rationalmind:


You didn't factor in interest on the loan into your analysis

Please read it again

Lazyyouth4u:


Banks in other countries were hearing ‘ween’ in 2020 as a result of Coro pandemic, lockdowns and curfews while Naija banks are reporting huge profits and declaring dividends

Na wa o...

In other countries, banks actually offer banking services: they give out loans, collect interest, etc. So economic downturns affect them in that they have to give payment holidays, lose interest income, face the prospect of some of their loans going bad, etc.
In Nigeria, our banks debit all customers for ostensibly small amounts regularly, this forms a reliable source of income for them whether or not the oil and gas people and others pay up the already massive interest on their facilities. Retail banking customers can be safely ignored, even where they exist.

condomuser:

In case A when business fails, he is still liable to the bank for $30 million capital, most banks can only offer no interest repayment plan, you are responsible for the success and failure of your business.

I took interest of USD10m into account. It’s not a zero interest loan. Please read Case A again.

You have a point though as per liability for the loan. When the business fails, the entrepreneur may be liable for the USD30m if he provided a personal guarantee. But business men are getting wiser these days and structuring such transactions as off balance sheet transactions (using separate SPVs) that are strictly backed by the collateral and cash flows of the project. No personal guarantees required especially for projects with very strong predictable cash flows and counterparty contracts.

But you are right. In some cases (especially if the loan is taken by the business man’s corporate group), he will be liable for the loans. The point of my post though was to show the basic workings of OPM and how it maximizes returns on the least possible investment

yazga:
It's been said here Nigerian banks have mastered the art of making money in Nigeria.

Yes, internet banking and other channels were used.

Indeed, they have mastered the art of making money. They have even mastered it better than the banks in developed countries that they learnt from

You say internet banking and other channels were used. Okay. Other countries wey get better internet and IT systems wey our banks dey learn from probably don’t know how to use these channels like Naija banks

Lazyyouth4u:


Indeed, they have mastered the art of making money. They have even mastered it better than the banks in developed countries that they learnt from

You say internet banking and other channels were used. Okay. Other countries wey get better internet and IT systems wey our banks dey learn from probably don’t know how to use these channels like Naija banks

If you recall the lockdown was not the entire country it's started with Kano, Abuja, Lagos and Ogun.

Lazyyouth4u:


Indeed, they have mastered the art of making money. They have even mastered it better than the banks in developed countries that they learnt from

You say internet banking and other channels were used. Okay. Other countries wey get better internet and IT systems wey our banks dey learn from probably don’t know how to use these channels like Naija banks

Not "they don't know how to".
Better put: "They cannot do so because they are not allowed to and the government will probably sanction them, while the public outcry will definitely expose them".

This may also be a trick to devalue the naira so that those storing USD can exchange it and invest in tbills.

ahiboilandgas:
Up

ahiboilandgas:
Up

Interesting.

Seems it's time to go back to tb.

XiaoLi:
This may also be a trick to devalue the naira so that those storing USD can exchange it and invest in tbills.

yes it a big trick their usually cycles 2016 (18 percent) then slam big devalution to wipe the entire thing ....since 2011 same cycle

I rather have my investments in 4 percent dollar securities than 20 percent in yeye naira...unless am moving back to Nigeria finally and no more dollar expense....

Grupo:


Interesting.

Seems it's time to go back to tb.

wait a little let see all their drama

Grupo:


Interesting.

Seems it's time to go back to tb.

Speculators are rubbing their hands with excitement waiting for you guys to leave NSE so they can buy some good stocks at dirt cheap prices, and then cash out when they sell back to una at high prices when una return to NSE when Tbill rates fall again. Don’t we just love this game?

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Lazyyouth4u:
For those people that don’t understand why billionaires with lots of money still go to take loans from banks, let me show a basic example of how OPM works. You can thank me later

Case A : Business man has a project of USD40m. Instead of carrying out the entire project with his own money, he goes to the bank to borrow USD30M and then puts only USD10M of his own money. The project succeeds and earns USD100M profit. He pays back USD40m (USD30m principal plus USD10m interest). The remaining USD60m is his profit. So he basically makes 6x his money back (6 multiplied by the USD10m invested). Neat profit. If business fails, he only loses USD10m.

