Posts Tagged ‘Nigerian Small Scale Business’

What Kind Of Income Are You Earning?

Tuesday, February 23rd, 2010

Are you working for money or is your money working for you? That is a familiar statement to those that read RichDad books. I’ve just finished reading RichDad’s Cashflow Quadrant all over again. It is not my first time of reading the book. But this time around a question really kept ringing in my heart. What kind of Income are you earning? If I stop working now, can I sustain my present level of monthly expenditure?

There are two kinds of income.

Income Earned By Working For Money

This is where most people start from, except you inherited some income generating asset from your parents. It consists of Salaries, Wages etc. The issue here is that you only earn by working. If you don’t work, you don’t earn. Once you stop working the income stops. So, it is not the best source of income. For many small scale entrepreneurs in Nigeria, this is the case.

Income Earned By Your Money Working For You

This refers to income generated from assets you own. Here, you invest in an asset and the asset in return generates passive income for you. Even if you decide not to work again, as long as you have a system in place to manage and maintain those assets the income keeps flowing.

Now that I’m done with the brief definition, let’s get back to my question.

What kind of Income are you earning?

Initially, when I read Cashflow Quadrant, I was congratulating myself that I receive income from different sources. Some are earned by me working while some are from assets that I owned. However, now I am more interested in the percentage of the passive income to the total income.

I sat down and wrote down all the income I earned monthly. I then classified them into Passive Income and Non-passive Income. The analysis was an eye opener. I realized for the first time that even though I was earning passive income, it was less than 10% of my total income. Invariably, I am still in the rat-race. I’m still busy working for money. That means, if I stop working today, I will not be able to sustain my present standard of living. The income from my assets is grossly insufficient to cover my monthly bill.

Since I made that discovery, I’ve been working on a plan to change my strategy. I don’t want to work for money at my old age. I will rather spend my time doing what I really enjoy doing while my money works for me. So, now is the time to start acquiring assets that will generate the volume of income that I desire to earn so as to sustain the kind of lifestyle I want to live.

The Cashflow Quadrant is a great book for small scale entrepreneur to read. I recommend it to my fellow Nigerian Entrepreneurs. It offers some great financial knowledge that would have cost you years to acquire. The paperback edition is readily available in bookshops and is not expensive. Please note that this is not a product review. Now it is your turn to answer the question, What kind of income are you earning? Tell us in a comment. Cheers.

Can You Still Trust Your Banker?

Wednesday, August 26th, 2009

Can you still trust your banker? I know that sounds like a foolish question, but hear me out first. As an Entrepreneur, I agree w to the fact that my business success team will not be complete without a trustworthy banker. Unfortunately, entrepreneurs in Nigeria, are being made to doubt if really the bankers  actually deserve a place in the success team. The recent Home Grown Financial Crisis rocking the Nigerian Banks is a real concern to Nigerian Entrepreneurs especially the small scale businesses.

I was chatting with a friend some weeks back and she asked if a particular Nigerian Bank was financially healthy. To me the question was absurd and I told her so. I even boasted that the era of banks going distressed is gone forever. Oh, how wrong I was. I had believed the lies that were told by my bankers. I believed the false reports tendered by the bankers as proof of health to the general public. The particular bank my friend was making enquiry about was among the five banks recently placed under searchlight by the CBN.

The five Nigerian Banks, according to CBN concentrated too much effort in granting loans to businesses in the highly risky oil and gas sector. As if that wasn’t enough, they set aside the rules governing loan approval and were utterly reckless in granting personal loans to insiders. Much of the loans were not properly collateralize as required by law. Simply put, they were playing lottery with depositors funds and jeopardizing investors funds.

While some people praised the effort of the CBN, some criticize the crude method used by the CBN. Recent information has shown that the CBN didn’t fine tune her findings before rushing to the press. Now the public is in a dilemma of what to believe! Well, I am not interested in the accusation and counter-accusations being traded by the CBN and the affected bankers. My personal concern is the effect of this ill wind on the economy of Nigeria.

Can I still trust my banker?

Until this millenum, small scale entrepreneur in Nigeria were quite skeptical of using banks.  They trusted their ‘Esusu’ ‘Akawo’ and other local cooperative societies better than the banks. However, it is practically impossible to expand ones business and play in the bigger market without making use of banks. So, many were forced to imbibe the culture of using the banking system.

Beside this, the activities of petty thieves and armed robbers have thought many that it is not a wise idea keeping large quantity of physical cash at home. Also, the introduction of ATM machine encouraged many entrepreneurs who are merchants to imbibe the culture of using banks for transfering money from one location to another. Gone are the days when merchants travelling from Onitsha to Lagos or any other part of Nigeria carries money on their person while travelling. The ATM card is safer and more portable.

Unfortunately, the recent activities of the bankers has cast serious doubts on the mind of the small scale entrepreneurs. The reality is that the average small scale businessman in Nigeria is now scared of putting his/her little fund in the bank. But how can you transact business without using the banks. This remains a dilemma! It is common sense to note that the risk of getting robbed while keeping physical cash is higher and more probable than the risk of a bank getting distressed. However, if bankers tells lies blatantly and engage in shoddy deals with depositors fund, should an entrepreneur still trust them?

I’m sorry if I disappointed you by not providing an answer to the nagging question, “Should I still trust my banker?” I really feel bad that the effort to encourage the public to imbibe the culture of keeping cash in the bank and doing less of physical cash transaction has been badly crippled by the dishonest financial institutions. The truth is, people are really getting scared of entrusting their funds with bankers.

Is there no Solution?

I really wish the regulatory bodies (CBN etc.) will wake up to their duties. Their primary assignment is to prevent fraudulent and illegal practices among the financial institutions. Their effort should be concentrated on prevention (not catching culprits long after the loot has been spent!)

I personally don’t give any kudos to CBN for their performance so far. As far as I’m concerned, they are partly to blame for the rottenness in the financial sector. If their inspectors and auditors are men of integrity who prefer good name to bribe, they would have discovered and reported long ago on the anomalies occurring in those banks books. Since they failed to give accurate and honest report as at when due, then I see them as accomplices who encouraged the bankers to misuse depositors funds.

The issue of non-performing loans

The outcry of the CBN on the mamoth size of the non-performing loans being carried by the banks is another issue that deserve closer srutiny. It is a well known fact that the various tiers of government are owning local entrepreneurs working for them. Instead of using the public fund in the coffer to settle contractors who have completed their job, some political office holders embezzle such fund while hiding behind official beureacracy.

Some of the entrepreneurs accused of owing non-performing loans in  those banks have come out to defend themselves and accused the government of being responsible for their inability to repay what they owed as at when due. If the government agencies refuses to pay an entrepreneur as agreed in a contract, then what right has the same government to insist that such entrepreneur should repay loan taken to execute the same contract?

If EFCC is serious about helping to recover the non-performing loans, then they should start by querying the top government officials in those parastatals that are owing contractors. The accountant-generals, commissioners of finance etc of each state and local government should be asked to explain to the public why they are not meeting up with the contract agreement made with the local entrepreneurs. The truth be told, we will have a better Nigeria if our leaders believe in the slogan, Good Leaders, Great Nation!

I’ll love to hear your opinion on this issue. Share with us in the comment section. You can get updates to this post Can You Still Trust Your Banker by subscribing to Nigerian Entrepreneur RSS feed, Cheers.