THE CAUSES AND EFFECT OF COMMUNICATION BREAKDOWN IN THE ORGANIZATION

THE CAUSES AND EFFECT OF COMMUNICATION BREAKDOWN IN THE ORGANIZATION

INTRODUCTION

It’s natural in every organization to have laid down rule of organization structure with the flow chart of communication within the organization between the employees of various departments. To achieve the goals and objectives of the organization communication plays a vital role of improving the organizational performance with effective communication; good communication skills are also required in hiring qualified candidates to work in an organization. Communication skills enhanced managers’ efficient and effective productivity of the organization, no communication no organization. Therefore, communication is derived from a Latin language ‘Communicare’ which means to share. Therefore communication could be described as process of passing information and understanding to one or more persons. It is a means by which behavior is modified, change is affected and information is made productive in order to achieve objectives and goals of organizations.

In an organization, there are different units performing various functions. Thus, communication serves as a linking process by which parts of a system are tied together. Communication provides the links, which bind an organization together in other to evolve common understanding. (Rogers et al 2002)

Freeman, (2005) define communication as the process by which people attempt to share meaning via the transmission of symbolic messages.

Communication breakdown in business organization has lead to frustration, loss of productivity and strained employees relation and failure to address to problem in communication with employees will cause the situation to be deteriorate even further and some causes of a break in communication are easy to spot like culture and personality differences and these has made this study to become necessary to be reviewed to ascertain and investigate the causes of communication breakdown in organization.

Aim and objective of the study

The aim of this paper is to find out the causes and effect of communication breakdown in the organization.

• To achieve the above stated aim the following objectives shall be pursued;
• To identify the communication lapses in the organization.
• To examine the causes of communication breakdown in the organization
• To examine how poor listening skills of employees affect organizational performance and
• To suggest a better ways to improving effective communication in an organization.

Significant of the study

The researcher hope and believe that this paper work will serve as a useful instrument to the organization and the society at large and beneficial to general readers and fellow respondents who may want to conduct similar or related research.

 LITERATURE REVIEW

Literature review focuses on the documentation of recognized authorities as it affect the problem of this study based on the historical of communication, meaning and difficulties of effective communication in an organization.

According to Peter Little in Tonga Volume 11 of “use of English” says communication is the process by which information is passed between individual and organization by means of previous agrees symbols. According to Bernard (1958) as define communication as “means by which people linked together in an organization to achieve a common purpose.

The above definition forms the essential elements of effective communication in an organization namely:

• A message sender
• The message
• Message vehicle (noise)
• Message receiver (or listener)
• An understood message and feedback

Both sender and receiver of any message share a common responsibility. The sender should ensure that his message is such that could be understood.

Message could be in the form of an instruction or information. An instruction in the sense that the receiver is told the definite things he is expected to accomplish. Information could take two forms namely; Information properly and news. Information proper guides the receiver on what decision to make while news is of no value for decision making.

However, what is important about communication is that the receiver must understand the message that has been sent across by asking certain questions; it may be possible to find out if the receiver has actually understood the message. This make communication to be a two way process in a sense that it prevents the development of psychologically negative attitude among the personnel in an organization. Thus, a feedback mechanism should be built into a communication process. There is need therefore to avoid an excessive amount of one way communication. (Uwakwe,2004)

It is pertinent to say that communication has been characterized as the life wire of any organization. Without communication, organization doesn’t achieve goals. The purpose of communication in an organization is to effect change-to influence action towards the welfare of the enterprise. Communication is essential for the internal functioning of enterprises because it integrates the managerial functions. (Wiehirich et al 2005). Especially communication is needed of an organization:

• To established and disseminates the goal of an organization.
• To develop plans for their achievement
• To organize human and other resources in the most effective and efficient way
• To select, develop and apprise members of the organization
• To lead, direct, motivate and create a climate in which people want to contribute and
• To control performance.

Generally, in the opinion of Efimova, (2004) much of the work of finding, interpreting and connecting relevant pieces of information, negotiating meanings and eliciting knowledge in conversations with others, creating new ideals and using them to come up with a final product happens as part of communication in organizations.

 

TYPES OF COMMUNICATION.

