are transferred to the consumers in the form of higher prices for the finished goods. This is called cost-push inflation. Inflation rate is the percentage increase or decrease in prices during a specified period, usually a year. This percentage tells you how quickly prices rose during the period. A few metrics are used to measure the inflation rate. The most popular is the Consumer Price Index, which measures prices for a basket of goods and services in the economy. Central banks around the world use monetary policy to control avoid inflation. In the United States, the Federal Reserve aims for a target inflation rate of 2% year-over-year. In Nigeria, the Central Bank of Nigeria is in charge of trying to control inflation. The CBN has a target range of 6%-9%. Inflation in Nigeria In March 2021, Nigeria’s inflation rate rose to 18.17% from 17.33% recorded in February. This is according to the Consumer Price Index report, recently released by the National Bureau of Statistics. The last time Nigeria recorded an inflation rate higher than 18.17% was in January 2017 when it stood at 18.72%. Since 2016, Nigeria’s inflation rate has been double digits. 2020’s hike was driven by the dire impact of the pandemic that also induced a drop in the price of oil and weakened the naira. In the third quarter of 2020, the economy went into recession – its second since 2020. The economy emerged from recession in the fourth quarter but analysts say the weak naira currency continues to fuel inflation. In Policy Round Up: Oil Price and Miscellaneous, we explained that the naira is a petrocurrency because its fate is intrinsically tied to global oil prices. Almost 90% of Nigeria’s foreign exchange comes from oil exports. So, when oil prices went down, the pressure on Nigeria’s exchange rate increased. The Central Bank of Nigeria (CBN) therefore had to devalue the Naira to reflect its true value. Meanwhile, food inflation spiked to 22.95% from 21.79% between February and March. February figures were already a four year-peak as it was the first time food prices jumped more than 20 percent since 2017. The NBS explained in its report that the rise in the food index was caused by increases in prices of bread and cereals, potatoes, yam and other tubers, meat, fruits, vegetables, fish and fats. In November, we explained that Nigeria’s land borders had been shut since August 2019. Although described as an effort to control smuggling and importation of contraband, the ultimate result was scarcity of food products and a consequent spike in prices. The federal government has now said it will cut import duty on tractors and mass transit vehicles to try to reduce transportation costs and tackle high food prices How does inflation concern you? Nigeria’s inflation has different consequences for respective stakeholders. Businesses face investment uncertainty resulting in capital expenditure constraints. The result of this is unemployment due to low business investments. Primarily, it indicates a dwindling in the purchasing power of Nigerians. The goods and services you can buy for a fixed amount continues to decline over time. This declining purchasing power forces you to cut back on items thereby affecting your standard of living. Inflation in Nigeria heaps financial pressure on households already faced with a shrinking labour market and a stagnant economy at a time of mounting insecurity. For investors, there are real returns concerns on how to protect and grow wealth. When there is inflation, money saved today will be less valuable tomorrow. It may even interfere with the ability to retire. How then do you protect your income? First, you would need to increase your income. This may involve negotiating a salary increase, changing jobs, starting a side hustle, or obtaining additional qualifications/skills. The best course of action however involves diversifying your investment portfolio to generate positive real returns. The total returns from your investments should at least match or be higher than the rate of inflation. There are a number of top-performing opportunities to explore in stocks, mutual funds, fixed income, real estate, commodities, crowd-investment schemes, depending on individual risk appetites.You may learn more about money and improve your financial literacy with a free investment course from our Director. Subomi Plumptre’s free investment course is your definitive guide to investing in Nigeria. Apply today.
