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Trouble in Nation’s Mortgage Banks Over Liquidity Squeeze

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Nigeria Mortgage Refinance Company NMRC
  • Trouble in Nation’s Mortgage Banks Over Liquidity Squeeze

A Crisis looms in the nation’s financial system as lack of funds hits the Primary Mortgage Banking (PMB) segment.

It was learnt that the situation which has become critical for one of the mortgage banks, as it no longer honours depositors’ claims, may soon result in its collapse and affect the sub-sector. As each depositor is only insured to the tune of N500,000, the collapse of PMBs would spell disaster for their customers.

The development could undermine confidence in the operations of the banks, set the national housing policy backward and lead to the collapse of some of the mortgage institutions.

The critically ill mortgagee found itself in the situation because it ignored the liquidity ratios, as it invested all depositors’ funds in assets that are now not easily convertible.

The inability of about 15 mortgage companies to pay premium contributions in 2016 is an indication of operational challenges in the sub-sector.

The Nigeria Deposit Insurance Corporation (NDIC) affirmed that about 15 of the 35 PMBs did not pay the insurance premium as at December 2016, a situation that put the customers at higher risk.

The Managing Director of NDIC, Umaru Ibrahim said the commission’s capacity to sustain its efforts in ensuring that insured institutions are put on the part of sustainable growth and development depends largely on the premium contribution, which is an amount paid periodically to the insurer (NDIC) by the insured (mortgage banks) for covering their risk.

Frontline economist and Chief Executive Officer of Financial Derivatives Limited, Bismarck Rewane, said the challenge could be a corporate governance issue in one or two institutions, but not in the entire industry. According to him, the possibility of having one or two issues would be there, but as a quoted company, the regulators would handle matters right.

But Rewane said there might be crisis if more than 40 per cent of the operators could not pay their premium contributions to the deposit insurer. “It means they are not in business and the situation is no longer a challenge, but a crisis. It means some are just being there until the whole crisis manifests,” he said.

The Managing Director of Cowry Asset Management Limited, Johnson Chukwu, described the failure of any deposit-taking institution, particularly a mortgage bank, to honour its obligations as partly a case of liquidity management, which boils down to corporate governance.

“Although the sub-sector is the weakest in the financial system, with total deposit liability that can easily be written off by the regulator, any shakeout will lead to losses in cash and perception.

“Every financial institution will become suspect if there is a distressed bank now. First, the sub-sector will be deserted. Second, even conventional banks will experience a cold response from customers. This is because not many know the differences. The mortgage refinancing company must be made to work more now,” he said.

He said that government’s policy of high interest rate on its risk-free securities at between 16 per cent and 18 per cent would not allow investments into the mortgage sub-sector, just as conventional banks would soon face the same effect.

NDIC spokesman, Hadi Birchi, reiterated that the commission’s mandate is to settle every depositor of failed financial institutions, first with the insured amount and second with as much as the assets of the company can provide.

While acknowledging that the commission is aware of the challenges in the mortgage banks and is currently looking for solutions, he said customers and other stakeholders should not panic.

Efforts to reach the spokesman of the Central Bank of Nigeria, Isaac Okorafor, through text message and calls were not successful.

At the weekend, an industry source told The Guardian that the number of defaulters on the premium contributions had decreased to 13, but affirmed that most of their investments (understandably housing projects) did not bring about the estimated returns.

“The economy is harder now and some who are expected to buy the houses are not forthcoming. The houses are there, but we cannot get money since they are not taken up,” the source said.

The chief executive officer of the mortgagee told The Guardian that the situation was tough, but that the company was doing its best to turn things around.

“The condition of the economy is also compounding the matter. There is no money and people are not meeting up to their obligations to the bank. The assets are there but you cannot easily convert them now because of the recession.

“I must admit that the projections of the bank did not turn up well. Yes, the liquidity ratios were well overshot, but I think the calculation was that the investments will turn up,” the bank boss said.

Also, the situation, which started about three years ago, has become so serious that the company failed to honour some customers’ demand in the last one year.

As at third quarter of 2016, the Nigerian Bureau of Statistics (NBS) could only report the sub-sector’s first quarter (Q1) activities on deposits, loans and interest rates, an indication of failing corporate governance structure.

Even with incomplete disclosures, the NBS said the sub-sector, made up of 35 institutions, had N78.1 billion in loans and leases; domestic debts of N65.6 billion; and National Housing Fund contribution of N9.7 billion in its books as at Q1.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Are There Better Ways to Help Consumers Tackle Social and Environmental Problems?

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Consumers - Investors King

Techniques used by online microfinance platforms to spur user involvement could be useful in helping organisations to persuade people to behave in ways that benefit both society and environment.

Microfinance platforms have popularised the idea that ordinary people can become bankers to the poor. Communities of lenders get together every day to crowdfund microloans to disadvantaged micro-entrepreneurs by investing small sums of around only 25 dollars.

A new study digs into the universe of these microloan platforms to investigate how they manage to attract investors and perpetuate their enthusiasm for responding to social problems such as poverty.

Researchers from the Universities of Birmingham and Southern Denmark have identified two major ways through which platforms maintain and potentiate lending. Their findings are published in the Journal of Consumer Research.

Firstly, the platforms assemble resources that function as an ‘apparatus of affirmation’ – providing first-hand evidence of impact that help consumers imagine the benefits of their actions, thereby creating a sense of empowerment.

Secondly, the platforms translate complex and distant social problems, such as poverty, into personal encounters between lenders and borrowers – creating a sense of connection and familiarity via photographs, stories and loan updates. This set of techniques is theorised as the ‘apparatus of relatability’.