The following types of communication are briefly discussed: written, oral and nonverbal communication (Tennen, 1995). Written and oral communication media have favorable and unfavorable characteristics; they are often used together so that the favorable qualities of each can complement the limitations of the other. In addition usual aids may be used to supplement both oral and written communication. It is believed that a message that is repeated through several media will be more accurately comprehended and recalled by the receiver. Hence Wiehirich et al, (2005) says that in selecting the media, one must consider the communicator, the audience, and the situation. An individual who feels uncomfortable in front of a large audience may choose written communication rather than speech. On the other hand, certain audience who may read a memo may be reached and become motivated by direct oral communication

On the other hand written communication occurs when a sender puts on paper the information he wants to sends. It is mostly made for formal message. Written communication has the advantage of providing records reference and legal defense. (ii) Message can be carefully prepared and can be read by large audience (iii) can promote uniformity in policy and procedures. (iv) Can reduce cost in some cases.

The disadvantages of written communication are: written message may create mountain of paper, may be poorly expressed by ineffective writers and may provide no immediate feedback. Consequently, nit may take a long time to know whether na message has been received and properly understood.(Stunk et al 1999) .

Non verbal communication: this is the conveyance of thoughts and feelings without the use of words., people communicate in many different ways, what a person says can be reinforced (or contradicted) by nonverbal communication, such as facial expressions and body gestures. Nonverbal communication is expected to support the verbal, but it does not always do so. Manager may states that they have an open door policy, but then they may haven a secretary carefully screen people who want to see them; this creates incongruence between what they say and what they do. Clearly, nonverbal communication, giving rise to the saying that actions often speak louder than words.(Weihrich et al, 2005).

Channels of communication in an organization

Effective communication enables management to perform appropriate functions and achieve pre-stated results. However, for a communication to be effective

These channels are means of transmitting information within and outside the organization these channels are broadly categories into formal and informal communication channels. (Madu 2006).

Internal communication: all organization generates internal communication. Communication flows within an organization are multi- direction, messages are sent verbally downward from one level to lower by way of chain of command. Most orders and instructions take this path. But much communicating is vertically upward, from lower level to higher levels. Managers require information from subordinates about their problems, work in progress and other data that relate to what the organization is doing. (Appleby, 2003)

External communication: all enterprises also initiate communication with individuals and groups outside the organization. Generally as an organization grows, external communications increase and may include thousands of suppliers, wholesales, retailer and other types of organization.

  Barriers to communication in an Organization

One of the functions of communication is to ensure that each individual in the organization knows what he/she is expected to be doing at work to further the goals of the organization. Good communications are essential to getting any organizational activities done because co-operation is impossible without it. However, difficulties to good communication arising from differences in social, racial or educational backgrounds, compounded by age differences, communication breakdown and poor listing skills (BPP 2000). Other communication barriers according to Madu,(2006) include: Emotionality, different perception, influence of attitude and differences in status and power. In this study specific attention is being paid to two barriers in communication, which Holmes (2007) noted are very critical problems in organizations. These are:

• Breakdown in communication
• Poor listing skills of employees in an organization.

Breakdown in communication: it is surprise that managers frequently site communication breakdown as one of their most important problems, however, communication problem are often symptoms of more deeply rooted problems as a result of poor planning which may be the cause of uncertainly about the direction of the organization (Wiehrich et al 2005). Similarly, a poorly design organization structure may not clearly communicate organizational relationships. Vague performance standards may leave managers uncertain about what is expected of them

(Holmes 2007). Thus the perceptive manager will look for the causes of communication breakdown, which could include:

Communication downward (i.e. from superior to subordinates) may breakdown because of poor organization, confusion about the message being transmits or for personal reasons. If the channels of communication are inefficient or insufficient, the organization is at fault. Confusion will also occur if the superior manager is incompetent and issues instructions, which cannot be understood because they do not make sense. Poor personal relations between superior and subordinate will cause a breakdown in communication because of mutual suspicion or because of their different backgrounds.

Communications upward (from subordinate to superior) may breakdown fro the same reasons. An additional consideration is that the subordinate, because he wants to hide his own errors on the errors of a fellow worker,

Horizontal communication. Horizontal communication (i e. between people on the same hierarchical levels, perhaps in different department) may cause breakdown of communication because departments are geographically separated with inadequate communication links. There is no formal organization for the cross-fertilization of ideas and opinions between departments, the organization is too centralized and insists on all such negotiations being made at top management level, or/ and because there is a poor informal communication structure.

Poor Listening skills of employees: The researcher has observed people entering discussion with comments that have no relation to the topic. The rushed, never-listening manager will seldom get an objective view of the functioning of the organization. Time   empathy and concentration on the communicator’s message are prerequisites for understanding. People (manager) want to heard, want to be taken seriously, and want to be understood. Thus managers most avoid interrupting subordinates and putting them on the defensive. Employees should learn the techniques of better listening in order to maintain good relation with those who deal with the organization. Poor listening is perhaps none of the most serious barriers to effective communication. Poor listening can generate costly accidents and cause misunderstanding and rumors in an organization. (Weihrich et al, 2005).

