Financial Freedom

Financial freedom is a measure of banking efficiency as well as a measure of independence from government control and interference in the financial sector. State ownership of banks and other financial institutions such as insurers and capital markets reduces competition and generally lowers the level of available services.

In an ideal banking and financing environment where a minimum level of government interference exists, independent central bank supervision and regulation of financial institutions are limited to enforcing contractual obligations and preventing fraud. Credit is allocated on market terms, and the government does not own financial institutions. Financial institutions provide various types of financial services to individuals and companies. Banks are free to extend credit, accept deposits, and conduct operations in foreign currencies. Foreign financial institutions operate freely and are treated the same as domestic institutions.

The Index scores an economy’s financial freedom by looking into the following five broad areas:

• The extent of government regulation of financial services,
• The degree of state intervention in banks and other financial firms through direct and indirect ownership,
• The extent of financial and capital market development,
• Government influence on the allocation of credit, and
• Openness to foreign competition.

These five areas are considered to assess an economy’s overall level of financial freedom that ensures easy and effective access to financing opportunities for people and businesses in the economy. An overall score on a scale of 0 to 100 is given to an economy’s financial freedom through deductions from the ideal score of 100.

• 100—Negligible government interference.
• 90—Minimal government interference. Regulation of financial institutions is minimal but may extend beyond enforcing contractual obligations and preventing fraud.
• 80—Nominal government interference. Government ownership of financial institutions is a small share of overall sector assets. Financial institutions face almost no restrictions on their ability to offer financial services.
• 70—Limited government interference. Credit allocation is influenced by the government, and private allocation of credit faces almost no restrictions. Government ownership of financial institutions is sizeable. Foreign financial institutions are subject to few restrictions.
• 60—Significant government interference. The central bank is not fully independent, its supervision and regulation of financial institutions are somewhat burdensome, and its ability to enforce contracts and prevent fraud is insufficient. The government exercises active ownership and control of financial institutions with a significant share of overall sector assets. The ability of financial institutions to offer financial services is subject to some restrictions.
• 50—Considerable government interference. Credit allocation is significantly influenced by the government, and private allocation of credit faces significant barriers. The ability of financial institutions to offer financial services is subject to significant restrictions. Foreign financial institutions are subject to some restrictions.
• 40—Strong government interference. The central bank is subject to government influence, its supervision of financial institutions is heavy-handed, and its ability to enforce contracts and prevent fraud is weak. The government exercises active ownership and control of financial institutions with a large minority share of overall sector assets.
• 30—Extensive government interference. Credit allocation is extensively influenced by the government. The government owns or controls a majority of financial institutions or is in a dominant position. Financial institutions are heavily restricted, and bank formation faces significant barriers. Foreign financial institutions are subject to significant restrictions.
• 20—Heavy government interference. The central bank is not independent, and its supervision of financial institutions is repressive. Foreign financial institutions are discouraged or highly constrained.
• 10—Near repressive. Credit allocation is controlled by the government. Bank formation is restricted. Foreign financial institutions are prohibited.
• 0—Repressive. Supervision and regulation are designed to prevent private financial institutions. Private financial institutions are prohibited.

Sources. Unless otherwise noted, the Index relies on the following sources for data on banking and finance, in order of priority: Economist Intelligence Unit, Country Commerce and Country Finance, 2009–2012; International Monetary Fund, Staff Country Report, “Selected Issues,” and Staff Country Report, “Article IV Consultation,” 2009–2012; Organisation for Economic Co-operation and Development, Economic Survey; official government publications of each country; U.S. Department of Commerce, Country Commercial Guide, 2009–2012; Office of the U.S. Trade Representative, 2011 National Trade Estimate Report on Foreign Trade Barriers; U.S. Department of State, Investment Climate Statements, 2009–2012; World Bank, World Development Indicators 2012; and various news and magazine articles on banking and finance.

What is Financial Freedom?

Written by: Kim Kiyosaki

As you work towards your goals this year, you may have already run into some challenges. Well, congratulations! This is part of the valuable, learning process in achieving your dream… but this is only the beginning of your journey to financial freedom, and …

What is financial freedom?

Financial freedom is much more than having money. It’s the freedom to be who you really are and do what you really want in life. And many of us, especially women, lose site of this by putting others first and playing many different roles such as parent, spouse, employee, friend, and more.

If you want to be financially-free, you need to become a different person than you are today and let go of whatever has held you back in the past. It’s a process of growth, improvement and gaining spiritual and emotional strength to become the most powerful, happy, and successful “you” possible. That is the true reward of financial freedom.

Money Does Not Make You Rich.

Just because you have money does not mean you have financial freedom. In It’s Rising Time!, I talk about how people like Ed McMahon from The Tonight Show and Nicole Murphy, the ex-wife of actor Eddie Murphy, had millions of dollars and lost it all. Nicole Murphy spent her $15-million divorce settlement in less than four years. And towards the end of his life, Ed McMahon faced foreclosure on his Beverly Hills home and owed $747,000 in credit-card debt.

Both of these examples illustrate that even if you have a lot of money, if you don’t know what to do with it, it will be gone.

And ladies, do any of these statements sound familiar?