Case B : Business man puts all the capital of USD40m and takes nothing from the bank. Project succeeds and earns same USD100m. He has no loans to pay. The entire USD100m profit is his. But wait a minute. He only makes 2.5x his money back (2.5 multiplied by the USD40m invested). Neat profit but less gain on money invested. If business fails, he loses the entire USD40m and possibly goes bankrupt

Lesson learned about OPM: most big business men would rather put the least money required to enhance profit and minimize their risk. Nobody will risk their entire net worth in business when they can use Other People’s Money to minimize risk and make higher profits on the money they invest.

I wish i can give you more than one like for this post.

It is only an unwise businessman that has access to credits that will ignore that access and then use all his/her money to finance a project.

condomuser:

In case A when business fails, he is still liable to the bank for $30 million capital, most banks can only offer no interest repayment plan, you are responsible for the success and failure of your business.

In theory, he is liable but what happens if the collateral for the loan cannot meet the amount?. Many companies have been taken over by AMCON while the promoters are moving about and living large. So where is the liability?.

NL1960:


In theory, he is liable but what happens if the collateral for the loan cannot meet the amount?. Many companies have been taken over by AMCON while the promoters are moving about and living large. So where is the liability?.

practically example of members that have used other people money to a achieve success is key theoritcal essay dont work in Nigeria...to risky....a member told us how they used credits to buy up a hospital and how they paid back

Every established business man from Tony, Dangote, Jim, Otedola, Aig, etc use loans in their businesses all the time.

Dangote took USD6bn loans to build the refinery. Dangote took loans from IFC and commercial banks to build his cement factories.

Tony took loans from Afreximbank and other banks to acquire OML 17

Seplat recently got close to USD300m from Nigerian banks for the new gas processing plant it is building. Seplat has huge loan exposure to local and international banks for its oil and gas projects.

All our Nigerian banks take loans from international lenders and issue bonds all the time

Airtel, MTN have huge loans on their books. The owners are very wealthy. But they won’t sink all their net worth in the businesses

Indorama took loans from AfDB, IFC and other banks to build its fertilizer plant. The family that owns Indorama are billionaires in dollars. But they won’t throw all their cash there.

BUA is currently approaching banks to fund its refinery.

These are just a few examples. This is something that happens all the time everywhere including Nigeria. Established business men don’t dump all their net worth in their businesses when banks are there to lend to them. They leverage these bank loans (and other OPM sources) to maximize their return on investments.

ahiboilandgas:
practically example of members that have used other people money to a achieve success is key theoritcal essay dont work in Nigeria...to risky....a member told us how they used credits to buy up a hospital and how they paid back

Is the credit not from a bank or from a source?. That source is the OPM. If he was unable to repay, he will only loose the property as he can go and setup the hospital in another location.

The fact that the repayment was fully done does not mean that OPM was not used.

In September every year, apart from normal expenses, i have bills for school resumption and rent. If TBs rate is 18% and i can get a loan for 16%, i will push the money for all those bills into TBs and take one year loan at 16%. The upfront interest will be put in MMF while i repay the loan from my monthly income.

NL1960:


Is the credit not from a bank or from a source?. That source is the OPM. If he was unable to repay, he will only loose the property as he can go and setup the hospital in another location.

The fact that the repayment was fully done does not mean that OPM was not used.

In September every year, apart from normal expenses, i have bills for school resumption and rent. If TBs rate is 18% and i can get a loan for 16%, i will push the money for all those bills into TBs and take one year loan at 16%. The upfront interest will be put in MMF while i repay the loan from my monthly income.

cost of money moves with money markets rate ....rate cannot be 18 risk free then u imagine bank to give u opm at 16 ....with risk..it impossible the risk free rate will alway determine the risk pro rate ....that why I like person that have gone through that routes to explain not some book theories

NL1960:


Is the credit not from a bank or from a source?. That source is the OPM. If he was unable to repay, he will only loose the property as he can go and setup the hospital in another location.

The fact that the repayment was fully done does not mean that OPM was not used.

In September every year, apart from normal expenses, i have bills for school resumption and rent. If TBs rate is 18% and i can get a loan for 16%, i will push the money for all those bills into TBs and take one year loan at 16%. The upfront interest will be put in MMF while i repay the loan from my monthly income.