Uncertain Reporting Relationships

Effective communication is hard to develop if people don’t know who to communicate with in certain situations. In many cases, employees understand their role with an immediate manager. However, the employee and manager may not really understand when and how to interact.

Poor Culture

A poor organizational culture can dramatically affect communication. In general, employees who are unhappy or uncomfortable in their workplace are less likely to communicate openly. Employees who don’t find their managers approachable may not seek help or offer input when need arises. Major problems exist with colleagues or work team members don’t get along. Some organizations instill diverse work teams, but don’t offer informal and formal ways for employees to build rapport. This lack of rapport can cause tension, and ultimately lead employees to shut down or avoid interaction.

Indecisive Leadership

The tone of communication usually starts at the top. If top managers communicate openly and clearly, their approach tends to filter down throughout the organization. Front line managers may more openly communicate with their work teams. When top managers are indecisive or lack confidence in the company’s vision, they may be reluctant to communicate as a way to avoid showing vulnerability. This silent approach to leadership can lead to distrust in the work environment, and cause informal gossip to take over.

Technology Problems

While face-to-face communication is imperative in many organizations, technology fuels a lot of important communication as well. Computers and mobile technology drive interaction in many cases. Sales reps often connect with home offices through cell phones, e-mail and tablets, for instance. These alternative forms of communication only work if the technology works and the employees involved know how to use it. Weak tools, defective equipment and poor employee training all can cause communication breakdowns.

CONCLUSION

In conclusion, Communication in a business is key to getting all leaders, departments and employees on the same page in working toward objectives. Breakdowns in communication can knock a company off track and prevent it from reaching its full potential. Understanding the core factors in breakdowns can help you proactively prepare to avoid them.

REFERENCES

Appleby, R.C. (2003) Modern Business Administration, London Pitman Book Ltd

Barnard ,C.J (1958). Practice of Communication. London. Pitman   Publishing Limited.

Nwanwene T.A.M.. (2007) Communication and Sustainable Development in

Nigeria

Rogers, C.R. and Roethlisberger (2002). Barriers and Gateways to communication, Boston: Harvard Business Review.

Peter L. (1965). Communication in Business, London, Longman Group 3^rd Edition.

DIFFERENCE BETWEEN CONSUMER AND INDUSTRIAL GOODS

DIFFERENCE BETWEEN CONSUMER AND INDUSTRIAL GOODS

INTRODUCTION: CONSUMER AND INDUSTRIAL GOODS

Physical products or goods have been classified into two separate categories, consumer goods and industrial goods. The classification or distinction between these two types of goods is necessary in order to determine different efficient strategies which are required to help in moving the products through the marketing system.

Product: A product can be refer to anything tangible and intangible that is capable of satisfying human wants.

Consumers goods

Consumer goods are goods purchase for immediate consumption or for household use. These goods are distinguish among convenience, shopping specialty, and unsought goods.

The goods which are bought for household use, personal use, or family use from retail stores are called “consumer goods”. The consumers have certain buying habits and based on these habits the consumers goods are divided into three different sub-categories:
• Shopping goods
• Specialty goods
• Convenience goods.
The consumer goods can also be differentiated or categorized into durable and non-durable goods.

Durable goods are goods which have longer durability such as furniture etc. Whereas, non-durable goods include food, supplies for school etc.

1. Convenience Goods: Goods which the consumer wants to buy with maximum convenience are mostly non-durable, bought in small quantities, are of low value, and frequently purchased are called “convenience goods” like milk, bread etc. These goods which are planned buys are called “staple goods” where are goods like newspapers, candies, etc which are bough impulsively and where not planned are called “impulse goods”.

2. Shopping goods: The goods which are of higher value, purchased infrequently after a lot of comparing and deliberation by the consumer are called “shopping goods” like televisions, refrigerators etc.

3. Specialty goods: Goods which are special for a consumer for which he has planned a lot and wants at all costs are called “specialty goods” like clothing of a special brand, automobile of a particular brand, jewellery etc.

Industrial Goods

Goods which are bought by companies to produce other products which are sold later are called “industrial goods”, these goods can be directly or indirectly used in  the production of goods which are classified according to their usage instead of consumer habits.

