HARD OR SOFT FINANCE: WHAT DOES IT MATTER?

SOFT FINANCE WITH AYO AROWOLO

Shortly after I had scanned the concept, SOFT FINANCE, to the designer working with me to come up with design options, he sent back a WhatsApp note to me asking me to explain what I meant by soft finance. He needed this to come up with a fitting design. I tried some explanations, which appeared to be okay with him. Then three days after, he forwarded to me the three options he had generated, and promptly I shared the designs with six persons who I felt could assist in working with me to arrive at the best option.

Surprisingly one of the reviewers, a lady, also sent a WhatsApp message to me asking the same question: What is soft finance? Why soft finance? As I was preparing to offer what I considered the best explanations to her, it just occurred to me that she might not be the only person interested in knowing what soft finance is. I had to think deeply and ask myself the question: how did I even come about soft finance ? It is not my coinage, by the way; it has been in use for years. And then I remembered that everything flew from my experience when I had just been hired as a reporter by African Concord Magazine , edited then by our very own Mr Bayo Onanuga, currently the director of the media campaign team of Asiwaju Bola Ahmed Tinubu.

It was a very interesting experience I cannot forget in a hurry. I had studied political science at the University of Ife (now OAU), and I had gotten so involved in social activism that I saw myself becoming either an activist or a lecturer. I had got fascinated with the great books we were exposed to, like How Europe Underdeveloped Africa; the all the Marxist books. Adeyinka Olumide-Fusika, now Senior Advocate of Nigeria (SAN), was my roommate, and he had succeeded in luring me to what was called ALPS, then an association of students who believed in the Marxist theory of socialism. We were always meeting in the night, arguing about socialism and other Marxist stuff. Kehinde Bamigbetan and Seye Kehinde were also comrades. So I saw myself becoming an activist. But a few dramatic things happened in my final year at the university that altered the direction of my academics and career. To cut the story short, I found myself in the journalism and starting in the proofreading department of Concord Newspaper, the media house owned by the late flamboyant billionaire MKO Abiola. I quickly adjusted my dream to a career in journalism. A year after graduating from the Nigerian Institute of Journalism, Ogba, where I got the Director’s Prize for the overall best student, I was recruited by Mr Onanuga into the African Concord. Then the next question was which desk I would fit into. I had mentally picked the politics desk, naturally. But Mr Onanuga instead instructed that I should resume on the business desk as the correspondent there was on leave.

I was confused. I hated anything numbers or statistics with passion right from secondary school. In fact, I was always at loggerheads with our mathematics teacher then, one guy called Sylvedra , a Srilankan. And at the university, one lecturer, Dr Kale Feyisetan, that was taking a course called Mathematics for Social Science Students, was everybody’s enemy. We hated his course, compounded even by his style of teaching. Many were casualties of his course on a yearly basis. Anyway, I passed it sha. But here I am, confronted with another ordeal. I protested, suggesting he should post me to their political desk.

He made me understand that the only place he could place me was the business desk, especially since the guy covering the business desk was on leave. I had to accept his offer but with a lot of trepidation. I was truly scared. To compound the matter, the first assignment he gave me was to cover the stock market at the Nigerian Stock Exchange. When I got to the floor of the exchange the following day, I was completely lost as the stockbrokers were shouting at the top of their voices, “offering and bidding”(it was one of the features of the regime they normally referred as the call-over session) , a language that was completely strange to me. It was a Monday, and I needed to file my report on Wednesday. I figured a disaster was lurking since I did not understand what took place on the exchange, talkless of filling a story. Eventually, I devised an agenda. I walked up to a stockbroker by the name of Dele Lateef. He was working with Marriot Securities, owned by Senator Dele Bajomo, at that time. I explained my dilemma to him, and good enough, he responded positively, and he asked me to follow him to his office, where he explained everything in the daily official list to me. We became friends, and I became a regular visitor to his office.

Eventually, I filled a story. Even though it was not used, my editor saw potential in me and asked me to repeat my visits to the exchange. He did more than that: he handed me over to a guy called Tunde Olugboji, the magazine’s copy editor, a dammed good guy when it comes to cleaning up copies. We became friends. With the encouragement I received from the editor and friendliness of the copy editor, I decided to give it all it would take. My first story was eventually published after about four months of amateur reporting. Eventually, I also got another person, Ariyo Olusekun, an investment banker with the defunct Center Point Merchant Bank, who actually suggested I visit his house on weekends for explanations. Then there was this senior colleague of mine, Ayo Aluko-Olokun, whose style of explaining financial terms creatively caught my attention. At that point, there was no going back. I started to buy and read financial newspapers. I also subscribed to a journal called Arbitrage Stock Guide, published by Dr Olasenni Akintola-Bello, a former commissioner for Finance in Ogun State, introduced to me by his brother, Mr Tunji Bello, Lagos state commissioner for Environment who was a great political journalist at the concord then.

I put everything into learning about financial terms and numbers, which later won me a sponsored programme to the United States of America by the US government.

