E-Financial
FBNQuest Asset Management Discusses ABC of Personal Finance Part 2
Ability to Take Risk
This is your financial capacity to take risks. It depends on factors such as your income, savings, financial obligations, and investment time horizon.
For example, higher income and substantial savings can increase your ability to take risks, high debt levels or significant financial responsibilities (like supporting a family) can reduce your ability to take risks, the longer your investment time frame, the more risk you can typically afford to take, as you have more time to recover from potential losses.
Balancing Willingness and Ability
Effective financial planning involves balancing your willingness and ability to take risks. Here are a few steps to consider: Assess Your Risk Tolerance, Evaluate Your Financial Situation, Diversify Your Investments and Adjust Over Time.
Understanding your willingness and ability to take risks helps you make informed investment decisions that align with your financial goals and comfort level.
- Liquidity Needs
This refers to how quickly and easily an asset can be converted into cash without significantly affecting its value.
Liquidity need is the requirement to have access to cash or easily convertible assets to meet short-term financial obligations or unexpected expenses. While liquid assets offer safety and flexibility, they typically yield lower returns compared to less liquid investments.
Balancing your portfolio to meet both liquidity needs, and long-term growth goals is essential. Understanding your liquidity needs ensures you have the right mix of assets to meet both immediate and future financial goals.
- The investment duration
This directly influences the investment objective. In essence, the longer the investment horizon, the greater the potential for risk and reward.
However, it’s crucial to align the investment duration with the investment objective to achieve financial goals effectively.
Short-term objectives: Investors typically seek investments that offer liquidity and stability. Examples include money market funds, certificates of deposit (CDs), and short-term government bonds.
Medium-term objectives: These investors often balance growth and income. They may consider a mix of stocks, bonds, and mutual funds.
Long-term objectives: Investors with a long-term horizon can tolerate higher risk for potentially higher returns. They may invest in stocks, real estate, and other growth-oriented assets.
Example: A young investor aiming to accumulate wealth for retirement (long-term objective) might invest in stocks, which historically offer higher returns over the long run while an investor nearing retirement seeking steady income (short-term objective) might prefer bonds and dividend-paying stocks.
- Understanding Various Investment Vehicle
An investment vehicle is a financial product or account that allows individuals and institutional investors to invest their money with the aim of generating profit or returns. These vehicles come in various forms, each carrying its own risks and rewards.
The best investment vehicle for you will depend on your individual circumstances and financial goals. Consulting with a financial advisor can help you make informed decisions. Here are some of the most popular investment vehicles:
- Stocks: A type of investment that gives you partial ownership of a publicly traded company. Such ownership entitles you to any dividends that may be paid, and you may experience gains or losses on your holdings over time. Potential for high returns but higher risk. E.g. shares of FBN holdings.
- Bonds: A debt instrument, a bond is essentially a loan that you are giving to a governmental entity or a company in exchange for a pre-set interest rate. Typically, the bond pays periodic interest (coupon payments) during its term, and it matures on a specific date. Steady income but moderate risk.
- Mutual Funds: An investment vehicle that allows you to invest your money in a professionally managed portfolio of assets that, depending on the specific fund, could contain a variety of stocks, bonds, or other investments. E.g. FBN Money Market Fund.
- Exchange-Traded Funds (ETFs): Like mutual funds but traded on stock exchanges, offering more flexibility and potentially lower costs.
- Real Estate: Investing in physical property, such as houses, apartments, or commercial buildings.
- Derivatives: Financial contracts based on an underlying asset (e.g., options, futures). This is also a high-risk investment.
- Commodities: Physical assets like gold, oil, or agricultural products.
Other consideration when choosing an investment vehicle
- Diversification benefit Fees and expenses Reputation of the Financial Advisor
- Stay Informed & Continuous learning (A way to take ownership of your finances)
Certainly, improving your financial literacy is a valuable endeavour that can empower you to make informed decisions and better manage your personal finances.
Remember, continuous learning is key to improving your financial literacy. Here are some effective ways to enhance your financial knowledge:
- Read Books and Magazines Visit Financial Websites
- Attend Local Presentations/Webinar Seek Expert Advice
Common Investment Mistakes
Here we highlight the past mistakes people have made while making an investment decision.
The aim is to prevent us from doing same and better equip ourselves to make better investment decisions. Investing is a journey, and learning from missteps can lead to better outcomes.
- Not setting financial goals Not diversifying
- Not learning from your mistakes Not doing your research
In conclusion, monitoring and reassessment are crucial components of successful personal finance management. It is not just enough to execute the actions above; it is important to imbibe the culture of discipline to achieve your financial objectives.
Remember, the journey to financial well-being is a marathon, not a sprint. Stay committed, stay informed, and your future self will thank you.
Federal High Court in Lagos has fixed July 1, 2025, for the commencement of trial in a money laundering case involving Cititrust Holdings PLC and three of its subsidiaries.
The subsidiaries are Cititrust Funding PLC, Cititrust Credit Limited and Cititrust Financial Services Limited,
The companies are facing an eight-count charge filed by a team of prosecutors from the Economic and Financial Crimes Commission (EFCC), comprising Anasoh Henry Onyekachi, Frankklin Ofoma, Abdulhamid Lamido Tukur, and A.A. Usman.
According to the charge, between 2021 and 2023, the companies, all incorporated in Nigeria, allegedly operated investment management services without a valid licence from the Central Bank of Nigeria (CBN).
This act contravenes Section 57 of the Banks and Other Financial Institutions Act (BOFIA) 2020 and is punishable under Section 57(5) of the same legislation.
