Mr. Solomon, a wealthy director of the Nigerian National Petroleum Corporation (NNPC), has approached our bank with a personal proposal for a loan of #200,000. He intends to use this loan to purchase shares in a promising investment opportunity that aligns with the federal government's privatization policies. Mr. Solomon has been informed that this investment has the potential to yield a significant return in the next few years, with tax advantages for himself. In his proposal, Mr. Solomon outlines his plan to repay the loan over a five-year period. He proposes to make interest payments only until the end of the term, with the full capital repayment due at the end of the five years. He plans to fund the interest payments from his regular income and intends to repay the capital by selling off the shares after the five-year period. Mr. Solomon offers no security for the loan other than the shares themselves. Additionally, Mr. Solomon provides a projected operational budget for his investment, including expenses for machinery, materials, shop rental, furniture and fittings, and working capital. He estimates that he will be able to make a profit of #1,000 per day on weekdays and #1,500 per day on weekends. He also plans to hire an assistant to help manage the investment.