Three years later, I also won a Reuters Award, which took me to their office in London, where we were exposed to deep training for three weeks on how to simplify financial reporting. Shortly after I returned from the trip, I joined Financial Standard as the founding CEO, where one of the things that distinguished us was simplifying financial information and numbers. Joseph Ode, an economist, was the editor, and Simon Kolawole, the publisher of the Cable, who was a graduate of mass communication, was his deputy. We worked together to ensure a culture of always asking questions. That was ingrained in every reporter we recruited. So that was how I came about the habit of always looking for the soft side of the hard financial stuff I was being asked to report. I always asked my self: how can I soften this stuff so that ordinary folks like me can understand it? It became an obsession to look for the soft side of every financial information I came across.

BACK TO THE ORIGINAL QUESTION

So, what is soft finance? I have always hated anything hard about finance. We were taught in the Reuters office in London always to ask questions that matter on any financial information. When you ask such questions, you will find answers that lurk underneath the surface. For instance, most times, government officials push out impressive numbers to show us how they have performed. You hear something like, GDP grew by 10 per cent, inflation moved by 10 percentage points, and forex reserves increased to a certain amount. What do these numbers and terms mean?

Late Akintunde Asalu, former President of the Nigerian Shareholders Association, was one of my great sources when it came to reporting the stock market. I was always at his James Robertson Street in Surulere, Lagos or his house in Bolade, Oshodi. He shared with me an interesting method for analysing companies. He called it soft screening. He taught me not to look much at the annual report of a company if I truly wanted to know their performance. He asked me to look for soft indicators like going to the reception of the company to listen to what the staff and visitors are saying and what they write in their in-house newsletters. There was a time a popular CEO of a manufacturing company started to appear in major newspapers granting interviews. Asalu asked me to spend some days at the reception of the company and listen to what the staff were saying. I got tonnes of useful information about the company, which I weaved into my story, ignoring the glowing report dished out by the managing director. The company folded up eventually and has remained closed. Another MD called a press conference at Sheraton Hotel and mesmerised reporters with great numbers. A week before the event, I had gone in search of my own soft indicators. After all the questions had been asked and answered, I raised my hands and asked to be given permission to ask a set of questions. The whole hall was quiet. The company had given the impression that the profit jumped by so much within a year. I had read the notes to the account and sat down with Asalu, who gave me a hint that what made the profit jump was that the company leased part of its building to a bank that fetched handsome cash, but it was not made from their normal operations. By the time we did another ratio analysis, we had discovered the company was indeed in deep trouble. The Annual General Meeting (AGM) was almost disrupted.

SO WHAT IS SOFT FINANCE?

Literally, it means we shall be softening financial information. When the government rolls out budget figures, we will not be moved. We shall ask the question, so what? How does it affect my family? The chop money I give to my wife monthly; will it increase? How will it affect my children’s school fees?
The other time, a colleague at THISDAY, Olusegun Adeniyi, a great columnist, wrote a powerful article pointing out the red flags in the 2023 budget. I made a short reply to his article, and it explains the kind of things we shall be looking at regularly in this column. I reproduce an abridged and updated version below:

1. First, you assumed in your analysis that we have been operating budgets in Nigeria. A budget is meant to be an instrument of control; not one single year has Nigeria’s budgetary system fulfilled that role. It is shameful that the National Assembly, the executive and the budget office have continued to amuse everyone that they have been running budgets. Nothing of such has ever happened for the past several years. If you reduce your analysis to a personal finance process at home, when you budget, you are simply telling yourself a few things:

a. These are the things I want to make happen within this period of time.
b. This is the estimated cost of making those things happen.
c. These are the sources of income for financing such expenses. And if you have financial intelligence, you will also include these:
d. Of my total expenditure, so much is allocated to expenditure that will bring more income into my wallet as time goes on. These are other expenses that, if properly executed, may not necessarily generate cash, but they will provide the enabling environment for making the above happen.
f. You will also state that I have put in place a tracking system that will enable me to monitor if I am following what I have planned, and if there are deviations, these are the monthly and quarterly measures I will take to put me back on track.

g. Finally, at the end of the year, I will do a variance analysis to see how far I deviated from all the targets set in the budget and the reasons. These observations will enable me to correct myself in the next budgeting exercise.

In all honesty, can we say that our budgets for the past several years have resembled these? Far from this! It is a tragedy that these governments have taken every single one of us on circus shows since, pretending to be leading us to a definite predetermined end.

2. More fundamental is the fact that those who were supposed to provide necessary checks and intelligent reviews of the exercise have no idea of what that means. So, when they invite heads of parastatals to come and defend their proposal, those who are intelligent among them hardly honour such invitations because they know they are mostly avenues to lubricate the wallets of those inviting them.
3. Worse. Those in charge at the helm have muddled up the well-tested strategies for controlling the levers of the economy. All over the world, the central bank authorities usually decide on which instrument they would use to regulate the economy: interest rates or inflation rates. In Nigeria, we have muddled up everything. We are using the two together and some other very strange instruments.

