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Smart Budgeting: Tips to Becoming Your own Financial Manager

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Often, a journey of a thousand miles starts with a step. The same principle applies to the journey of financial freedom.

To build a strong personal finance core, budgeting must be taken very serious. In fact, it is the first step in the journey to financial independence.

Smart budgeting is very important if you want to live a carefree life. Do you want to have some fun travelling and experiencing beautiful places by the end of the year? Plan ahead. If you would like to enjoy the wonderful feeling of peace then you need to always work on your budget. Yes, you have absolute control over it.

Why is budgeting so important?

Today, many people find it difficult to manage their money. Managing money doesn’t have to be a hard thing to do.

It begins with smart budgeting. Fundamentally, budgeting has to do with your understanding about the amount of income you earn and how much you spend. To be on a good side, you would want to live beliwt your means. That is, spending less than you earn.

One of the top reasons for having a budget is that it helps you know where your earnings are going. It simply allows you to adjust your spending in order to save more money, live a good life, and avoid debts.

Again, smart budgeting allows you to set your financial goal(s). When you set a money goal, budgeting can help you achieve it faster. Are you fed up with a lifestyle where you have to live from paycheck to paycheck? Sure, you need an emergency fund in place for a back-up. The art of smart budgeting irons this need out early.

A lot of people are often stressed up when thinking about money. If you take your budgeting serious, you can easily reduce unnecessary stressA life where you don’t have to bother about money is worth living. It gives you peace of mind. Budgeting and planning your financial future is easy when you get it right.

Six Effective Strategies for Budgeting Smarter

1. Automate your finance. 

Thanks to technology, you can now automate almost everything. The tedious work of budget can be reduced dramatically. Leverage on it today.

Begin by having automatic transfers. You can use this to pay your bills at regular intervals. It is also important that you watch closely everything you automate. Cut off any monthly subscriptions that no longer add values to you.

When you automate your finances, it is easier for you to allocate expenses and bills – even before you spend it.

Do you operate multiple accounts? Just automate them all. This helps you to organize your finances. You can also transfer money from your regular account to your bills account (you can create one for this purpose. When bills come up, you would be able to pay them easily.

You can also create or download a financial statement. This is very important for budgeting smarter. Have an overview of your financial statement. It can be on an Excel sheet. There are also other websites that help you with this. With a financial statement, you have a perfect insight into your budget and finances.

2. List all your income.

If you want to budget, you need to know what goes into it. Your wages, allowances, a bonus, monthly mortgage interest refund, holiday pay, possible benefits, or rental income. Put everything in a row. When you can list down all you income, it becomes easier for you to have more control over your money.

3. List all your expenses and shop wisely.

You must be honest about all your expenses; small and big.

From energy bills, to rents, to transport, to foods, and other expenses – you must know where your money goes. If you start taking budgeting more serious, you will notice that your expenses are often higher. All those small impulse purchases do add up.

When next you plan to go out for shopping, be a savvy shopper. You would want to get quality as well as good discounts.

Today, there are great websites that offer good discounts on almost everything you need to buy (think LivingSocial, Buytopia, Groupon, and others). You will always find great discounts, from entertainment to travel, you will find a good deal.

Again, you can shop for second-hand goods. Kijiji is a good example of websites where you can find great deals. You will find quality goods if you take your time. It saves you more money and you can enjoy the value of those goods.

4. Adjust your budget every month.

It’s obvious that some of your monthly expenses may vary. Vehicle registration fees and getting holiday gifts are good examples.

Also, your income might change. That is, you may earn more if you have a side hustle.

For these reasons, you need to examine your budget at least once a month. You may check and adjust more frequently too.

5. Prioritize your financial goals and expenses

It is essential that you understand the clear line between wants and needs. You must strive to first focus on your needs – the essentials like house rents, foods, and others.

Other expenses like your financial goal of pay off your debt(s) are also very important. Same for saving for your retirement.

Don’t forget that one of the key purposes of a budget is to determine whether your money goes into what makes you happy and correlating to your values – or not.

For example, you can group your expenses using the 50/30/20 budgeting method. It means 50% of your earnings goes into what you need. 30% is allocated for your wants. The remaining 20% is for savings and debt.

6. Save and Invest for growth.

Developing the habit of saving a part of your income is essential in reaching your financial-freedom goal faster.