The durable goods are called “capital items” as they are of very high value and non-durable goods are called “expense items” and are usually used within a year. They have been categorized into five subcategories:

• Industrial supplies: These include frequently bought expense items like computer paper, office supplies, light bulbs which help in the production of a final product are called industrial supplies.
• Installations: Capital items used directly in making other goods are called “installation goods” like machine tools, conveyor systems commercial ovens etc.
• Fabricated parts and materials: Goods which are used in a final product without processing are called “fabricated parts” like batteries, spark plugs, etc, used in automobiles. Items which require processing before using in final products are called “fabricated materials” such as steel, fabric for upholstery etc.
• Accessory Equipment: Accessory equipment are capital items which have a shorter life and are less expensive than installations such as hand tools, desk computers etc.
• Raw Materials: Products bought in their raw form like crude oil, iron etc which need to be processed before producing any goods are called “raw materials”.

Differences Between Consumer And Industrial Goods

Given below are some of the differences between consumer and industrial goods.

1. The consumer goods are those which are meant for final consumption by the consumer or in simple words they are used by the consumers directly while industrial goods are those which are not used by the consumers directly but these goods are used for the production of consumer goods.
2. Bread, Soap, furniture are some of the examples of consumer goods while lubricants, copper, timber, tools etc are some examples of industrial goods.
3. While the number of customers for consumer goods is very large but the quality purchased by them is less whereas the number of customers for industrial goods is less but they purchase the quantities in bulk.
4. The demand for consumer goods is autonomous demand as these goods are demanded for ultimate consumption while the demand for industrial goods is derived demand as these industrial goods are used for the production of consumer goods.
5. While the market in which the companies can sell consumers goods is large because of large number of customers whereas in case of industrial goods the market is small because of less number of buyers of such goods.

Conclusion

Industrial goods and consumer goods cannot be clearly differentiated from each other. The differentiation depends on what the consumer intends to do with the product: thus, those goods which are ready and in final forms to be sold and are bought by the consumer to be resold can be classified as “consumer goods” whereas, if the goods are bought by a consumer for their own use to produce other products, they are called “industrial goods”.

REFERENCES

1. O. ODE; B.O Duru NNEBUE; C.M. Mathew (2011): Fundamentals of Marketing Principles and Applications, 6^th edition, Divine computers, Kaduna.
2. Amber, T. (2003): Marketing and the Bottom Line. The New Methods of Corporate Wealth, 2^nd Pearson Education, London.
3. Internet “Google”
4. Abbah Adikwu Linus: Basics to purchasing Management 1^st edition Ray Product, Makurdi.

A SAMPLE PROPERTY INSPECTION AND SURVEY REPORT

A SAMPLE PROPERTY INSPECTION AND SURVEY REPORT

INSPECTION AND SURVEY OF A PRIMARY SCHOOL LOCATED AT KOFAR KUDU, NASARAWA.

INTRODUCTION

In accordance with your instruction that we should carry out a proper schedule of condition of a primary school, we have conducted the physical inspection and have the pleasure to furnish you with the report.

DATE OF INSPECTION

The physical inspection were carried out on the 10th January, 2015 which forms the effective date of the report. All observations and opinions in this report refer to this date.

PURPOSE OF INSPECTION

This inspection was required to serve as a record of the condition of the property.

LOCATION OF PROPERTY

The subject property is situated within Kofar Kudu, Nasarawa it is one of the primary school developed by the government.

DESCRIPTION OF PROPERTY
SITE

Occupying a very large area of land, the site is endowed with soil qualities that can support the building purpose. In other words the site is suitable for construction work. Moreover, the topography of the site is moderate.
Finally, there is easy accessibility between the site and adjoining properties and the neighbourhood at large. There is however no fence wall enclosing the property.

STRUCTURAL DETAILS
FOUNDATION

Strip foundation and assumed to be taken to a reasonable depth.

FLOOR

All floors are fundamentally made of mass concrete on well rammed hardcore filling.

WALLS

Both external and internal walls are made of sandcrete blocks, in mortar and plastered. They were predominately painted with yellow texture paint but a particular section was painted with blue and a particular section was not plastered both internal and external.

DOORS

The entrance doors to the classes are single swing leaf metal doors.

WINDOWS

All the windows are also made of double swing leaf type.
CEILING
The ceiling is made of asbestos nailed on wooden ceiling noggin and protected with fine ceiling battings.

ROOF

The roof is made of zinc roofing sheets.

DETAILS OF ACCOMMODATION

19 No. Class rooms
4 No. Offices
28 No. Of seat per class
5 No. Store
2 No. Laboratory

INVENTORY OF FURNITURE AND FITTING

5 No. Ceiling fans
3 No. Chairs in each classroom for staff
1No. Tables in each classroom

DECORATIVE STATE OF REPAIR

The primary school can be said to be in an old stage, therefore, it is in a fair decorative condition.