Policy Round-Up: the Finance Act 2020
Crude oil remains Nigeria’s dominant revenue earner. So, over the years, the Nigerian government has struggled to finance its budget mainly due to low revenue caused by oil price volatilities. The result of this is an increasing budget deficit and borrowing from both domestic and international bodies. In September 2020, the nation’s public debt stood at a total of N32 trillion. On Thursday, 31st December, President Muhammadu Buhari signed the 2021 appropriation bill of N13.59 trillion. The bill shows an expected revenue of N7.99 trillion and an estimated expenditure of N13.59 trillion, equaling a budget deficit of N5.6 trillion which would be financed, in part, by borrowings of N4.69 trillion. Already, 24% of the total expenditure is designated for debt servicing, a whooping N3.3 trillion. On 31st December 2020, the President signed the Finance Bill, 2020 (now Finance Act) into law. It introduced over 80 amendments to 14 different tax laws and it took effect from 1st January 2021. Nigeria hopes to offset its budget deficit and decentralize the economy. Here, we have done a summary of the Act, at least it’s highlights. These have been sorted into subheadings – additions, exemptions, and procedure. Now let’s begin! Additions Unclaimed dividends and bank balances can be borrowed The Finance Act empowers the federal government to borrow unclaimed dividends and dormant account funds. It specifically refers to any unclaimed dividend in a public company listed on the Nigerian Stock Exchange. Also, any unutilized amounts in a dormant bank account. The dividend or amounts must have been unclaimed for six years. Companies (in the case of dividends) and banks (in the case of bank accounts) are expected to transfer the funds to the “Unclaimed Funds Trust Fund”. This trust fund is to be supervised by the Debt Management Office and governed by a governing council chaired by the Minister of Finance. However, owners can request for their money. The borrowed funds will be available for claim (alongside any interest) by the shareholders and the bank account holders at any time. However, the era of unclaimed dividends and dormant bank account balances is over. More excise duties In Nigeria, excise duties are levied on the manufacture of certain goods. The Finance Act has now expanded the scope of goods to which excise duties apply to include telecommunication services provided in Nigeria. N50 on transfers above N10,000 Electronic bank transfers are no longer treated as transactions liable to stamp duties. An “electronic money transfer levy” of N50 is now imposed on the electronic transfer of money deposited in any bank (or financial institution) on any account on sums of N10,000 or more. Exemptions Donations are tax exempt Cost of donation made in cash or kind to any fund set up by the government in respect of any pandemic or natural disaster to be tax-deductible subject to a maximum of 10% of assessable profit after other allowable donations. Our guess is – this provision is supposed to encourage companies that contributed to COVID-19 relief. Tax exemption for SMEs A small or medium company engaged in primary agricultural production may be granted pioneer status for an initial period of 4 years and an additional 2 years (making a total of 6 years). This means they would not pay tax for the period. Tax exemption for agriculture Interest on a loan granted to companies involved in “primary agricultural production” is exempted from tax. “Primary agricultural production” was defined to mean primary crop production, primary livestock production, primary forestry production, and primary fishing production. Tax exemption for software The development and acquisition of software or electronic applications now qualify for capital allowance. That is, they will not contribute to taxable income. Many businesses spend a lot of money in acquiring software or in engaging IT firms to build software. This provision will come as a relief to them. Exemption of low-income earners earning minimum wage or less from personal income tax The current national minimum wage is 30,000 naira. This means that anyone earning 30,000 naira or less is exempted from paying personal income tax. Reduction of import duties In Nigeria, importers pay duties on the goods they bring into the country. The Finance Act has now reduced the import duty on tractors from 35% to 5%. Also, the duty on mass transit vehicles (for the transport of more than 10 persons) and trucks has been reduced from 35% to 10%. The duty on cars has been reduced from 30% to 5%. This should be good news for everyone in the import business! Exemption from VAT Commercial airline tickets are now exempt from value added tax. As well as commercial aircraft, engines, spare parts. Also, airlines registered in Nigeria are entitled to duty-free importation of their aircraft, engines, spare parts, and components whether purchased or leased. We expect that all these would reduce the cost of flight tickets. Ordinarily, by half! The Act also exempts animal feed and hire or lease of agricultural equipment for agricultural purposes from VAT. Goods subject to VAT exclude land and building, money or securities while services subject to VAT exclude interest in land and building, money or security. It is now settled that lease of commercial buildings is not VATable in Nigeria. Exemption from TET Most companies in Nigeria pay Companies Income Tax and Tertiary Education Tax. Small companies with less than ₦25million turnover are now exempted from payment of Tertiary Education Tax. Minimum tax As a Covid-19 incentive, minimum tax for companies in respect of returns for years of assessments due between 1st January 2020 and 31st December 2021 has been reduced from 0.5% to 0.25%. Procedure All going virtual First, service of notice of assessment and objections under CITA (Companies Income Tax Act) may now be done via courier service, email, or other electronic means as may be directed by FIRS in a notice. Also, the Tax Appeal Tribunal may conduct its hearing remotely via virtual means, using such technology or application as may be necessary to ensure a fair