What is the business of CBN disbursing money directly to farmers? Something that should be left to development banks. And this: politicians have also taken over the business of commercial banks by giving out loans: TraderMoni. Do they know what it takes to give out loans and what it takes to track if the granted loans are used for the purpose for which they were granted? Most of the money given out is gone forever. My daughter’s school teacher, who collected one such freebie, gladly announced to my wife and I: “sir, the government has given us another money for Christmas chicken and rice! He was given N250k as the first tranche of the Agric loan money. The government official never visited his “farm”. The guy has “chopped” the money. That is how we have been wasting money since.

4. Sometimes, the CBN gives crazy and ridiculous instructions to commercial banks, like asking them to give entrepreneurs low-interest-bearing loans as if the CBN would subsidise the cost of mobilising the funds. Remember PEOPLES BANKS? Such schemes never work.
5. And this one is a very scary one. We are busy focusing on the supposed loans accumulated by the Federal Government. Nobody is focusing on what is happening at the state level. When you look at the exposures by the states, you will weep for the country. We are in deep trouble, but because we only focus on the surface, we have no idea of the collective damages the disasters the states and the FG are accumulating for generations of unborn Nigerians.
6. I knew we were in trouble when the CBN governor came out publicly to accuse Aboki Fx of being responsible for the woes of the Naira. It is a simple arithmetic: we are not producing much that would generate forex. Oga Sege alluded as much to this in the composition of our tax system. Many people don’t know that the external reserves figures we have been parading are GROSS, not NET. When we adjust for due obligations, what is left cannot finance up to three months of imports the usual globally recommended But no one is tracking that.
7. It is obvious that those who are running around campaigning to take over the reign of government have no idea of what is on the ground. My assumption is that none is coming to fix anything. None has the capacity to do that until something deeper happens to Nigeria’s current architecture.

The former minister of transport collected a Chinese loan to start rail projects, but he has left. No one is asking him to account for the status of the projects, which in the first place, were not designed to be profitably run, and given the available facts that when you compare them with similar projects by the same Chinese financiers in a few other African countries: there are obvious questions marks.

So we shall be looking at the meaning behind the numbers in this column.

Life is tough already, Finance should be easy.

SO WHAT IS SOFT FINANCE?

Soft finance can be used interchangeably with personal finance and has been defined by a finance magazine as the management of individual or family financial resources to create enough wealth to achieve the basic needs, chosen lifestyle and aspirations of that individual or family. This definition picked from a book does it for me.

Breaking the term down into its components, personal and financial, clarifies its meaning a little more. Personal means that it’s about you and your family. It is not about the business and its revenue, costs and profits, it is about what comes into your household, what goes out of your household, what stays in your household and what is saved. The goals are personal, as are the means and tools to achieve them. True, you may watch your investments from your desk, and your health insurance may actually come as a business health plan. But these factors influence your personal well-being, not your business.

So get ready and let us do it together. We shall be working with our team at the THISDAY ECONOMIC AND INTELLIGENCE UNIT, which is also working with a network of researchers.

Can’t wait to catch up with you next week.

QUOTE

And this one is a very scary one. We are busy focusing on the supposed loans accumulated by the FG. Nobody is focusing on what is happening at the state level. When you look at the exposures by the states, you will weep for the country.

ME AND MY MONEY
Yemisi Shyllon

DON’T USE ALL YOUR HANDS TO EAT.

I have always lived by the principle: “don’t use all your hands to eat”, and it has always saved me from financial stress. Many people make this mistake. When they get a raise in the office, they immediately adjust their tastes. You see, a worker staying in a one-room apartment suddenly decides it is time to move to a highbrow area. That is a display of financial foolishness. Remember, there will be times when what you have may not be available again, and you will have to rely on what you have put together. When I was working, I had a policy that 10 per cent of my money every month must go into investment. I am talking about liquid investment, and another 10 per cent would go into non-liquid investment. The remaining 80 per cent we used to take care of myself and my family. When you spend all the money you get, you have eaten both the seed and the harvest. You have sown a seed of disaster into your future.

BINOCULAR

Is Governor Ben Ayade in the wrong career?

If you asked for my opinion, I would like to suggest that the executive governor of Cross River State is probably in the wrong career. I am persuaded that if he had sought appropriate guidance and counselling, he might have been advised to pick a career in the drama area or, better still, set up a shop as a comedian. He would have probably made a good outing working with AY or even joined forces with our able Senator Deno Melaye to be producing comedy skits.

Take a look at the nomenclature of his annual budget, which someone rightly observed has been reduced to an annual comic spectacle. Just take a look:

2016-BUDGET OF DEEP VISION
2017: BUDGET OF INFINITE TRANSPOSITION
2018: BUDGET OF KINETIC CRYSTALLIZATION
2019: BUDGET OF QABALISTIC DENSIFICATION
2020; BUDGET OF OLYMPOTIC MERISTEMATIC
2021: BUDGET OF BLUSH AND BLISH
2022: BUDGET OF QUANTUM INFINITUM

I beg, what questions do the state assembly people ask him during his comic budget presentation? Tragedy-comedy.