ASSUMPTION AND LIMITING CONDUCTION

This work has been conducted subjected to the fitting assumption and limiting conditions. All the information passed to us and all were observe for the purpose of this report are genuine and accurate for the purpose of the work here in carried out.

RECOMMENDATIONS

For maximum economic benefit, the primary school should be renovated as it provide the government with a favourable return. Moreover, a sound maintenance cycle should be put in place.

CONCLUSION

By the power and privileges conferred on us members of HNDII estate management department, Nasarawa. Our opinion is that the property is in a fair physical condition and has the capacity of providing of providing favourable return to the government

To this end, we suggest that the government should to take of all the repairs without further delay of voids so as to ensure prompt economic viability.

 

IMPACT OF FUEL SUBSIDY REMOVAL ON NIGERIAN ECONOMY

IMPACT OF FUEL SUBSIDY REMOVAL ON NIGERIAN ECONOMY

INTRODUCTION

A subsidy is a benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy is usually given to remove some type of burden and is often considered to be in the interest of the public.

Fuel subsidy is payment made by the federal government to assist her citizens consume fuel at lower cost. When the cost is higher they can decide not to make payments. When this happens then it is called “subsidy removal” Subsidy may be made not only to consumers but also to producers. It may be in form of price guarantee to make the producers produce more food. Subsidy is often common, where it is given to producer of food to reduce food insecurity (FAO, 2012). There are so many different way to classify subsidy, labour subsidy, infrastructural subsidy, export subsidy, consumption subsidy, (Yemi, 2012). Much as subsidy is an economic necessity, who benefit from it? Is it the citizen or the government? This question is necessary because government continue to have more money at the expense of the citizens when there is subsidy removal, but if there is no subsidy removal, the citizen’s benefit. Government removal of subsidy is always hung on the premise that it will use the money realize to provide infrastructures. This has never been achieved. This culminated to the formation of Subsidy Reinvestment
Programme (SURE-P) to manage the funds accrued from the subsidy removal (Alwell, 2012) Despite the (SURE-P) intervention the people still did not see any benefit of subsidy removal. The cost of the fuel subsidy continues to expose the citizens to untold hard-ship due to rising cost of fuel as well as transportation which indirectly affect food prices.

REMOVAL OF FUEL SUBSIDY IN NIGERIA

The Federal Government of Nigeria in its efforts to deregulate the downstream oil sector completely decided to remove fuel subsidy on January 1st 2012, under the leadership of President Goodluck Jonathan. This was made real when the president of Nigeria decided not to make provision for subsidy payment in the 2012 appropriation bill (the budget). The president came up with a strong argument that the sum of 3.4 billion naira spent in subsidizing fuel went into fraudulent hands (Gyoh, 2012). The sum of 1.4 trillion Naira spent annually in subsidizing fuel, had slowed down economic growth. It was against this back drop that the government through the instrumentality of the Petroleum Product Price Regulatory Agency (PPPRA) announced the removal of fuel subsidy by 32 naira thereby moving the previous price of fuel from 65 naira to 97 naira per litre. This singular act brought about massive protest across Nigeria by labour unions and civil society groups to speak against this policy.

Government also insisted that subsidy removal will eliminate fuel smuggling across Nigeria boarder thereby eliminating scarcity in Nigeria. Although, in-spite of these benefits, the federal government was not unaware of the hardship that would accompany subsidy removal policy and as such promised some palliative measures to reduce the hardship.

The present government of the day, the APC government under the leadership of President Muhammed Buhari have succeeded in complete removal of fuel subsidy in Nigeria as there was no provision for fuel subsidy in the proposed 2016 budget.

The Negative Impact of Oil Subsidy Removal In Nigeria

Increased Cost Of Living In Nigeria

Gasoline, premium motor spirit (PMS) or fuel as it is normally called in Nigeria is the second most used product after food in Nigeria. Whenever the price of fuel goes up, the price of everything goes up. This is because transport cost for providing essential services goes up and it creates multiplier effect in the economy, the ripples are felt even up to the rural areas. No part of the economy functions in isolation, every part of the economy depends on the other for services. The movement of agricultural product from one place to another depends on the transport subsector, the tagging of price of agric transport cost; Removal of subsidy means increase in transport cost, increase in the cost of running business (Small scale business), and increase cost of production which generally translate into high cost of living in Nigeria.

Despite the unrest, the decision to abolish Nigeria’s fuel subsidy is the right one. In 2011 alone, Nigeria’s fuel subsidy cost the country an estimated $8 billion and the price tag for 2012 was expected to be even greater. This does not even take into account the country’s losses due to market distortions as a result of the subsidy.