Co-author Dr Pilar Rojas-Gaviria, Lecturer in Marketing at the University of Birmingham, comments: “Organisations such as microlending platforms, which strive to mobilise responsible consumers, face two key challenges – overcoming the powerlessness felt when facing daunting problems, and removing a sense of disconnection from ‘faraway’ problems.

“Supplementing the power of ideas and knowledge with personal stories that inspire hope and aspiration, affinity and connection are powerful techniques that could be useful in inspiring consumers to more actively participate in efforts to tackle social and environmental problems, such as climate change.”

Through storytelling, imagery, platform design and communication, the researchers note that online microlending platforms nurture a feeling that genuine change is possible through affordable actions. They also develop a sense of affinity and empathy among potential investors with aspiring micro-entrepreneurs, particularly those from Low-and Middle-income Countries (LMIC).

For example, the platforms publish loan requests to showcase individual borrowers with first names, photographs, and short biographies. This personalised strategy effectively frames microlending as a virtual encounter with a borrower and their story of micro-entrepreneurship. Celebrities, such as actor Natalie Portman, have over the past years helped the microfinance industry to promote microloans as an act of hope that empowers resourceful poor in their efforts to escape poverty.

Co-author Domen Bajde, from the University of Southern Denmark comments: “The advent of online microlending has expanded the pool of potential investors to anyone with internet access and $25 to spare.

“After learning that lenders were more interested in ’emotional returns’ rather than financial profit from their loans, platforms began to dramatise microlending as an act of aspirational hope and affinity toward the entrepreneurial poor.”

The research is also significant for charitable giving, noting that donors are more likely to contribute when they see their donations as a way of empowering the disadvantaged and when donations are experienced as impactful investments.

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Tunde Hassan-Odukale is FBN Holdings Largest Shareholder, Not Femi Otedola, FBN Holdings Clarifies

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Tunde Hassan Odukale - Investors King

In response to the questions asked by the Nigerian Exchange Limited (NGX), FBN Holdings has said Mr. Tunde Hassan-Odukale, a Director of First Bank of Nigeria Limited is FBN Holdings Plc’s largest shareholder and not billionaire Femi Otedola.

In a statement signed by Seye Kosoko, Company Secretary, FBN Holdings Plc and released via the Nigerian Exchange Limited on Wednesday, Mr. Tunde Hassan-Odukale directly holds 26,231,887 shares or 0.07 percent.

However, his indirect holdings stood at 1,897,280,212 shares or 5.29 percent of FBN Holdings’ total issued shares.

Breaking down Mr. Tunde Hassan-Odukale indirect holdings, the director holds 755,959,459 or 2.11 percent shares through Leadway Assurance Company Ltd.

Another 486,605,478 shares or 1.36 percent via ZPC/Leadway Assurance Prem & Inv Coll Acct. He acquired 0.04 percent or 13,229,148 shares through Haskal Holdings Ltd. Mr. Hassan-Odukale also purchased 1,004,528 shares through Leadway Capital & Trust Ltd.

He then bought 112,552 shares through LAC Investments Ltd; 112,237 through Leadway Properties & Investment Ltd; 211,290,798 or 0.59 percent via Leadway Holdings (Holdco); 53,771,413 or 0.15 percent through OHO Investment and finally acquired 375,194,599 or 1.05 percent through Leadway Pensure PFA.

Therefore, Mr. Tunde Hassan-Odukale direct and indirect holdings in FBN Holdings Plc stood at 26,231,887 or 0.07 percent and 1,897,280,212 or 5.29 percent, respectively. In totality (Direct and Indirect), he holds 1,923,512,099 or 5.36 percent shares in FBN Holdings.

This is more than the 10,000,000 or 0.03 percent shares directly owned by Mr. Olufemi Peter Otedola and another 1,808,551,625 or 5.04 percent he acquired via Calvados Global Services Limited. Mr. Otedola total stake’s in FBN Holdings now stood at 1,818,551,625 or 5.07 percent. Making him the second-largest shareholder in the company.

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Tesla’s Valuation Crosses $1 Trillion Mark After Hertz Orders 100,000 Vehicles

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Tesla Model 3 - Investors King

Price of Tesla stock rose by $115.18 or 12.66 percent on Monday after Hertz, an American car rental company based in Estero, Florida, ordered 100,000 Tesla electric vehicles in a deal worth $4.2 billion.

Four months after surviving bankruptcy, Hertz Global Holdings Inc. is strategically moving away from fuel cars to electrify its rental-car fleet.

According to Hertz, customers will be able to order Tesla Model 3 at airports and other locations in major U.S. markets and some cities in Europe starting from early November.

The announcement bolstered Tesla’s market value above $1.03 trillion before it moderated to $1.01 trillion at the close of business on Monday.

Tesla’s valuation has risen at an unusual pace since the COVID-19 outbreak. The company’s valuation jumped from $100 billion to $1 trillion in less than two years, according to data available on Dow Jones. It took Amazon, Apple and others more years to attain the same status. To put it in perspective, it took Amazon more than eight years to move from a $100 billion valuation company to $1 trillion.

Despite analysts saying Tesla is extremely overvalued and a series of price adjustments post-COVID-19 are predicted, Tesla Inc and Elon Musk, the company’s CEO and Co-founder, seem not to be slowing down.

Musk’s Tesla holdings, including vested and unvested options, were valued at around $297 billion as of Monday, October 25, 2021, according to corporate-governance data company Equilar Inc. Elon Musk’s holdings in Tesla is more than the valuation of Toyota Motor Corp., the second-largest automaker by market capitalization.

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