Nigeria A Compelling Investment Destination Arunma Oteh Director - - PowerPoint PPT Presentation

Nigeria A Compelling Investment Destination

Arunma Oteh Director General Securities and Exchange Commission 3rd September, 2010

Page 2

Background information on Nigeria

Macroeconomic data (IMF 2010E) Population: 156 million GDP: $214billion Real GDP growth: 7% CPI inflation: 10.7% Currency: Nigerian naira (NGN) Market information: Equity Market Capitalization:

• NGN 6,000.bn (USD 40 bn) as at 31/08/2010

Average daily turnover (H1-10):

• USD 23,589,591

Opening hours: (Mon-Fri) Local time GMT

• 10.00am - 12.00pm 10.00am - 12.00pm

Settlement: T+3(Equity), T+2 (Bonds) Trading system: ATS Delivery: Electronic Tradable instruments:

• Equities – Ordinary
• Corporate bonds
• Government bonds
• Preference Stock
• Industrial Loans

Central depository : Yes Same-day funds : Yes Securities lending/short selling : No T+3 rolling settlement : No

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Source: Reuters, IMF and Renaissance Capital estimates.

Algeria 9% South Africa 17% Other SSA 25% Egypt 13% Nigeria 14% Other North Africa 17% Angola 5%

Nigeria contributes 14% to Africa’s GDP

EU 22% North America 22% Africa 2% Japan 7% RoW 47%

Africa contributes 2% to the world’s GDP Total Banking Assets Globally, 2008

EU, 48% North America, 17% Japan, 10% Africa, 1% RoW, 24%

Total Banking Assets in Africa, 2008

South Africa, 45% Algeria, 13% Egypt, 25% Nigeria, 15% Rest of Africa, 1%

Where Nigeria goes, Africa goes

Stable macroeconomic environment

Page 4 20 40 60 80 100 120 140 Russia Nigeria China Zambia South Africa Kenya Ghana Brazil Spain Ireland UK Germany India USA Greece %/GDP

• 14
• 12
• 10
• 8
• 6
• 4
• 2

Ireland UK USA Spain India Greece Ghana Euro Area Kenya Nigeria South Africa China Russia Zambia Ivory Coast Brazil %/GDP

2010 Fiscal Deficit estimates 2010 Public debt estimates

• Low levels of debt
• Reasonable inflation
• Relatively stable exchange rates
• Current account Surplus

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Political commitment to reform agenda including Niger Delta amnesty program, free and fair elections, and economic reforms

1,890,000.00 1,790,000.00 1,760,000.00 1,720,000.00 1,790,000.00 1,720,000.00 1,680,000.00 1,710,000.00 1,840,000.00 1,860,000.00 1,910,000.00 2,010,000.00 2,025,000.00 1,940,000.00 2,010,000.00 2,025,000.00 2,085,000.00 2,010,000.00 2,030,000.00 2,000,000.00

• 500,000.00

1,000,000.00 1,500,000.00 2,000,000.00 2,500,000.00 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10

Average barrels per day rises post its amnesty program

‘I have also given a strong mandate to the head of Securities and Exchange Commission, Arunma Oteh, to use any means backed by law to bring all those who abused the capital market to book. Those who could not retire as planned because of losses sustained in the stock market crash should be confident that i feel their pains and will give the political cover to those whose jobs it is to pursue, apprehend and prosecute those responsible with the aim of restituting losses’.

Facebook comment made on 31st July, 2010 by President Goodluck Jonathan

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Opportunity to benefit from large population and rising income

2009 GDP per capita- US$ (‘000) GDP US$ (Trillion)

46.00 34.10 32.60 15.10 10.3 10.10 6.60 3.1 2.30

• 5.00

10.00 15.00 20.00 25.00 30.00 35.00 40.00 45.00 50.00 USA Germany France Russia South Africa Brazil China India Nigeria

Nigeria is the eighth most populous nation Population growth prospect

0.65% 1.41% 0.98% 1.14% 1.19% 1.56% 1.29% 1.99% 0.28% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% China India US Indonesia Brazil Pakistan Bangladesh Nigeria South Africa 1,338 1,156 307 240 199 175 156 156 49