While politically costly in the short run, if Nigeria’s government can implement transparent and well-structured reforms, the funds from the fuel subsidy program could be put to far greater use.

With an estimated 37.2 billion barrels of proven oil reserves, Nigeria is one of the world’s largest oil producers. However, the country’s mineral riches have not resulted in a significant improvement in the quality of life for the majority of Nigeria’s citizens, 54 percent of whom live below the national poverty line. In 2010, Nigeria earned $59 billion from oil exports. Therefore, Nigeria does not lack the resources to reach its development goals, rather its resources have been utilized inefficiently.

The Positives Impact of Oil Subsidy Removal In Nigeria

 

If fuel subsidy is removed in Nigeria, Natural monopoly (by the NNPC) will automatically be destroyed, giving room for private companies and thus competition. Just as it was in the days of NITEL (Nigerian Telecommunications), before the telecommunication sector was deregulated and the door was opened to private investors and thus a revolutionary good to the Nigerian economy. Just as it was then, when new companies flood in there will be an increase in price, SIM cards then were as high as N50, 000. In the face of competition, this dropped as low as N100. Same will be the case for oil, when the subsidy is removed, petrol may sell as high as N160 per litre, but when competition comes in it will drop to the barest minimum, possibly lower than N65 per litre.

The amount the Government pay on subsidy can be channeled to meeting social needs like free and quality health care and education for all. This is therefore a right step in the right direction, and is capable of helping Nigeria achieve her vision 202020.

It’s no news that the Nigerian oil sector loses 40% of her oil produce annually to the mis-managing hands of flaring. Flaring causes pollution and subsequently the depletion of the ozone layer. If the sector is deregulated and subsidy is removed, flaring will drop drastically as no company will want to lose that much.

When the price of petroleum product sky rockets within the first 6-12months after the removal of subsidy, Nigerians will look elsewhere for generation of Fuel. This will lead to the development of alternate power supply. This can help the solar energy sector thrive better. Also, it can help the coal industry find her foot in the Nigerian Market.

Retrenchment is inevitable in cases of deregulation on the short run, but on the long run employment opportunities will be nearly unlimited. A good example is that of telecommunications, when the sector was deregulated, the staff of NITEL lost their jobs in hundreds. But in no time, jobs were all over in MTN, GLO, ZAIN, ETISALAT, VISAFONE and about 16 other companies in thousands. The case will be identical for the downstream oil sector.

The recently launched GLO 1 cable had made indigenous telecommunication company, Globacom, capable of selling bandwidth to international companies. The same would be the case in the Petroleum industry if deregulated.

Removal of Fuel subsidy is a hard one to sell; this is due to the fact that we, the masses are not ready to look the other way on this issue. The removal of oil subsidy, if properly done has inexhaustible benefits. Removal of subsidy from black gold in Nigeria is an awful tasting medicine, but the Nigerian patient is in dire need of it.

CONCLUSION

A subsidy as discussed above is a benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction so fuel subsidy is the reduction in the cost of fuel per litre given by the Nigeria government to her citizens. The removal of this subsidy means that the fuel price per litre will go higher than usually which at the moment make will life more unbearable for Nigerian people as the price of almost everything will go up. But if properly handle over time the result of the subsidy removal and deregulation of the petroleum down stream will definitely have a greater positive side as this is believed to bring down the price as a result of competition, provision of employment opportunities, creation of more job opportunities as more jobs will be created if more private sectors are involved in refining and marketing of petroleum products. There will increase in provision of more social amenities and infrastructure as the government will use the money meant for subsidy on developmental project.

Finally I will conclude that the removal of fuel subsidy at the onset will have a harsh effect on Nigeria economy and its people but it will be a worthwhile adventure if properly hand as a result of its many positive benefits.

REFERENCES

Adegbulugbe, A.O and A. Adenikinju (2008), “Energizing Vision 2020”. Paper Presented at the 1st International Conference of NAEE/IAEE at the Transcorp Hilton Hotel, 29th – 30th

Afonne E., (2011), “Politics of Oil Subsidy: The Cartel‟s Fraudulent Acts” ,Nigerian Newsworld, October 24, 15(34).

Anderson, K. and McKibben, W.J. (1997). “Reducing Coal Subsidies and Trade Barriers: Their Contribution to Greenhouse Gas Abatement.” Seminar Paper 97-07. Centre for International Economic Studies, University of Adelaide: Adelaide, Australia.

Birol, F., Aleagha, A.V. and Ferrouki, R. (1995). “The economic impact of subsidy phase out in oil exporting developing countries: a case study of Algeria, Iran and Nigeria.” Energy Policy . 23(3):209-215.

