Many Nigerian investors may think that investing in a foreign currency asset is an exotic venture for ultra-high-net-worth investors. On the contrary, diversifying into foreign currency assets may be easier than you think and offers both short-term and long-term benefits.
Over the past few years, a growing number of savvy investors are putting their money into vehicles that offer exposure to low-risk dollar assets. This allows them to better manage the currency risk associated with a volatile exchange rate. They are doing this by investing in instruments like Eurobonds.
Eurobonds are debt instruments that are denominated in a currency, such as the US dollar, other than the home currency of the country or market in which it is issued. Nigeria’s federal government and several companies have issued Eurobonds that are currently traded on international financial markets.
Though the Eurobond market was previously dominated by investors from large banks and financial institutions, it has now become more accessible to everyone. Individuals are able to invest in Eurobonds directly or indirectly by investing in mutual funds created for this purpose.
Among the main benefits of investing in Eurobonds is the diversification of your investment portfolio. It is never a good idea to put all your eggs in one basket, it is better to spread your investments across several asset classes or issuers.
In addition to the returns that you could potentially make from the investment, you also benefit from the protection against a possible depreciation of the naira relative to the US dollar. If the naira depreciates against the dollar, then the return that you make on your investment in a Eurobond actually increases in naira terms.
Investing in a Eurobond is a relatively medium-risk investment option for those seeking exposure to assets denominated in foreign currency. Eurobonds offer fixed coupons or interest payments. The return on the investment is, therefore, more predictable. What you can make from a Eurobond also beats the interest that you will earn in most dollar domiciliary accounts in Nigeria.
Consider the FBN Dollar Fund offered by FBNQuest. It is a medium to a long-term investment fund that provides income and capital appreciation by investing in US dollar-denominated instruments issued by the Nigerian government and reputable corporate institutions. It is well suited for and adaptable to any investor type. The Fund offers attractive returns, safety, and liquidity to investors.
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By Michelle Knowles, Oladapo Adeigbe
Access to finance remains one of the single biggest constraints for small and medium-sized businesses on the African continent.
Nevertheless, it is important to understand the exact nature of the financing challenges experienced in order to design the tools to build financing capacity in this key sector of the economy.
When discussing SME financing, we tend to focus on early-stage and start-up financing. While this is certainly an important topic in the small business ecosystem, this may not necessarily be where financing efforts should be focused.
Rather a concerted effort to improve the value proposition around trade finance may offer a higher impact solution, particularly in Africa where the trade financing gap has risen to $82 billion and is still widening. Trade Finance is the oil that greases supply chains and ensures that buyers and sellers can ultimately fulfil their obligations.
For instance, a construction company places an order for work overalls from a local supplier. The construction company might only pay for the fulfilment of the contract.
However, the supplier has to deal with manufacturing capacity, people and raw materials to fulfil the order. This roadblock is a common issue for small businesses who receive orders but are unable to readily access the finance to fulfil these orders – it impacts not only the organisation which has received the contract but also the downstream suppliers.
Without finance to facilitate the transaction, the entire supply chain comes to a halt.
Trade finance becomes highly relevant here, by introducing liquidity into this transaction.
One of the segments that has been impacted the most by the exit of large global banks in frontier and emerging market economies (following the economic fall-out of the ongoing COVID-19 pandemic and the subsequent impact on the availability of trade finance) is SMEs.
The reasons for this are varied but the cost of regulation in the sector has increased, the perceived credit-worthiness of SMEs and lack of credit data are issues and foreign currency availability challenges persist when it comes to trade.
Financial inclusion across Africa is yet to peak as most SMEs operate in the informal sector and are largely unbanked. Hence, their viability cannot be ascertained or assessed directly by financial institutions.
More, the hurdles that impede growth in the informal market have not been effectively tackled. For example, an average transaction that involves, for instance, customs clearance in the local ports requires tons of paper documents which slow down trade activities by forcing unnecessary supply chain bottlenecks.
These trade and finance situations form a hurdle for a larger percentage of the SMEs who require ease of doing business and the valuable financial products offered by the banks to drive their growth plans.
It is for this reason Absa is focused on powering trade finance across Africa and enhancing the role that digitisation will play in facilitating access to finance for small businesses.
Digitisation is a key enabler in democratising trade finance and the pandemic has accelerated the adoption of digital trade finance solutions by SMEs and corporates. While technology-driven solutions are becoming more and more relevant, much of the trade finance sector is still very paper-driven with manual processes slowing down access to finance.
To digitize trade finance, the entire ecosystem needs to support and participate in re-imagining how we unlock value. This includes integrating activities between all role players including the regulators, the logistic companies, banks and other non-bank financial institutions (e.g., fintechs).
