₦airaland Forum

chimex38:
Explain this MMF -ve interest rate in foreign countries Biko.
like one is charged on the capital for investing or.....

I didn't say foreign countries.

I said negative interest rate markets.

Just like the money rate in Nigeria is currently +27.5%

There were countries whose interest rates were below 0, so playing in the debt market in such countries mean you effectively pay interest for lending out your money. And the borrower earns interest for borrowing.


Japan was the most recent to exit such rates last year. (Japan is the one I can recall I should say)

You can look it up.

Joyful365:
Please house clarify these grey areas on commercial papers and money market funds if you have the experience.

For commercial papers, is the interest rate quoted prorated? For example, if 21.15% is quoted for 270 days tenure, is the 21.15% indicated for one year interest rate, meaning to prorate it to 270 days you do 21.15%/365 * 270 = 15.64%? Meaning it is 15.64% that will be paid for the commercial paper of 270 days tenure? Or the 21.15% will be paid for the 270 days CP tenure? Also, are CPs subject to witholding tax? What other fees are charged on CPs?

On money market funds, what are the fees charged and are they charged on the interest earned or charged on the total sum under management? For example, if you put ₦10 million in a money market fund and it earns 10% (1 million) in one year, will the fees be charged on the 1 million earned or the entire 11 million? If on the entire 11 million, what happens when the fund managers don't make any returns? Will they still continue to remove their management fees from your capital?

-> CP discounts are prorated, so yes for 270 days, you'll get the 15.64% discount, your actual yield would be around 18.5%
-> Yes, CPs are subject to 10% WHT. Then you also pay fees to the bank or finance house through which you buy. Fees should be under 1%, less than 0.5% if you find efficient folks like StanbicIBTC

-> MMF management fees is a portion of the earnings ALONE! Except your MMF is invested in Germany or some other negative interest rate markets, MMF will always make returns.

Agbalowomeri:
Wetin concern CBN with stock market o
Dem no send una o

27.5 is not sustainable.

They're literally printing over N20trn in new naira per year. More naira, less value.

Cbn should approve dividends and cut mpr by 175 basis points, so the market can catch a breath.

100k volume on MTN would move it closer to 136k.

146k to 138k in about 2weeks.

The market seems to be going through a lot.

Bizibi:
shebi you remember that sugar in the 90's,I never saw an advert on that product.

Maybe that's why we have to go as far back as the 90s to remember it??

Doesn't look like it survived 😁

Agbalowomeri:
Na you wan fight Mr. Market price action

Mr Market doesn't bother me.
My entire portfolio is up over 1% today alone. That's more than half my expenses for the whole month.

If volume traded are low, that's when I can be bothered 😁

Index below 140k.
Not the best start to a new month!

Agbalowomeri:
Waiting for Japaul @50kobo

With these prices you quote, you might need a time machine ultimately. 😁

No end in sight to this AIRTEL DIVERGENCE!
N2300 in Lagos, N4600 in London!

and NGX thinks anyone would sell their 100k units at 2300??

mikeapollo:
Lol!
Ok, thanks for sparing sometime to answer my enquiries. You tried!

Ignorant little me. I for go attend school well well, instead of absconding and running around with Kabiru at Ayetoro to look for bushmeat in the farms. Na that guy put me for this kind trouble now. God dey.

I apologize for the tone.

This is the deal:
I already pointed out that you could use dividends to pay off the N2.5m interest, now even if you don't have or use that, you can obviously sell just N3m worth of shares (taxed at about 15%) which will cost you way less in taxes than if you had to sell the entire N50m and pay over 20% average tax rate. The maths is straight forward.

I just thought we needed to beat the back and forth, so we don't derail/spam the thread.

Sorry boss.

mikeapollo:
What source of funs would be used to repay the capital (before rollover) if there is no selling of the shares, and no other source of income?

Try Google.

If you yet have confusion about this issue, I don't share it.

Try Google and chatGpt. They'll help you.

Give the AI enough context about your peculiar situation.

However if you prefer to think you have no way out of the tax situation, good for you!!!

Maybe how would you pay the interest is the question you should ask.

The capital can be rolled over perpetually.

You can easily pay N2.5m interest cost via dividends.

mikeapollo:
Even with your clever strategy, how would one repay the loan without selling the shares (assuming no other source of income/savings)?

Banks will gladly roll it over.

It's common practice in countries like US.
Look it up!

FGN has been rolling their bonds and T-bills for decades.

Agbalowomeri:
Just take one-month loan equivalent to your needs, pay back on share liquidation. Continue trading forever

Depends on the spread between the pricing of the loan and the tax rate.

In developed economies, interest rates are usually below 5% while tax rates are usually above 20%

So if I need 50m to fund my expenses, instead of withdrawing my stocks proceeds and pay N10m as taxes, I'd rather get the N50m as loan and pay N2.5m as interest.

And keep rolling over forever 😀😀

With lending rates at 30% here though, you still need to teach us how it can work.

mikeapollo:

You cannot dodge it forever.
God Almighty says He will bless you abundantly and mightily so you can ''enter the net'' and pay 20% tax!

No, it's not to enter any ridiculous net, it's so I can be a blessing to others 😁

mikeapollo:
Don't worry. One day, you go enter the net
Your fortunes, gains, blessings, expenditures, obligations, plans, projects, opportunities, responsibilities, will surely increase and will not be as it is forever. You go enter am, dont worry.