TYPES OF INVESTMENT

TYPES OF INVESTMENT

Stocks: Stocks are an equity investment that represents part ownership in a corporation and entitles you to part of that corporation’s earnings and assets. Common stock gives shareholders voting rights but no guarantee of dividend payments. When you buy stock, you buy a piece of the company and any rights that go along with partial ownership. The way to make a profit with stocks is to buy low and sell high or to receive stock dividends. Stocks can be quite risky.

Bonds: Bonds are loans, or IOUs, but you serve as the bank. You loan your money to a company, a city, the government – and they promise to pay you back in full, with regular interest payments. A city may sell bonds to raise money to build a bridge, while the federal government issues bonds to finance its spiraling debts. When you invest in bonds, you are actually lending money, usually to a government agency. Bonds are much less risky than stocks.

Real Estate: Real estate investment is the type of investment that generates income or is otherwise intended for investment purposes rather than as a primary residence. It is common for investors to own multiple pieces of real estate, one of which serves as a primary residence, while the others are used to generate rental income and profits through price appreciation. When you invest in real estate, you may be purchasing with the intent to re-sell at a profit, or you may be buying property to use as rental property. Traditionally considered a sound investment, the real estate market is currently a buyer’s market, so real estate investing is trickier right now.

Foreign Currency: The Forex market is a currency-trading market that is open all the time and accessible via the Internet. With Forex, you trade currency pairs for other currency pairs in the hope that you will trade for currency that has more value.

Mutual Funds: A mutual fund is a professionally-managed trust that pools the savings of many investors and invests them in securities like stocks, bonds, short-term money market instruments and commodities such as precious metals. ‘Mutual Fund’ An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.

Certificates of Deposit: ‘Certificate Of Deposit – CD’ A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination. CDs are generally issued by commercial banks and are insured by the FDIC.

Insurance: Some people choose to use life insurance as an investment. Many policies have investment properties, and an insurance agent or financial advisor can help you choose the right one.

Savings Accounts: Savings accounts offer very little return; in fact, although they are technically a form of investment, they barely qualify anymore. They are certainly a very good way to teach your kids the process of saving, however.

Of course there are other different forms of investment, such as investing in a start up company or some other form of business. But as you can see a variety of types of investment can add spice to your financial future.

Direct and Indirect Investment - Advantages and Disadvantages

Direct and Indirect Investment – Advantages and Disadvantages

INTRODUCTION

In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.

When considering investing in property, one should choose between direct investment (owning one or two properties that are physically rented out and managed) or indirect investment (shares in a property loan stock or unit trust company).

Either can be rewarding, but an investor must choose the investment vehicle carefully and plan properly, says Michael Bauer, general manager of IHFM, a property management company.

DIRECT INVESTMENT

Direct investment is defined by the International Monetary Fund (IMF) as “Investment that is made to acquire a lasting interest in an enterprise operating in an economy other than that of the investor, the investor’s purpose being to have an effective voice in the management of the enterprise.” In practice, this translates to an equity holding of 10 percent or more in the foreign firm. For example, the investor who decides to invest in a toll road is a direct investor.

ADVANTAGES OF DIRECT INVESTMENT

1. Greater potential for capital appreciation. The goal is to make money.  Direct real estate offers the best means of maximizing returns through greater potential capital appreciation from increased property values captured when properties are sold.
2. Better tax benefits. The goal is to shelter one’s income once one has earned it.  Direct real estate offers the best shelter through greater tax benefits.  Unlike REITs, direct investments can pass through tax losses, which may then be used to offset taxable gains.  Direct real estate investment can be particularly appealing to accredited investors.
3. Superior portfolio diversification.  The goal is to protect one’s assets through diversification.  Direct investment offers the best diversification benefit.  While REITs are commonly marketed as having a low correlation to the stock market, direct investments have an even lower factual correlation.

The advantage of owning a property outright and not in partnership with anyone is that it is yours and you can gear up to 100 percent of the investment (which means you own property without equity).

You earn the future rewards of that property and have 100 percent decision making ability on that property.

The disadvantage is that the risk is 100 percent yours – in terms of financial market risk (interest rates), business risks, and the risk of default when you have tenants.

INDIRECT INVESTMENT

Indirect investment is a way of investing in real estate without actually investing in the property. Indirect investment can be done in many ways, including securities, funds, or private equity. Most investors interested in indirect investment would do so through a company or advisor who has experience in this type of investing.

Indirect property investment is also defined as the acquisition of participating interests through the main stock exchange or during before hours-trading or Over the Counter (OTC), where the investor is only interested in property shares or indirectly interested in so-called “listed real estate”.

