 Welcome to the Advocates, your Sunday reminder that important conversations are among the necessary tools for a saner society. I will be talking about good debt. Elijah Felix will be talking about the girl child, our time is now, our rights, our future. Victor and Ye Query will be talking about focus areas for the next Nigeria CU. So Lumoyan will be focusing on migration and its effects on the Nigerian economy. We'll be right back after the break. The debate on good debt and bad debt is a long standing one. On one side are those who strongly believe that all debt is bad. On the other side are those who believe that there is necessary debt and so if it is necessary then it must be good. Those who believe that all debt is bad do so mainly because in the scripture in Proverbs 22.7 says that the borrower is slave to the lender and they quote this believing that it was written as a warning against borrowing. However, I think that while it's a caution to borrowers, if you read the whole chapter and look at its context, it is also a warning to lenders not to take advantage of the poor in our society. I believe not all debt is bad and I would like to highlight some strategic ways to utilize debt. When we say the use of debt can be strategic you would immediately think maybe for business but no. Even for personal use sometimes debt is necessary. Not everything we do can be done with our own personal funds or at the pace at which we earn a salary. Strategic uses for personal debt. Education. The more education you have the greater your earning potential. Education also has a positive correlation with the ability to find employment. Educated people are more likely to find well-paying jobs and tend to have an easier time finding new jobs should the need arise. So an investment in education can often pay for itself within a few years of entering the workforce. However, not all degrees are of equal value. So consider both the short and long-term prospects for any field of study that appeals to you. Your own business. Money that you borrow to invest in your own business can also come under the heading of good debt. Being your own boss is often both financially and psychologically rewarding. It can also be very hard work and running your own business comes with risks. Many ventures fail but your chances for success are greater if you choose a field that you have some skill in and have already done the groundwork. Your home or other real estate. There are a variety of ways to make money in real estate. On the residential front, the simplest involves taking out a mortgage to buy a home, living in the home for a few decades and then reselling the home at a profit. Residential real estate or commercial real estate can be a source of cash flow, an eventual capital gain if you know what you're doing. Before you take a loan, however, there is something called a debt to income ratio. This simply means the percentage of your monthly income that goes to making your monthly debt repayments. Creditors use your DTI ratio to calculate how much they can lend to you. In Nigeria, labor law pegs the DTI ratio of salary earners at not more than 33.3% of your income. So whatever lending you do, you cannot exceed that ratio unless you go to unregulated lenders and loan sharks. Strategic uses of business loans. For fast growing businesses, it is near impossible to grow without using other people's money, either equity or debt. Many fast growing companies would prefer to use debt to support their growth rather than equity because it is a cheaper form of financing and you don't have to part with any of your equity. There must be sufficient operating cash flow generated by the business to service the debt's interest and principal repayment obligations or there would be severe consequences for the business. Some reasons why companies might elect to use debt rather than equity financing include. Debt can be a less expensive source of growth capital if the company is growing at a high rate. Building the business using debt is a way to consistently build equity value for shareholders as the debt repayment is paid. Debt can be somewhat less complicated to arrange than equity financing and may not require a shareholder approval. Once the debt is repaid, it's gone. Equity however remains outstanding unless repurchased by the company which typically requires the shareholder's consent. Debt can be used to finance a wide variety of business activities like working capital, capital expenditure to acquire inventory and also to finance equipment purchases. Debt is neutral, it depends on what you do with it that makes it good or bad. So it's advisable to use debt and drive it into production. Now when I mean production, I don't necessarily mean actually creating physical tangibles. Just like you said, other things like education, reducing a refined view, your personal comfort if we guarantee something bigger, for instance now you are living somewhere and you need to pay your rent, you know you are working somewhere just like you said your salary frequency is not in congruence or is not synchronized with the fine you need to pay that rent. You can take that, provided that you can pay and then your comfort, your comfort staying at your house without being disturbed by whoever, the landlord or whoever would later generate into a peaceful mind that will make you more productive. So see, whichever things you do, let the debt be driven towards production either directly or indirectly, tangible or intangible. So that's my thinking. I like that. Yeah, and you know, just add a little bit to that. When I look at debt, I look at it from two perspectives, you know asset and liabilities, right? So debt can be an asset or can be a liability. If you have for instance a fantastic business idea, you know where you need money to finance it and you've done your financials and it makes sense, your projections make sense, then when you take debt to do that, you know you get returns and because you've also calculated what the debt, you know, the interest on the debt and it makes sense. So you do that. Unfortunately, what happens is when they take debt, they go and buy a car, you know, and the car is, it means you kick, you start that car and you drive it out of the, you know, after that place, it starts to depreciate in value, you know. So we must always think of debt in terms of, you know, investing it in assets versus liabilities. That's a nervous start. I think I pretty much agree with everyone. I mean, basically Tulu, you know, Elijah said, because at the end of the day, you want to think about what's to, oftentimes I think we should even start having a mindset re-engineering for people who take money because we use money, like I said, narrow escape to yourself problems. We're not thinking about how do we, what's the return on that? How do we recuperate, you know? So I think taking money as itself is something that should be good. In fact, people should be made to take loans, really. People don't understand how it works. But people don't understand how it works and we get so careless and, you know, see if some of these loan sharks, they'll call you. Mr. XYZ is an armed robber. He's a hire killer, you know. How much did he take? $12,000. If you think you used to start a hire killer, do you get so far? I get it. And I think most of these loan sharks just start that re-education and mindset programming of people. I think all that. Just like you are counting the lot at three pieces, I think these things are unregulated. Anything can happen in fact. But I just wonder how folks, all these folks in advance would like US, UK, somebody wants to buy an iPhone or an Apple gadget or something, is it a key? They want to walk all into business. We just throw it into the shop there and just get his credit card and just purchase this thing. And then they pay me back. Have you understood the system yet? You know, the credit system works very well there because they can track people. So we can track people with all our BVN and NNR. You see someone take a loan from here and run his credit down. And then we locate to... What are the BVN and NIN? So I think we've all come to the conclusion that debts can be both good and bad. If you use it the right way, it will be good. If you use it the wrong way, it's bad debts. After the break, Elijah Felix will be talking about the girl child. Our time is now, our rights, our future.