Plan to save at least 10% of your income every month. When you are used to budgeting smartly, you will notice that it is possible to save 10%.

But it is not enough to just save, you must invest. The money you set aside in your savings account can lose value as a result of inflation.

There are lots of investments today that can give you good returns in naira. Consult a financial planner in order to explore some options suitable for you. You can also drive into research by yourself.

Becoming smart with you budget needs practice. With the tips discussed above, you should be able to be your own financial manager. You will be good with money.

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.

Loans

Credit to Private Sector Rises to N33.26 Trillion in August 2021

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The Central Bank of Nigeria (CBN) has disclosed that credit to private sector went up by N498.6billion in August to N33.26trillion from N32.8trillion reported in July 2021.

The N33.36trillion figure announced by the CBN is a new record that was fuelled by banks, among others increased lending to real sector.

CBN in its Money and Credit Statistics for the period revealed that credit to private sector in January was N30.65trillion and dropped by 0.47 per cent to N30.5 trillion in February.

However, in March, it closed at N31.44trillion and crossed the N32.1trillion mark in April to N32.12 trillion.

In addition, the CBN reported N32.63trillion and N33.36trillion credit to private sector May and June respectively.
Analysts believe banks lending to real sector played a critical role in the recent increase in Nigeria’s Gross Domestic Product (GDP).

An economist and Chief Executive Officer, BIC Consultancy Services, Dr Boniface Chizea said he is optimistic that banks credit to real sector, amid severe challenges are yielding positive results. According to him, “The volume of credit which seems humongous will deliver expected dividends despite perceived inhospitable investment environment. We should therefore remain confident and hopeful that desired impact must be felt if not immediately then in due course.

“We must also accept the fact that we would be challenged if we want to isolate the direct impact of the credit on the economy. So, we must remain assured that the credit is not money down the drain.”

On his part, Economist & Private Sector Advocate, Dr Muda Yusuf said the growth in credit to private sector is laudable.

He noted that the impact would depend on the sectoral spread, quality of credit, tenure of the funds and interest rate.

Yusuf said: “My guess is that a significant percentage of this have been given to large corporates, multinationals and high end medium enterprises. The CBN has done a lot in lending to agriculture, but the quality of the lending is an issue. Reports indicate high default rates in agricultural credit, especially the anchor borrowers’ scheme.

“Monetary intervention is imperative for real sector development. But it is not sufficient to guarantee the desired outcomes of growth and productivity. The context in which businesses are operating is as important as the funding, if not even more important. The totality of the investment environment must be right for sustainable real sector development to be achieved.”

He added, “Therefore, to complement the credit to the private sector, the other factors that should reckoned with include infrastructure quality, especially power, roads and railways. There are also issues around the quality of the regulatory environment, the foreign exchange policy regime, the ports situation, volatility of the naira exchange rate, the tax environment and the security situation.

“These are not things monetary intervention can solve. It takes an impactful fiscal policy intervention to fix these problems. Some of the issues border on economic reforms that need to happen. Engagements between the private sector stakeholders and policymakers is critical to achieving sustainable development of the economy.”

The Governor, CBN, Mr. Godwin Emefiele had in his communiqué at the end of August Monetary Policy Committee (MPC) meeting said the committee noted the improvement in lending to the real sector following the introduction of the Loans-to-Deposit Ratio (LDR) in 2019.

According to him, “Industry gross credit increased by N6.63 trillion from N15.57 trillion at end-May, 2019 to N22.20 trillion at end-July, 2021. The credit growth was largely recorded in manufacturing, oil and gas and agriculture sectors.”

He expressed further that the MPC members noted the unequivocal importance of credit growth to the sustained recovery of output and the moderation in price development as supply improves.

“It thus, called on the Bank to maintain adequate surveillance on banks to ensure compliance with its extant credit policy, while ensuring that they are not unduly exposed to credit risks.

“The Committee also noted the relevance of the Bank’s suite of interventions to the overall system credit, urging its continued use to fund sectors with high employment-generating capacity,” he said.

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Banking Sector

Fitch Upgrades Bank Of Industry’s National Rating to ‘AAA(Nga)’

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Fitch Ratings has upgraded Bank of Industry’s (BoI) National Long-Term Rating to ‘AAA(nga)’ from ‘AA+(nga);’ and affirmed the Nigeria-based bank’s Long-Term Issuer Default Rating (IDR) at ‘B’ with a Stable Outlook.