An indirect investment is a type of investing opportunity that does not require the actual purchase of the asset that ultimately generates the return. This type of arrangement is often associated with investing in real estate ventures, typically by purchasing stocks issued by a real estate company that in turn purchases and maintains the properties generating the dividends issued to the shareholders. There are a number of benefits to indirect investment, including the ability to avoid having to be directly involved in the management and upkeep of the assets involved.

Advantages of indirect investment

Indirect property investment has the following advantages:

1. Shares / Shares in funds

• General Remarks

1. Investment with low levels of capital expenditure as well
2. Investment diversification (shares, funds, bonds)
3. No involvement in refinancing, facility management, real estate management and end-users (tenants, lessees etc.)
4. Comparability / benchmarking
5. Liquidity of participating interests » sale on the stock market
6. Improved performance / higher yields (professional real estate management and facility management
7. Performance monitoring by other investors, analysts and media
8. Income stream

• For property companies limited by shares (listed on the stock market)

1. Property shares may be bought and sold on the stock market at any time
2. Visibility through option to publish real estate

• For shares in property funds

1. Return option
2. Investor protection through investment rules and supervision
3. Property bond option
4. Market making opportunities for trading in shares in property funds
5. Visibility through option to publish real estate indices 2. Companies

Disadvantages

1. Shares / Shares in funds

• General Remarks

1. Dependence on the professionalism of the fund management
2. Dependence on the protection of minority holdings and its effectiveness
3. Complete transparency
   1. of mutlisectional structures, profit transfers possible
   2. Clarification of the structures and procedures is necessary

• For property companies limited by shares

1. Risks inherent in company purpose (no restrictions on holding and trading in real estate, e.g. additional purpose as a general undertaking or total solution provider and as a property developer [e.g. Allreal AG]
2. No investment rules (in contrast to the mutual property fund, property OEICs and property CEICs)
3. Voting shares for promoter as reason for not participating in the vehicle
4. Group-related subordination and resultant risks
5. Clarify group structure

• For property funds

1. Cost intensity (marketing costs [portfolio management commission [also retrocessions], subject to marketing outlay], fund management fees, depository bank, real estate management and so on)
2. Liquidity issues (insolvency of unsellable real estate)
3. Shares are only taken back at the end of the financial year, every 12 months (exceptions are possible)
4. Closure of fund / compulsory liquidation

The differences between direct and indirect property investment?

Direct investment in property refers to when you buy the whole or part of a physical property. As a process, this is not as easy or as quick as investing in equities or bonds, as it requires more time and more capital.

As a property owner you receive rent directly from your tenant, and you can realise gains or losses from the sale of the property. As a landlord you have additional responsibilities for the management of the property. Some of these require specific and specialist knowledge, such as that held by a chartered surveyor. while

Indirect property investment involves investing in the skills and expertise of other people, such as property or fund managers. There are a number of different ways of investing indirectly in property (see the ‘How can I invest in property?’ section). One of the most common routes into the property market, particularly for commercial property, is through collective investment schemes (such as property funds), where investors’ funds are pooled together.

Investors need to be aware that making indirect investments is likely to mean the performance of their investment vehicle is not wholly related to the performance of the property or properties contained within the vehicle. In addition, the tax treatment of indirect investment vehicles may be an issue. You need to be aware of the risks involved, and you should always seek financial advice where required.

For more information on indirect investment see the ‘How can I invest in property?’ section.

 Factors to consider when choosing between direct and indirect investment?

The choice between making an indirect or direct investment tends to be based on two main factors:

The first factor is cost, or the amount of money an investor has available to invest. Most individuals simply can’t afford to buy an entire commercial property, meaning that collective investment may be the only option for them in this instance.

The second factor is risk – specifically, the risk of putting a very large investment into an individual property, or into a small number of individual properties, rather than spreading the risk through a collective investment scheme, which may invest in many different properties, possibly even in different countries.

For those people interested in residential investment, there are fewer professionally managed collective investment schemes available, and investors have typically chosen individual buy-to-let properties as their preferred investment vehicle. However, these investors still need to be aware of the risks involved in concentrating their investments in one place, as opposed to diversifying their investments.

REFERENCES

Aitken, Brian J., and Ann E. Harrison. (1999). `Do Domestic Firms Benefit from Foreign Direct Investment? Evidence from Venezuela’, American Economic Review, 605–618.

Angelucci, M., and De Giorgi, G. (2009). `Indirect Effects of an Aid Program: The Case of Progresa and Consumption’, American Economic Review, 99, 486–508.