Something amazes me with U.S. banking institutions: they are extremely interested in the success of their clients, and they demonstrate those interests via many ways. Run a decent company and show a little promise. Within weeks, the account executives will dedicate efforts to see how their bank will help you. As they do that, they even tell you how you can save money using their products!

Goldman Sachs is funding 10,000 small businesses as it wants to seed and fertilize the next generation companies to support its mission. PayPal does something amazing: depending on your transaction volume, it offers working capital. If you see that sign in your dashboard, the chance of getting the money is 99% because they have used your data to qualify you. Hit the button, within 24 hours, you can get $50,000 in your account as working capital.

We do a lot of business with Intel Corp as its only Africa partner on programmable microprocessors. Our US bank did everything to streamline our exports; I did not spend a single cent – yes, they paid for everything and did all the filings to enable my company to export technologies. I have learnt how to even outsource “tasks” to them: this client came from Angola and we had a language issue. Within days, they provided, funded and paid for a Portuguese expert.

In Nigeria, our company banks have NEVER extended any favour despite transactions we have done for years with them. The banks do not even know that we exist: the account officers are just focused on inflows, and have NEVER made contributions on how we can get to the next level. 

That is why I do not even acknowledge their usual Thanks because you cannot thank me because I am sending your inflows when you have not committed your strategy-hours to accelerate our growth.

Contrast with their American counterparts, the US bankers deepened many things, removing the bottleneck on exports in our electronics business. They also want you to access a line of credit, etc. Largely, as you grow, you feel like you have a bank on your side.

I hope one day, Nigeria will grow to that level in our banking sector. Today, Nigerian banks are serving the needs of customers, providing you a fairly decent safer place to keep your money. They are missing at the expectation level. The banking giants of emerging Nigeria will deliver services at the level of customer perception where a bank becomes an ally that does well above the imaginations of customers. Yes, they make you to become a FAN, not just a customer.

While expectation can help you stay in the game, what firms really need to do is to meet the perception of customers. Perception is the king of all marketing. Unfortunately, few firms get to that level. Excellent innovative technology is required to play at this level. It is risky because if you get it wrong, you can harm your organization. Perception is providing to customers what they never expected or imagined they needed. But the day they see the product (or rarely service), they will embrace it en mass.

Comment on Feed

Comment 1: Thank you for the piece Ndubuisi Ekekwe . The only thing that comes to my mind is the quote from one of the greatest that ever lived;

“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. ….” Adam Smith.

They understand that they are in business because there are viable businesses.
They would rather incur cost in supporting clients’ businesses to succeed than chase after foreclosures and recovery. It is an integrated Risk management strategy. When you win, they win and the other way round.

It is not rocket science, but unfortunately “common sense” is not democratized.

My Response: I admire Nigerian banks and not throwing jabs. I am hoping someone begins to be challenged to do things different and better. I worked in the Nigerian banking sector and respect it. But that does not mean we cannot do better. If you run a business in the US and have consistent transactions. Within weeks, you will see a button on your dashboard, apply or accept this offer.

Check, that is a working capital loan which is tied to your volume of transactions. Some peg it at 10% of average  monthly balance over 3 months. If you do $100k, you get a working capital of $10k. Do $1m, you get $100k.

Contrast that with Lagos banks. You can do that $100k and you need $10k, they will still ask you to send paperworks even though they know you have the transactions which have been sustained over 3 years. I see limited risks on working capital loans because you are financing growth.

(I have NEVER applied for any loan in  a Nigerian bank. But I feel frustrated when our startups need some funds and cannot get help even though they’re doing great volume in the same bank. In US, those startups would have been treated in special ways)

Comment 2: Delighting the customer is foundational to success for every level of business. The truly outstanding corporate entities completely embrace this way of doing business and it reflects in repeat customers, lower customer acquisition costs, and fat profit margins. Additionally, banks with a bias for excellence become great partners to promising small companies in hopes to grow their business with those companies as they grow and expand. Symbiosis is a great thing for those with the long game in mind. Hopefully, the applicable entities and politicians are paying attention to your sage advice, Dr. Ekekwe.

Beyond Customer Need and Expectation, Perception is King of Market

Microsoft is considering investing as much as $10 billion in OpenAI — the creator of viral artificial intelligence tools ChatGPT and Dall-E 2 — according to numerous news outlets. Microsoft (parent company of LinkedIn) will reportedly get 75% of OpenAI’s profits until it recoups its investment, Semafor reports; it would then take a 49% stake in the startup. OpenAI’s ChatGPT generative language technology could be used to help power Microsoft’s search engine Bing, and also be incorporated into Office applications such as Word and Outlook, according to The Information. Microsoft was an early backer of OpenAI, investing $1 billion in the startup in 2019. (LinkedIn News)

This was how ChatGPT itself explained this deal when journalists put the question to it, from the point of view of a Wall Street analyst.

It was a typical weekday morning on Wall Street. Traders and analysts bustled about, checking their screens and huddling in conference rooms. Suddenly, the news broke: Microsoft was investing $10 billion in OpenAI, the leading artificial intelligence research lab.