The prosecution also alleged that the companies conducted a Collective Investment Scheme without registering with the Securities and Exchange Commission (SEC), another violation of regulatory requirements.
In one of the counts, Cititrust Credit Limited is specifically accused of failing to report high-value financial transactions to the Nigerian Financial Intelligence Unit (NFIU).
These transactions include a N20 million transfer on January 7, 2021; a N200 million transfer on April 4, 2021; and a N200 million lodgement on January 29, 2021.
Additionally, both Cititrust Credit Limited and Cititrust Financial Services Limited are alleged to have made a single transfer and lodgement respectively of N42 million into their bank accounts on January 29, 2021, without proper disclosure to relevant authorities.
The alleged offences are in breach of Sections 11(1)(b) and 11(3) of the Money Laundering (Prohibition) Act 2022, as well as Section 54(1) of the Investment and Securities Act 2007, and are punishable under the respective laws.
The court is expected to begin full proceedings on July 1.
Ecobank Nigeria’s long-term issuer credit rating has been downgraded to ‘CCC-’ from CCC, with the outlook placed at negative by S&P Global Ratings. This is a resultant effect of the $150 million bond buyback offer on the bank’s $300 million Senior Unsecured Eurobond.
Part of the tender offer made by Ecobank includes an early tender premium of $12.50 for every $1,000 in principal (equivalent to 1.25%), with the anticipated settlement date set for July 8, 2025. The offer also requests bondholders’ consent to eliminate the capital adequacy covenant on the outstanding notes.
These actions also led S&P to downgrade the $300 million Eurobond from ‘CCC’ to ‘CCC-’. Although S&P notes that it does not consider the tender offer a distressed debt restructuring.
However, this assessment is at risk of changing if the bank does not receive the promised capital injection from the parent group, Ecobank Transnational Incorporated (ETI).
Following the naira devaluation, Ecobank was unable to meet the regulatory Capital Adequacy Ratio (CAR) requirement, as its CAR dropped to 7 per cent. This was below the 10 percent regulatory minimum. The breach of the CAR caused the bank to seek the consent of its bondholders to pause the capital adequacy notes on the Eurobond notes till September 2025.
Following this development, the bank received a $50 million prepayment on promissory notes from its parent company, ETI, along with early repayments on certain foreign currency loans. However, it has been insufficient in restoring the capital adequacy to regulatory levels.
According to S&P, the bank is expected to receive another $50 million capital injection from its parent group before August 2025. However, the ratings agency notes that if the bank is unable to receive this capital injection, it will inevitably default on its bonds. A situation that would cause a further downgrade to ‘CC’.
It was recommended that Ecobank Nigeria consider raising $150 million through additional Tier-1 instruments to strengthen its liquidity buffers. Additionally, the bank was advised to intensify efforts to recover its foreign currency-denominated loans.
Fidelity Bank Plc, leading financial institution has reaffirmed its commitment to corporate social responsibility with the donation of food and essential items to the Old People’s Home in Yaba, Lagos.
The donation was made possible through the generosity of the bank’s Nexus Inductees Class, under its Corporate Social Responsibility initiative known as the Fidelity Helping Hands Programme (FHHP).
Through the FHHP, staff across Fidelity Bank branches nationwide identify crucial interventions needed in their immediate community and raise funds to execute them. The bank’s management then matches this contribution with an equal amount and disburses it for the selected project.
Commenting on the donation, Divisional Head, Brand and Communications, Fidelity Bank Plc, Dr Meksley Nwagboh, emphasized the bank’s unwavering commitment to impacting its host communities positively noting that the community is an essential part of the bank success story.
“Today’s donation is a token of our appreciation for our incredible parents and guardians who have raised outstanding individuals that trust us with their banking needs.
“Our donation to the Old People’s Home reflects our deep commitment to supporting the well-being and dignity of our senior citizens.
“We are honored to contribute to a cause that ensures they receive the care, comfort, and respect they deserve.” Nwagboh stated.
Appreciating the gesture from the bank, the Director-in-Charge of the Home in Yaba, Adetutu Ipaye, said “Community support initiatives such as this from Fidelity Bank is vital to sustaining our mission and enhancing the quality of life for the elderly.
“We urge other organizations to follow in the Bank’s footsteps as this kind of support will go a long way to ensure that the elderly live with dignity and comfort”.
One of the beneficiaries from the home, Mr. Kamoru Adeyetu noted that, “Your presence today has brought us immense joy, and our greatest happiness lies in seeing the younger generation thrive. Beyond the gifts, your visit means the world to us and please remember to visit us regularly.”
Ranked among the best banks in Nigeria, Fidelity Bank Plc is a full-fledged Commercial Deposit Money Bank serving over 9.1 million customers through digital banking channels, its 255 business offices in Nigeria and United Kingdom subsidiary, FidBank UK Limited.
The Bank is the recipient of multiple local and international Awards, including the 2024 Excellence in Digital Transformation & MSME Banking Award by BusinessDay Banks and Financial Institutions (BAFI) Awards; the 2024 Most Innovative Mobile Banking Application award for its Fidelity Mobile App by Global Business Outlook, and the 2024 Most Innovative Investment Banking Service Provider award by Global Brands Magazine. Additionally, the Bank was recognized as the Best Bank for SMEs in Nigeria by the Euromoney Awards for Excellence and as the Export Financing Bank of the Year by the BusinessDay Banks and Financial Institutions (BAFI) Awards.
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