• I will find a rich man to take care of me.
• I don’t want to deal with finances and will ignore it.
• I’ll take the easy road today and deal with the consequences in the future.

If so, you are not alone as these are common choices women make. But if you don’t take financial matters into your own hands, your chances of having a secure, financial life are slim. The good news is that it’s not rocket science.

You can take control of your situation, no matter what it is, and enjoy financial freedom.

Enjoying the rewards of financial freedom is simply a matter of increasing your financial education and determining where you are now financially and where you want to go.

To start your journey, check out the Triple A Triangle™ from It’s Rising Time! I’ve broken down the process into three, easy-to-understand areas that include: Aspire to achieve a goal, Acquire knowledge and Apply what you’ve learned to be successful.

I know it can be scary to make change happen, but think about it: if you don’t take action now, what does your financial future really look like?

OF DANGOTE'S RISING FINANCIAL PROFILE AND THE REST OF US

by Thomas Wilson

A few days ago, the Forbes Magazine released its latest ranking of the richest people in the world. The list revealed that Nigerian billionaire and Africa's richest man, Aliko Dangote, is now Africa's first $20 billion man and the 25th richest man in the world.

The President/Chief Executive of the pan-African conglomerate, the Dangote Group, has become the first African entrepreneur to lay claim to a $20 billion fortune as the stock value of his flagship holding, Dangote Cement, leaped just about three-fourths since March 2013, when Forbes last released its yearly ranking of the world's richest people.

With a current market cap of $20.5 billion, Dangote Cement becomes the first Nigerian company to achieve a market capitalisation of over $20 billion. The global business and financial intelligence news magazine, Forbes, reported that Dangote's 93 per cent stake in the cement company is now worth $19.5 billion.

Carl Franklin, the head of Dangote Cement’s investor relations team in the UK, said:“Quarter one was the first sign of just how profitable we can be in Nigeria. The amazing thing is that 66% of our gas-fired production in quarter one was done at 84% gas. "Imagine what would happen to margins if we did the same amount at 95%. This has given investors a good sense of what we can really do when everything goes in the right direction.”

Added to this are his controlling stakes in other public-listed companies like Dangote Sugar and National Salt Company of Nigeria, and his significant shareholdings in other blue chips like Zenith Bank, UBA Group and Dangote Flour.

He equally has extensive real estate portfolio, jets, yachts and current cash position, which includes over $300 million in recently-awarded Dangote Cement, which puts his current worth at over $20 billion.

With his fortune, Dangote is richer than Russia's richest man, Alisher Usmanov, India's Lakshmi Mittal and running neck and neck with India's Mukesh Ambani. He is also catching up on such Americans as Google's billionaire founders, Larry Page and Sergey Brin.

Dangote Cement had recorded an unprecedented surge in share price largely due to market response to its impressive results in the first quarter of this year. Its unaudited results for the three months ending March 31 showed that the company's pre-tax profit rose to $339 million, representing an 80.6 per cent increase from last year and a strong indicator of the company's future earning potential.

The results also indicate a 79.5 per cent rise in its earnings per share over the corresponding period last year. While Forbes reasoned that other companies might eventually achieve this, it noted but it would take a bit of time. Dangote Cement currently accounts for over a quarter of the total market capitalization of the Nigerian Stock Exchange (NSE).

The second largest company on the NSE is currently West Africa's largest manufacturer of alcoholic and non-alcoholic beverages, Nigerian Breweries, with a market cap of $8.5 billion.

Dangote debuted on Forbes' billionaires list in 2008 with a fortune at $3.3 billion, which dropped to $2.5 billion in 2009 and plunged further to $2.1 billion in 2010.

This, however, surged 557 per cent in 2011 to $13.8 billion after he took Dangote Cement public. He dropped to $11.2 billion in last year's rankings, but rebounded at $16.1 billion this year. Since March, his fortune has jumped another 30 per cent.

Forbes believes that Dangote still has bigger ambitions, as he reportedly told the magazine's Wealth Editor, Luisa Kroll, at Davos in 2011 that he expected his firm to have a market cap of $60 billion within five years.

What I found amusing in all of this is that Aliko, the son of Dangote started off in the seventies as a mere trader in cement. Today, he is one of the world's largest cement manufacturers, vis-a-vis other business concerns.

All of us do not have to be billionaires, but we can work our ways to the top in our chosen vocations and be relevant in society and beneficial to mankind.

It is very convenient to fold your hands and blame your woes on the Nigerian epileptic system. No regular power supply, no fuel, no government incentives, no this no that. Yet, in the midst of all of these inadequacies, some people are making head ways in their chosen vocations and consistently climbing up the ladder.

Why brand yourself the weeping child? Look beyond your present status and limitations and begin to think globally. The unfortunate truth is that, there are people whose destinies are tied to yours. There are people whose elevation in life is tied to your own elevation. If you continue to complain and fail to soar above environmental limitations, you inadvertently jeopardize their emergence!

So, it is time to re-charge your inner battery. The law of relative comparison favours your glowing heretofore. For if Aliko, a little boy from Kano, can rise from nowhere to become a global brand today, then there is no tenable excuse for you not to soar. 

If he can, you can.

Dr. Thomas S. Wilson

Akure

First published in Trace News Magazine, 23rd March 2014.

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