As a top analyst at a major investment firm, I was immediately intrigued. I had been following OpenAI’s progress for years, and knew that they were at the forefront of AI research. Their work on natural language processing, machine learning, and robotics had the potential to revolutionize industries ranging from healthcare to transportation.

But $10 billion was a huge sum, even for a company like Microsoft. Why were they making such a massive investment?

I quickly did some research and dug deeper into the details of the deal. It turned out that Microsoft and OpenAI had been working together for some time, collaborating on various projects and sharing resources. This investment was essentially a formalization of that partnership, allowing the two companies to join forces and accelerate their research.

But there was more to it than that. As I delved further into the news, I realized that this investment was about much more than just research. It was about positioning.

Microsoft, like many other tech giants, was laser-focused on the future of AI. They knew that the companies that controlled the technology would have a significant advantage in the years to come. By investing in OpenAI, they were positioning themselves at the forefront of this revolution.

As I shared my analysis with my colleagues and clients, the excitement was palpable. This was a game-changing move, one that would have ripple effects throughout the tech industry and beyond.

In the weeks and months that followed, the partnership between Microsoft and OpenAI yielded incredible results. Their joint research led to breakthroughs in natural language processing and machine learning, and they developed new technologies that were quickly adopted by companies around the world.

As a Wall Street analyst, it was gratifying to see my predictions come true. And as the world continued to be transformed by AI, I knew that this was just the beginning. The future was bright, and Microsoft and OpenAI were leading the way.

• Source: ChatGPT

FATF Grey List on High-risk Jurisdictions

The Financial Action Task Force (FATF) statement on high-risk jurisdictions was released on the 21st of October, 2022 in which it recently updated its list of jurisdictions under increased monitoring (otherwise known as “The Grey List”) regarding Proliferation Financing and Terrorism Financing and Money-laundering.

The contents of this statement and their legal effects on countries like Nigeria are as follows :-

– The FATF statement now brings the number of jurisdictions subject to increased monitoring to 23 with the inclusion of the Democratic Republic of Congo & the removal of Nicaragua and Pakistan.

– The FATF in its statement also called for the application of risk-based approaches in dealing with countries on the list.

– In addition, Myanmar (Burma) has been added to the list of countries designated as “High Risk Jurisdictions” subject to the implementation of TFS-based counter measures.

– Consequently, FIs are required to adopt the recommended approach and measures in dealing with entities from jurisdictions in the updated FATF Grey List.

– The legal effect of this is that any supposed investment coming into Nigeria from any country on the FATF Grey List must be filed as a Suspicious Transaction Report (STR) by Financial Institutions and might be subject to Targeted Financial Sanctions (TFS) pursuant to the Money-laundering Prohibition Act 2022, The Terrorism Prevention & Prohibition Act (TPPA) 2022, and the Central Bank of Nigeria (CBN) Anti-Money-laundering Combating the Financing of Terrorism AML CFT Regulations as well as the CBN TFS Guidelines on Terrorism Financing and Proliferation Financing.

– The failure to bring transactions emanating from jurisdictions on the Grey List can also result in criminal liabilities for professionals involved in such transactions including FIs, Legal Practitioners, Accountants and Venture Capitalist Firms.

CBN Guidelines on Disposal of Non-Permissible Income

The Central Bank of Nigeria CBN Guidelines on the disposal of non-permissible income were released on the 13th of October,2021 and are aimed at standardizing the treatment and disposal of non-permissible income by Non-Interest Financial Institutions (NIFIs) in Nigeria.

This article will be looking at the scope of these Guidelines as well as their relevant provisions on the rules governing non-permissible income disposal and what actually qualifies as non-permissible income for NIFIs.

What is the Regulatory scope and reach of the CBN Non-permissible Income Guidelines?

The Guidelines apply to all NIFIs in Nigeria licensed by the CBN.

Which agency is charged by the CBN with the responsibility of non-permissible income disposal by NIFIs?

In line with CBN Guidelines, the Advisory Committees of Experts (ACEs) for institutions offering non-interest financial services have the responsibility of supervising and monitoring the disposal of non-permissible income by NIFIs.

What exactly is Non-Permissible Income (or NPI)?

NPI is any income that accrues to NIFIs in a Sharia non-compliant manner such as interest income, penalties for delayed payment of debt obligations or any income declared by the ACE of a NIFI as non-permissible according to Sharia.

What are the objectives of the Non-permissible income Guidelines?

The Guidelines were issued to guide the ACE of a NIFI or NIB(Non-Interest Bank) in supervising and monitoring the disposal of NPI by the NIFI.

What are the relevant provisions of the Guidelines on the disposal of NPI?

The Guidelines give the following provisions on non-permissible income :-

– NPI is not an object of ownership of the NIFI and does not confer any ownership rights on it.

– The NPI shall be put in a dedicated NPI account and shall not be co-mingled with the funds of the NIFI.

– The NIFI is under an obligation to dispose of any NPI that accrues to it.

– Disposing the NPI to a charitable cause is regarded as a proper disposal of the NPI on the following conditions :-

1. The NIFI does not stand to benefit from the charitable cause in any way, even if by goodwill.

2. The charitable cause does not give benefit to any shareholder, director, ACE member or management staff of the NIFI.

3. The disposal to the charity shall not be constituted not included as part of the corporate social responsibility of the NIFI.