No I won't. 😁😁

mikeapollo:
Me and you dey inside together. You never know?

Very soon you will understand my plight and others with similar concerns!
One day, monkey go go market, im leg go hang for basket!

Not quite 😁
Every law has a loop hole.
The reinvest clause here works for me 😁😁.
Again scenarios are different.

Some people have expenses that are 20x mine.

What if they didn't include the clause, it wouldn't have been funny at all.

Pay them 20% average tax rate for what?

mikeapollo:
My brother, my potential loot is in several multiples of that amount!
And I cannot possibly understand why I should pay useless huge tax to any govt.
I must sell off some tangible units before Dec 31

Government that you're not even a fan of anyways. Good thing you still have 4 months 😁😁😁

faoogoke:
Royalex did not close green today.

Go to court?? 😁😁😁

Agbalowomeri:
You think September will be green

CBN should have approved banks' half year,
Some people would have started sniffing Q3
Maybe MPC will do a slight cut.

-3% to +7% is my estimate.

mikeapollo:
@Ositadima and everybody in the house: please confirm this for me before I go crazy:
If one should sell shares and make a profit (chargeable gain) of N200m, you pay tax of N47.9m to govt. going by the new tax law?

If you make the gain, why am I the one to pay the taxes?? 😁😁😁

Why did you frame the question like that?

Modified:

I didn't read your post well,
I read it as "if I sell and make gains, you pay...

August's bull survives marginally at 0.2%

September should be better!

mikeapollo:
There is one constant factor in investing in equity: uncertainty.
There is no certainty that a company will always pay dividend consistently, every year, without fail, forever
GTCo or any other bank/company for that matter can experience problems and stop paying dividends for some time.
Most of the companies that have folded up used to pay dividends annually at a time, until they started experiencing problems.
But I wish you always continue receiving your dividends as you desire.

You do realize results come out on a quarterly basis right?

You make it sound like companies' numbers stay hidden until dividend period.

Anyways, let's not flog this too much.

What I know is, as far as the NGX is concerned, getting 8% dividend yield will only be tough for people who are still learning.

mikeapollo:
Yeah, I understand it may be perfect for you.
I am only considering the implications for a wider number of investors who may rely on capital gains for projects and emergency obligations. Paying so much tax to govt would be a disincentive.

Also remember, you cannot ''withdraw'' dividend. You can only receive dividend when the directors decide to declare it. So it is not a certainty. So in a year (or years) that dividend is not declared, what do you do?

It's not that hard to tell which companies will or will not declare dividends is it?

If I'm hunting for dividends, would I leave GTCO to buy TRANSPOWER?? or a company with negative shareholders funds? Or one with forbearance issues, I mean these things wouldn't really catch you by surprise if you know what you're doing.

Getting 8% dividend yield on the NGX isn't too hard. Even DANGCEM would hit it.

mikeapollo:
Are you joking?
A person has a stocks worth 50m; he receives dividends of 2m per year. He needs 20m to buy a house or settle an emergency obligation.
This thing can affect majority of people in the NGX

There is potential confusion looming.

Few things:
- if you pick the right stocks, the dividends are more like N4m not N2m
- NGX is not my only income stream
- I already have a big house with rental income even

So Yes dividends would do, especially when the capital is more than N50m. Maybe N40m dividend on N500m capital helps you get the perspective 😁😁😁

Anyways, it's not a one-size-fits-all approach.

But it's one that'll certainly work for me.

KarlTom:
I stand to be corrected but Let me quote your original post:

B. On Capital Gains from Shares
• Threshold Exemption: No tax if BOTH apply in a 12-month period:
o Total sale proceeds < ₦150m, AND
o Chargeable gains < ₦10m.

the key word here is BOTH so exemption only happens WHEN both conditions are met

Yes sir. But that's condition 1 of exemption (it deals with the values of proceeds and gains)


The other condition of exemption is about what you do with the proceeds. It's separate from the first.

mikeapollo:
One day, you will need to withdraw your cash e.g. for a major project or to pay for your child's school fees abroad.
Then the govt comes to collect a whooping tax on it?

I'll withdraw it as dividends and pay just 10% 😁😁

Dividends are enough to cover my bills.

KarlTom:
There's a cap of total sales (₦150m).

You wey dey do ₦billion per month on a norms, how you wan take run am

The N150m is for complete tax exemption.

Like if all your sales for a year are less than 150m you'll be exempted whether you reinvest or not.

The reinvestment is a different clause which exempt the tax burden as long as you're not pulling out the funds, but instead redeploying to other stock. That still applies even if it N500bn per year. (I SUPPOSE)

KarlTom:
it is not double taxation in the Financial Sense

The listed company and the investor are two seperate entities...
That's the reason why HNI will always use their personal company(ies) to reduce their tax burden...

I agree 100%
It isn't double taxation in the Financial sense, where the company and the owners are separate entities. But it is in the real sense, cos the company's owners actually make the company, abi na company dey wear suit sit down for.board room??.😁

If you're an HNI, does a company shield you from WHT though? Isn't it payable by all entities?

crownprince2017:
The corporate tax and the tax on dividends from each investors dividend, isn't that a double taxation.

It indeed is.
You tax the profit of a company I co-own, then when a portion of that after tax profit is given to me, you tax it again