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Investor’s Guide: Stay Head Above Debt



With the increase in access to finance, many Nigerians have been able to access loans either though their banks or through the many financial technology (FinTech) companies that now operate in the space.

For most banks, access to loan takes only  a few steps while for fintechs, within a few minutes, the account of the customer is customer who applied for a loan. However as easy as it is to now apply for a loan, it is also as easy to end up with a huge burden of debt that must be paid off.

As the Global Standing Instruction has taken effect, individuals as well as small businesses are warned to be wary of taking loans that would become a burden to them.

The Director General, Lagos Chamber of Commerce and Industry, Muda Yusuf advised that as much as taking a loan can be helpful for individuals and businesses, it must be taken with caution


Be disciplined in Spending

For individuals it has to do with discipline in spending because going into debt particularly for the purpose of consumption is not often advisable. Most times it is lack of self-discipline that leads people to incur debt for consumption. As far as consumption spending is concerned one has to limit it within the scope of ones earning power. That is not living above your income and it takes a lot of discipline to do that.

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Don’t be an Impulsive Buyer

There are also quite a lot of individuals that buy impulsively. They don’t have a budget, when they see something they like they buy, sometimes people copy other people. Particularly women, they want to belong and not be left behind and before you know it they are in very embarrassing debts.

Borrow for Investments

If it is for purpose of investment and there is proper risk analysis of the investment, an individual can borrow and if it works out well, the proceeds of the investment can help pay off the debt which makes economic sense.

Businesses Need Debt to Grow, but Borrow within Your Capacity

For corporates, they are in business and any corporate that want to grow can’t avoid debt. But again they have to measure the degree of debt that they get into. The level of the debt must be something that it will be easy for the corporate entity to service. If they incur debt that they do not have the cash flow, to service it can bring down the business.

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Do more of Equity than Borrowing

Another way is to ensure that you have more equity rather than going to borrow. Have people who can invest in your business as shareholders. It doesn’t mean you lose control of the business, you are still the major shareholder, so you can sell 10 to 15 percent of the holding and use it to raise money to finance whatever you want to finance.

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