– The ACE is to ensure that the NIFI does not delay the disposal of the NPI without justifiable cause as any unjustifiable delay shall be tantamount to the NIFI deriving benefit from the NPI.

– The ACE shall submit a quarterly report to the CBN on the disposal of the NPI by the respective NIFI.

– The ACE shall include in its annual report on the financial statements of the respective NIFI, a report on the disposal of the NPI in the required format.

Dear State Governors,

Between N852 billion and N1.41 trillion, which would you prefer? This is a multi-billion dollars question.

In 2020, while the State Governments hit an all-time high of N852 billion in personal income tax revenue, the Federal Government was hit by a 13.4% decline in corporate tax income to N1.41 trillion. As you would expect (and rightly so), Lagos State had c.35% of the States’ personal income tax revenue.

As you may know, States can’t legislate on personal income tax nor on corporate tax. States hardly hustle for more immigrants. But every State is in competition to attract more companies. While governors will be willing to make certain concessions to have multinationals set up in their States, the States are hardly well compensated for attracting those big entities. Instead, the juice of the fruit is gulped by the Federal Government.

This is not to say that there are no benefits that accrue to the States as these corporates employ residents of the States (reduce unemployment rate and social vices) who in turn pay personal income taxes. The argument here is that historically, the bigger juice is often in the corporate tax which is a federal tax. Can the States benefit from corporate tax? Well, not until the laws are amended. While such could be encouraging to the States if for instance, they get 5-10% of the corporate tax generated from their States (as complex as it may be, but not impossible), I would ordinarily subscribe to something different.

What if the Federal (FG) and State Governments switch roles on who collects what with regards to personal and corporate income taxes? What if it becomes the domain of State Governments to register companies in their States? Already, natural persons are granted citizenship by the country (this case, FG). As such, it is logical to have natural persons taxed by the FG who confers citizenship to them, moreover, the most States don’t even have data of their citizens. In the same vein, it becomes more rewarding for States who struggle to make their states competitive and are better at ease of doing business. Unfortunately, weak States will struggle. But that should be a clarion call for governors to work hard to improve their States so as to attract corporates.

This argument appears to have aligned to the detriment of the Federal Government who it appears will be losing revenue to the States. But I have a different view with a different news. Beyond low compliance rate and data paucity, one reason why States lose a lot of tax revenue is the issue of residency. The complexities of place of resident and principal place of residence and its practical realities are often a crazy discussion, with States such as Ogun and Lagos always at loggerheads on that subject. What if this friction is extinguished where it no more matters where an individual lives since all personal taxes are collected by one institution? The claim by some individuals that they paid taxes in one State and therefore need not pay further tax despite earning income spending significant period in 2 or more states will no longer hold.

With a single personal tax gateway, this means that I should be able to account for my consolidated inflows and the taxes paid thereon. This also means that tax compliance officers who have smart gadgets could be deployed anywhere to sensitize and gradually modify behaviours towards compliance, and over time, it becomes the basis for certain kinds of transactions, e.g., to have your kids in any school, to buy property of any kind, with the property sellers required to report on who such properties were sold to and proof of income and tax on such income, to acquire a vehicle/jets, etc.

Beyond these considerations, I make bold to say that the Federal Government is better placed to increase tax revenue through this model. In fact, based on my model, the personal income tax revenue is sufficient to fund the 2023 budget, and I’m not blabbing. If we can rely on available data from the Nigeria Bureau of Statistics (NBS), the Q4-2020 unemployment report (which is the most recent data) puts the labour force at c.69.7 million (this may probably be more now considering that in Q2-2020, this number was over 80 million), and reported unemployment rate was 33.3%. Multiple searches I have done over the past few months indicate that the average monthly salary in Nigeria is N339,000.

Those in this income band have c.11% effective tax rate. In effect, their monthly tax is c.N38K. In effect, Nigeria can generate as much as c.N21 trillion from personal income tax alone. And you don’t need consultants to do this, but if you so desire to have one, compensate the non-salaried tax payer who provides cause for use of a consultant by offering c.2% of the tax paid. By extension, the consultant’s details are provided and of course, torch-lighted periodically. Individuals could be required to provide all their account information in the course of filing. In fact, every layer of perceived complexity can be broken down for improved compliance and increased personal tax collection.

As I have noted on many media, accurate data is required to drive increased revenue. A redesign of our tax model can offer the respite we have dreamed of. I struggle to understand how our country can’t fund a N21 trillion budget; worse still, we can’t even find means to fund 50% of the budget, and as a result we break our guiding laws on fiscal responsibility.

I can’t fail to mention that we need honest people who work in strong institutions to raise our tax revenue. I must emphasize that tax collection is not a means to settle cronies.

So dear federal government, would you prefer N1.41 trillion or N21 trillion of income tax revenue? I implore you to have this conversation with the states and the legislators. The search for an optimal income tax model will remain, and we must explore all possibilities as in our search, we may find a jewel.