This will drive a concept that is known as Digital Trade Ecosystems which are secure online platforms that facilitate the exchange of data between partners in trade finance networks and will be a catalyst for the sector.
While innovation and technological advancements are important, there are three issues that have to receive urgent attention over the coming year to leverage the positive impact digitisation could have on SME’s
The first is a focus on the interoperability of systems to facilitate coherent industry-wide solutions that can operate at scale. This will become particularly relevant in Africa with the opening up of the African Continental Free Trade Area which is expected to be a big driver of cross-border trade.
The second issue will be Standardisation. A major issue for the sector as a whole is that only parts of the Trade and Trade Finance process are subject to digital innovation, whereas the end-to-end digitalisation across the trade value chain remains fragmented. We need a common language, technology and credit-scoring systems to facilitate faster access to solutions.
Thirdly, there needs to be a focus on more agility in the regulatory space. A perfect example of this is the limited acceptance of electronic documents and digital signatures on contracts by banks and other stakeholders. Millions of dollars of transactions could be freed up through the adoption of these digital tools, but there needs to be regulatory buy-in as a priority.
Digitisation must be supported by increasing foreign currency availability, and regulatory reform as it relates to the treatment of trade finance. Hence collaboration is required between the financial industry, Fintech, DFI’s and regulators. At Absa, we have seen and continue to see, increasing demand for these digital solutions and are accelerating our efforts to be a key driver of trade finance solutions on the continent and to be an enabler of the AfCFTA Agreement which is a critical step to building a healthy SME ecosystem for Africa.
Michelle Knowles is the Head of Trade Finance at Absa, while Oladapo Adeigbe is the Head of Financial Institutions Trade Sales at Absa
By Jerome-Mario Utomi
This piece stemmed primarily from a 2023 presidency-focused telephone talk I had with Theresa Ashien, Publisher’s Assistant, the Ika Weekly Newspaper, a Delta State-based community newspaper.
Aside from being apt and accurate in her presentation, she gave an indication that there exists a possibility that Dr Ifeanyi Okowa may emerge as the President of the nation come 2023. A state of affairs she argued that if achieved, is laced with the capacity to stabilize the nation’s political geography.
Her opinion was hinged on reasons that come in multiple folds.
First and very fundamental is that the Governor is from the Delta North Senatorial zone. The zone is also known as Anioma. A loose interpretation of Anioma in the Igbo language is good land. They are Igbo speaking. By virtue of this fact, Governor Okowa is an Igbo man from Delta State. The Aniomas are ably represented at Ohaneze Ndigbo, a socio-cultural umbrella of all Igbos in Nigeria.
Looking at geopolitical consideration, Okowa, she stated, is from the South-South region/geopolitical zone. And there is this ingrained belief/agitation by the people of the zone that they need to complete the remaining four years (one term) which former President Goodluck Ebele Jonathan (GEJ) was denied.
While pointing out that another factor that may work in Okowa’s favour is the fact that he is a prominent member of the Peoples Democratic Party (PDP) as well as a rallying point when it comes to issues of national importance.
She concluded that Okowa’s presidency, if fate allows, will serve a dual purpose, to settle Igbo persistence agitation for the presidency and calm frail nerves of the people of South-South geopolitical zones.
Indeed, I have given some serious thought to the issues raised by Mrs Ashien, they are objective concerns. It is also obvious in my view, that we cannot push back the hands of time in this direction. The only option left for us if we are not to be caught napping is to harness the factors of change and use them to our advantage.
The truth, the bitter truth in my views, is that it is a barefaced truth that the Nigerian state has not treated the people of South-South and the Igbos fairly since Independence. Making the situation worse is that the leadership style of the present government at the centre today leaves much to be desired.
Other things that bother Nigerians in addition to the above is our vision for the nation beyond 2023; the nation’s rising debt profile, the scary unemployment situation in the country, galloping growth in population, high rate of corruption, mindless near-exclusion of some zone in government appointments, economic stagnation/very high degree of insecurity in the country.
In the face of these realities, the question may be asked; is Governor Okowa interested in the 2023 Presidency? If yes, is he laced with the capacity needed to arrest the drifting nation and tackle the catalogue of challenges outlined above? Will he speak out for justice and practice justice? Can he efficiently and effectively handle the issue of just wages for Nigerian workers who are currently treated like slaves? Could the above arguments/observation by Ashien be considered as a vote for Governor Okowa’s 2023 Presidency?
In providing answers to the above beginning with Okowa having an interest in the presidency, this piece may not say categorically, but Okowa has at different times and places urged Nigerians to support the PDP to take over governance in the country in 2023.
For instance, during a recent thanksgiving service by Chairman of the PDP in Delta, Chief Kingsley Esiso, in Sapele, Delta State, he said the party would do everything possible with the support of the people of Nigeria to win the 2023 presidential election and restore good governance, including infrastructural development in the country.