It said the upgrade of BOI’s Long-Term National Rating of ‘AAA(nga)’ reflects the linkage between the bank and the sovereign has strengthened, as evident in the significant size of the CBN guarantees provided for BOI’s recent external funding.

The full list of rating actions shows that “BOI’s Long-Term IDR and SRF are equalised with the Long-Term IDR of the sovereign as we believe that the Nigerian authorities have a high propensity to support BOI.

Fitch said its assessment primarily reflects the following: The bank’s important and clearly defined policy role in funding economic growth in Nigeria; Its 99.9% state ownership, split between the Ministry of Finance (94.8%) and the Central Bank of Nigeria (CBN; 5.1%); and the entirety of the bank’s wholesale funding being either provided or guaranteed by the Nigerian state. However, Fitch also views the ability of the authorities to support BOI as limited by Nigeria’s ‘B’ Long-Term IDR.

BOI is Nigeria’s primary development bank, with the mandate of financing the country’s emerging industrial sector.

The bank plays an important role in supporting government policies and in providing counter-cyclical loans since the onset of the economic crisis resulting from the coronavirus pandemic.

According to the international rating agency, “BOI’s funding has increased substantially since March 2020, as the bank secured two large syndicated loan facilities of EUR1 billion and USD1 billion from syndicates of commercial banks and multilateral development banks, which are fully guaranteed by the CBN. The proceeds of the borrowings are swapped with the CBN, boosting its foreign-exchange (FX) reserves and providing BOI with Nigerian naira to support its developmental activities.”

“BOI’s management has indicated that this fundraising will serve to expand the bank’s lending to priority sectors. It might take BOI substantial time to channel the recently attracted funding to borrowers and as of end-1H21, 48% of BOI’s total assets were kept in liquid government bonds and cash, compared with 20% at end-2019.

Fitch says BOI maintains solid capitalisation and leverage metrics (end-1H21: equity-to-asset ratio of 19.4%), which is prudent for the bank’s exposure to the volatile operating environment.

“Profitability is not a key objective; however, BOI continues to generate reasonable returns on equity (1H21: 18% annualised) driven by healthy net interest margins and, so far, moderate loan impairment charges,” Fitch noted.

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Finance

Tanzania: African Development Fund Approves $116 Million Loan to Upgrade Southern Road Corridor

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The Board of Directors of the African Development Fund on Wednesday approved a loan of around $116 million to the Tanzanian government to upgrade a 160-km Mnivata-Newala-Masasi road corridor in the southern part of the country.

The Bank’s loan represents 98.71% of the project cost; the government of Tanzania will provide the remaining 1.29% in funding.

The project will upgrade the roadway, including the 84-meter Mwiti bridge, to bituminous standard. The works also have social components, including the provision of potable water, education and medical infrastructure, the establishment of cashew nut processing units, and extension of entrepreneurial training to women and youth.

The upgrade is expected to open up rural areas in the region and enhance the Mtwara Development Corridor, which links Mtwara Port and Mbamba Bay port on Lake Nyasa. Exporters, importers, small-scale cross-border traders, farmers, transporters are all expected to benefit.

“The periodic isolation of such a significant population worsens vulnerability and undermines social inclusion. Improved road connectivity would therefore build the resilience of the people and widen livelihood opportunities within the Mtwara Development Corridor and the surrounding districts,” Bank Director General for East Africa Nnenna Nwabufo said.

Overall, the five-year project will improve mobility and accessibility for about 1.1 million people in Mtwara, Tandahimba, Newala and Masasi districts and facilitate integration with neighbouring Mozambique, Malawi and Zambia.

Currently, the districts of Tandahimba and Newala, with an estimated combined population of 509,000 people, are mostly cut off, while connection with the Mtwara port area for essential supplies is severely constrained during rainy seasons due to the state of the road.

The project will advance Tanzania’s current five-year Development Plan (2021-2026) and aligns with the Bank Group’s Country Strategy Paper (2021-2025) which emphasizes sustainable infrastructure for a competitive economy and an improved private sector business environment for job creation, as well as two High-5 strategic priorities: Integrate Africa and Improve the quality of life for the people of Africa.

At 30 June 2021, the Bank Group’s active portfolio in Tanzania comprised 22 operations (19 public and 3 private) with a total commitment of about $2.4 billion.

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