• 200

400 600 800 1,000 1,200 1,400 1,600 China India US Indonesia Brazil Pakistan Bangladesh Nigeria South Africa 14.26 5.07 4.91 1.57 1.26 1.24 0.32 0.21

• 2.00

4.00 6.00 8.00 10.00 12.00 14.00 16.00 USA Japan China Brazil Russia India South Africa Nigeria

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Investment opportunities abound in Nigeria

Roadmap for Power Sector Reforms

• Achieve 40,000 MW by 2020
• Required investment of US$3.5 billion/year over the next 10

years

• Government will incentivise private sector to make the

required investment

• Pending investments by the private sector, the Government

will take active steps to ensure modest but genuine improvements in the amount and quality of electricity supplied

• Government will establish an appropriate pricing regime
• Establish a bulk purchaser who carries out bulk buying

pending a developed settlement, accounting system required for bilateral contracting

• Government will provide credit enhancement to the bulk

purchasers that will enter into PPA with generating companies and IPPs

• Strengthening the NERC so that private sector operators

will have a level playing field

• Government will divest from the 18 successor companies

though

• Concessions to Kainji, Jebba and Shiroro hydro

power generating plants

• Sale of minimum of 51% of Thermal generating

plants

• Transmission company will be handed over to a

credible management company under a 5 year management contract

• Sale of at least 51% of the Distribution companies

0.13 0.26 0.62 India 0.0 BRIC Average 0.1 0.4 0.2 0.3 0.8 0.6 0.5 1.6 China Mozambique Brazil Others Average Philipines Pakistan Uganda Sudan Mexico Indonesia Iran Nigeria Zimbabwe Zambia Tanzania Senegal Africa Avg Egypt

• S. Africa

Bangladesh kenya Ethiopia 0.7 Ghana Gabon Congo 1.52 Russia

Power Sector – Electricity capacity per capita Per capita electricity capacity is

• ne of the lowest in the world

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Investment opportunities abound in Nigeria

971 223 216 421 205 0.0 200.0 400.0 600.0 800.0 1,000.0 Angola Congo Gabon Ghana Ethiopia Kenya Mozambique Nigeria Senegal Sudan Tanzania Uganda Zambia Zimbabw e South Africa Africa-Average Bangladesh Egypt Iran Indonesia Mexico Pakistan Philippines countries average Others Emerging India Brazil China Russia BRIC-Average G-7 Average Mobiles (per 1,000 people)

Mobile penetration in Nigeria is at the level

• f that in other

emerging nations… …but much less than that in BRIC and G7 countries

55.3 104.4 141.9 44.5 0.0 50.0 100.0 150.0 200.0 250.0 Angola Congo Gabon Ghana Ethiopia Kenya Mozambique Nigeria Senegal Sudan Tanzania Uganda Zambia Zimbabw e South Africa Africa Avg Bangladesh Egypt Iran Indonesia Mexico Pakistan Philippines Countries' Avg Other emerging Brazil China Russia India BRIC Avg Internet/ '000 persons

Mobile penetration Broadband penetration Market highly under- penetrated. Substantial scope for investment in broadband.

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Investment opportunities abound in Nigeria

60 145 108 100 200 300 400 500 Angola Congo Gabon Ghana Ethiopia Kenya Mozambique Nigeria Senegal Sudan Tanzania Uganda Zambia Zimbabw e South Africa Africa Avg Bangladesh Egypt Iran Indonesia Mexico Pakistan Philippines Countries' Avg Other Brazil China Russia India BRIC Avg Air Passengers ('000)

Air Penetration is low compared to Other Emerging countries and BRIC countries.