OPM must not be from the the bank it can come from source that their will be no interest on it .....let me give u a local example and a real use of OPM ...during the oil boom and zenon was controlling the deseal markets in Nigeria .....zenon depot will put out price of like 65 naira per litre for AGO while other are selling at 70 naira ....this will instigate payments by marketers in billions .meanwhile zenon is having just 1m litres in their tank farm and have collected OPM for 10m litres the wait game begins the pay vitol in near by benin offsihore and baam product deliver.....zero loan ..

ahiboilandgas:
cost of money moves with money markets rate ...[b].rate cannot be 18 risk free then u imagine bank to give u opm at 16 ....[/b]with risk..it impossible the risk free rate will alway determine the risk pro rate ....that why I like person that have gone through that routes to explain not some book theories

I said 'if'.

On the bold, that is why i did not take the loan when TBs rate was 18% and interest was more than 18%.

Anyway, when you make $200m, carry the entire money go do one project. Me, i can never do that.

ahiboilandgas:
OPM must not be from the the bank it can come from source that their will be no interest on it .....let me give u a local example and a real use of OPM ...during the oil boom and zenon was controlling the deseal markets in Nigeria .....zenon depot will put out price of like 65 naira per litre for AGO while other are selling at 70 naira ....this will instigate payments by marketers in billions .meanwhile zenon is having just 1m litres in their tank farm and have collected OPM for 10m litres the wait game begins the pay vitol in near by benin offsihore and baam product deliver.....zero loan ..

OPM is 'Other Peoples Money'. It does not have to be a loan. Zenon had people paid billions into its account which it will use to bring the AGO. Why Zenon no use its own money?.

NL1960:


I said 'if'.

On the bold, that is why i did not take the loan when TBs rate was 18% and interest was more than 18%.

Anyway, when you make $200m, carry the entire money go do one project. Me, i can never do that.

at 200m usd i will be retired which project again.....so since u didn't take loan when t.b was 18 then why suggest it theoritcally when u know it an impossibility in practice...milliom of sme and mse use a lot of OPM not only big business ....OPM can be used as operation cost against costly bank loans and establishment cost

NL1960:


OPM is 'Other Peoples Money'. It does not have to be a loan. Zenon had people paid billions into its account which it will use to bring the AGO. Why Zenon no use its own money?.

u have been takling about credits and loan only
they have used their equity to established the depots and brand name ...u think people will just sink money ....any way Nigerians are weired they can put money any in MBA MMM PHD

NL1960:


OPM is 'Other Peoples Money'. It does not have to be a loan. Zenon had people paid billions into its account which it will use to bring the AGO. Why Zenon no use its own money?.

their is a movies called other people money try and watch it

NL1960:


OPM is 'Other Peoples Money'. It does not have to be a loan. Zenon had people paid billions into its account which it will use to bring the AGO. Why Zenon no use its own money?.

abdulmunafi owner azman air bought his first 3 aircraft cash...no bank loan and no OPM ..like wise max air owned by dahiru Mangal....he paid 170m usd for share in onando (cash )

Most Nigerian airline companies finance the purchase of their aircrafts through lease agreements (another form of OPM). Axxxx Air leases its fleet of planes from European lessors. Go FBN go confirm

When Arik and Aero were taking loans and entering lease arrangements for their fleet of planes, Nigerians were hailing Ibru and that Arumeni man say them dey buy the planes with their own cash. Until AMCON struck and took over these companies and their fleet of planes

Pls house what's d last treasury bill rate and when is d next auction sir's

ahiboilandgas:
their is a movies called other people money try and watch it

I have watched it. Was thinking of recommending it to you.

ahiboilandgas:
abdulmunafi owner azman air bought his first 3 aircraft cash...no bank loan and no OPM ..like wise max air owned by dahiru Mangal....he paid 170m usd for share in onando (cash )

Did he buy others in the fleet with cash?. Why did he not use the cash for the 3 aircraft to get more airctaft on lease basis?.

I know of an owner of a company who thinks in this cash usage way. He wanted to buy 4 Toyota Corrola cars for use in the operations of the company. The cost of a Toyota Corolla then was 4m. He wanted to pay 16m cash for the 4 cars. His eyes were then opened to the possibility that he can pay 4m down payment for the 4 cars and spread the balance repayment over 4 years with a monthly repayment on each car thereby having 12m cash at hand.

So between the owner of Azman air and this business man, who you think say get business sense pass?.