Definitely, Governor Okowa may not have completely kept pace with the signs of time but as noted in a similar intervention in the past, evidence abounds that he is equipped with a transformation mentality. This spurred him upon assumption of office in May 2015 to declare that he will create an enabling environment for local and foreign investors via appropriate measures to sustain, increase, and even introduce new measures to contain and tackle the sources which breed and encourage insecurity as no society can grow without peace and security.
In keeping with this promise and to effectively secure lives and property, Okowa’s administration in the year 2020, came up with Operation Delta Hawk, a new security outfit floated by the Delta State Government to enhance the security of lives and property and checkmate insecurity in all parts of the state headlong.
Today, the state is peaceful.
At this time, this piece will take a critical look at Governor Okowa’s nation-building footprints/relevance. Beginning with his recent call for a complete overhaul of the nation’s 1999 Constitution, it was widely reported that the Senate Sub-Committee on review of the 1999 Constitution met recently with Governor Ifeanyi Okowa, in Asaba, the state capital.
Surprisingly but to the admiration of all, Governor Okowa was not only decisive but emphatic in his position/demand. While he noted that Nigeria needs a new constitution, he kicked against the amendment of the 1999 Constitution (as amended).
Let’s listen to him; a new constitution for the country had become necessary in view of inherent flaws in the 1999 Constitution. It’s good enough that those sent here are familiar with the zone. So, when the people speak, they would understand “But, I also wished that some persons from other zones actually had the opportunity to come here and hear the voices of our people directly, because sometimes we do not understand the extent of the pains that the Niger Delta people truly suffer in the country.
As the debate on who becomes the nation’s president come 2023 continues, two things stand Okowa out.
First, he is transformation personified; a medical doctor turned politician. A politician turned Administrative Secretary of Ika Local Government; Administrative Secretary turned Local Government Chairman (Ika Local Government); Local Government Chairman turned Commissioner where he at different times and places transversed about three different ministries; Commissioner turned Secretary to the State Government (SSG); SSG turned Senator and of course, a Senator turned Executive Governor of the state who is now serving out his second in office as the Governor of the state.
Secondly, Delta State, to use the words of Governor Okowa, is a microcosm of Nigeria because she is populated by different ethnic nationalities and has had inter-ethnic conflicts/clashes, fatal boundary disputes, especially over oil-bearing land, and political tensions, a case that in my views qualifies a governor of such state to effectively lead the Federation.
Jerome-Mario Utomi is the Programme Coordinator (Media and Public Policy), Social and Economic Justice Advocacy (SEJA), Lagos. He could be reached via email@example.com/08032725374.
By Nneka Okumazie
What does it take to develop a country? Courage, the right mix of courage. There are all kinds of courageous experiences by billions of people over places and history, but there is a right collection of courage it takes to make progress.
It takes courage to take a trip, work somewhere, or stay in school, etc. It takes negative courage to do organized crime like drugs or human trafficking, fraud, corruption, etc. but no matter what it seems like when they get away with it, that courage is useless to actual progress.
What will it take for most sectors of a developing country to do their best in their own area, to ensure that it is not just business as a tradition, or business for competition, but endeavours towards progress?
Resources including humans are necessary, but lots of countries around the world have natural and human resources but are far backwards. Mostly, people blame governments, but a very efficient government with a non-efficient, non-public sector is a waste.
The seller of the product whose aim is not just to expand shop or use the profit to seek luxury, but to plan towards making new products, in a quality, affordable and for sales to go beyond their shore.
The education people whose objective is not to just teach, but to cultivate intellects of simmering talents that can go into society and be driven to making great difference only, nothing else.
The finance people whose goal is not just to seek out profit, but to ensure that a percentage of their investment goes to areas of high risk, that if it works, would move their society forward.
The government people who understand that they could as well not exist, if what they are there for is negativity or could be done by anyone else, just in position and status quo.
There has to be courage, to try, to adjust, to implement and for real palpable change; this courage, from different people, known and unknown, in vision for progress for that society.
There are many whose courage is to get things so they are comfortable or for them to seek luxury. However, with so much comfort, really good place to stay, good wears, good automobile, or device or anything, all of it for what?
Status, show-off with things that are inanimate whose specialness is a construct, becomes what many prioritize over what is possible for the good of all.
It is difficult to use the word courage for things that are for selfish gain. Courage is so rare, only the nations that have lots of the right mix would be ahead.
There are many isolated projects and programs, but no development for most countries because those projects are the least possible courage, not the right ones.
How many fights or conflicts, of all occurring ones, are necessary? Probably a smaller percentage than accepted; courage of many is for many worthless fights. But the right mix for progress is too rare.
Ecclesiastes 7:24, That which is far off, and exceeding deep, who can find it out?]
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