36 187 114 24 250 50 100 150 200 250 Angola Congo Gabon Ghana Ethiopia Kenya Mozambique Nigeria Senegal Sudan Tanzania Uganda Zambia Zimbabw e South Africa Africa-Average Bangladesh Egypt Iran Indonesia Mexico Pakistan Philippines countries average Others emerging India Brazil China Russia BRIC-Avg Road (km)/ '000 sq km

Paved road density in Nigeria is ~1/5th of BRIC nations Road density Air passengers

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200 400 600 800 1,000 1,200 1,400 Jan-00 Apr-00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 May-06 Aug-06 Nov-06 Feb-07 May-07 Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 MSCI - EMEA MSCI - EM NSE

MSCI-EM & EMEA compared to NSE ALSI

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Deepening and broadening the Nigerian Capital Markets

62.47% 5.54% 3.08% 4.84% 8.75% 4.46%

2007

Banking Breweries Conglomerates Building Material Food & Bev Pet Marketing 42.83% 12.04% 4.69% 6.92% 14.24% 5.36%

2010

Banking Breweries Conglomerates Building Material Food & Bev Pet Marketing

• Encourage upstream oil & gas, and

telecommunication companies to list in Nigeria to diversify the sector distribution of the NSE.

• Institutionalizing the stock market through

encouraging collective investment schemes including exchange traded funds, Islamic funds, and other ethical funds, and REITs.

• Alternative investment Market to address

funding needs for SMEs

• Building a vibrant fixed income market on the

heels of a successful sovereign bond market

• President recently granted tax waivers

granted that have reduced issuance costs for sub-national and corporate government bonds by 300 basis points

• Pension assets total USD 13 billion and

growing at more than 20% pa

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• World class legal framework including Investment and Securities promulgated in 2007

and specified Investment and Securities Court- the Investment and Securities Tribunal

• Recently established Asset Management Company to takeover toxic assets
• Best practice rules and regulations including
• Promulgation of news rules and regulation to ensure a world class capital market
• Recent introduction of margin guidelines to curtail excessive risk taking
• Adoption of International Financial Reporting Standards (IFRS) for all banks and

publicly quoted companies for 2012 financial statements

• Ongoing revision of corporate governance code
• Leveraging technology to strengthen monitoring and investigation

Restoring Market Integrity

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Zero tolerance for inappropriate behaviour

• Fit and proper tests for brokers/dealers
• Suspension of brokers that have not been filing statutory returns and plan to revoke

licenses where necessary

• 260 individuals and entities taken to the Investment and Securities Tribunal for

allegations of insider dealing and share price manipulation

• Seeking declaratory orders for the defendants to disgorge illegally

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Strengthen market institutions

• Addressing governance challenges at the Nigerian Stock Exchange
• Upgrading Abuja Securities and Commodities Exchange
• Preparing Exchanges for demutualization
• Partnering with international agencies to build capacity amongst capital market
• perators
• Strengthening all capital market trade groups
• Opportunities to leap frog in terms of technology platforms for exchanges

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How the markets compare?

GDP/Capita in US$ Population in millions Value traded in USD millions Market capitalization in US$ millions China 3,565.73 1,334.30 19,472.37 3,285,964 Brazil 7,737.32 191.48 2,118.83 855,185 Russia 8,873.61 141.39 4,000 1,050,000 India 1,032.71 1,203.28 1,855.62 700,029 South Africa 5,635.19 49.22 113.26 370,000 Mexico 8,040.24 107.75 298.83 262,508 Egypt 2,450.41 76.7 123.34 109,656 Morocco 2,847.50 31.87 16.589 65,709 Nigeria 1,089.30 151.87 19.29 40,000 Kenya 841.95 35.88 2.146 11,000 Ghana 638.79 23.1 0.62 10,880 Zambia 1,026.92 11.97 0.216 5,002 Zimbabwe 303.14 11.732 0.212 4,203

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“…..The frontier index has been helped along by positive

returns in three of its important markets – Nigeria, Kuwait and Qatar. ……The combination of resource wealth and macroeconomic stability is attracting investors….”

Tim Gray, New York Times, 11 July 2010

“….Who is the next Brazil amongst frontier markets? I answer without hesitation that it’s Nigeria”-

Adam Kutas Fidelity Emerging Group in New York Times,11 July 2010