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CARPE DIEM: THE NIGERIAN
STOCK EXCHANGE AND THE
NIGERIAN OPPORTUNITY Presented by
Taba Peterside
General Manager/Head, Listings Sales & Retention
to the
British Business Group
Ikoyi, Lagos
11th April, 2012
11/04/2012 1 The Nigerian Stock Exchange
• Global and African Economic Outlook
• Nigeria’s Comparative Advantage
• The Nigerian Stock Exchange – NSE Vision and Goal
– The NSE Advantage
– Key Initiatives
– A Multi Pronged Effort to
• Seize the Day
11/04/2012 The Nigerian Stock Exchange 2
Outline
• Debt Crisis in Western Economies
– Sovereign debt threating survival of Euro
– Importation of Euro crisis into capital markets (Greek bond yields > 30%)
– Downgrading of credit rating (European equities down)
– Impact on FDI for Nigeria and other emerging economies
• Global Markets In Bear Territory
– Most now pre-2009 levels (bear market territory)
– More than $10 trillion eroded from US Equities during height of 2011 downturn
– MSCI All-Country World Index of 45 nations down by 20% in 2011
• Global Economic Growth Easing
– Recession a stark reality for most European economies
– Slow down in growth for commodities, with impact on emerging economies
– Global economic slow down in the horizon (downward revision of GDP growth)
State of the Global Economy
11/04/2012 The Nigerian Stock Exchange 3
• Global recovery underway, surrounded by risks
• Eurozone debt crisis remains a key risk to the world economy
• Concerns surrounding sovereign debt sustainability
• Volatility in certain regions (and sectors) driven by prolonged
unrest
• Slower growth projected in OECD countries*
– 2.1% (2011), 2.6% (2012), 2.5% (2013)
• US 2.9%, Eurozone 1.8%, Japan 2.6%
• Non-OECD countries to sustain world growth*
– East Asia & Pacific 8.1%, South Asia 7.7%; Sub-Saharan
Africa 5.7%
• Nigeria 7.5%
2012 Outlook - Global
11/04/2012 The Nigerian Stock Exchange 4
* Figures reported by World Bank
• 11 of the world's fastest growing economies are in
Sub Saharan Africa
• SSA has some of the lowest sovereign indebtedness
globally, including Nigeria- $9 billion approx.
• Continent’s advantage of low wages and high
demographic growth rates; drivers for growth in
infrastructure, financial services, consumer goods
The African Renaissance?
11/04/2012 The Nigerian Stock Exchange 5
Source: Renaissance Capital
• Banking Crisis Over but Impact High
– We now have best capitalised banks in the world
– Nationalisation and delisting of 3 banks wiped min of N170bn from equity prices
– Confidence of equity holders affected
• GDP and Employment
– Relatively strong and sustainable GDP growth
– Worsening trend in youth employment and overall job creation
– Unemployment rate estimated at 22%
• Tightening Monetary Policies
– Dampening effect on growth
– MPR at 12% with direct impact to bond and equity prices (flight to safety)
• Global Competitiveness
– Difficult place to do business (index ranking remains low)
– Growing security, corruption concerns
The Nigerian Economy
11/04/2012 The Nigerian Stock Exchange 6
• Economy growing at 7.5%+
• Large population (largely under 30)
• Strong profitable growth businesses (Food & Beverages,
Manufacturing)
• Liberal labour and investment laws
• Short term outlook in oil prices positive
• Huge mineral reserves
• Under-exploited manufacturing base
• Possibly strongest banking sector in the world in terms of
capital ratio
• Entrepreneurship “Can do, Will do” Attitude
Nigeria’s Comparative Advantage
11/04/2012 The Nigerian Stock Exchange 7
11/04/2012 The Nigerian Stock Exchange
Capital
Opportunity to fund development and growth through tradable securities
Price Discovery
Determination of prices of tradable securities
Access
Facilitation of buyer and seller interaction
Liquidity
Mechanism for issuers and investors to convert securities to cash
Risk Transfer
Risks borne by those willing to bear them
Wealth Creation
Vehicle for generating wealth
Basic Functions of a Capital Market
8
Established in 1960; Company limited by guarantee
Approx. 5 million investors: Foreign – 81% of market activity Local – 19% of market activity
234 active Broker-Dealer firms 28 member Issuing Houses
Equities – 199 listed cos. N6.61t ($42.04b) mkt cap
Bonds – 49 bonds N5.37t ($32.21b) mkt cap ETFs – 1 ETF N1.11b ($6.43m) AUM
14 electronic trading floors around Nigeria 3rd largest stock exchange in Africa by capitalization Services the 2nd largest financial center in sub-Saharan Africa
About the NSE
11/04/2012 The Nigerian Stock Exchange 9
Figures as at 10-Apr-2012
NSE Vision and Goal
The Nigerian Stock Exchange 10 11/04/2012
NSE services the 2nd largest financial centre in sub-Saharan Africa
NSE is the 3rd largest stock
exchange in Africa by capitalization
NSE is the largest market in West
Africa by company capitalization
The NSE Advantage
11/04/2012 The Nigerian Stock Exchange 11
Quantitative
• Nearly 200 listed companies numbering several global brands in diverse sectors
• Highly competitive tax regime for investors- zero capital gains tax; 10% withholding tax on dividends
• Nearly 5 million registered shareholders
• Widely tracked all share and sectoral indices
Qualitative
• Compliance standards that ensure listed companies conform to global best practices
• Fully electronic trading, clearing and settlement systems
• Current product bouquet of fixed income, equities and Exchange Traded Funds and is being expanded to Options, and Futures
• Best-in-class services and the expertise to assist companies to raise capital speedily and efficiently
The NSE Advantage
11/04/2012 The Nigerian Stock Exchange 12
The Nigerian Stock Exchange
Benefits of Listing
13
Improved Brand Equity
Visibility -- Inclusion in indices,
portfolios
Growth –Access to capital ; lower cost
of borrowing
Transparency – Greater public
confidence through listing disciplines Continuity – A basis
for company valuation and
surviving beyond founders
Sustainability – Spreads risk of
long-term investment projects
11/04/2012
The Nigerian Stock Exchange 14
Corporate Governance Investor Relations Institutional Services
Analyst Coverage Corporate Access Advocacy
Partnering for Value Added
Services
11/04/2012
Drivers of Success
Integrity
• Accountability
• Effective Corporate Governance
• Transparency and Strong Regulation
Durable
Wealth
Creation
• Operational Efficiency
• Technology and Supporting Infrastructure
• Capacity Building
• Demutualisation
Market
Leadership
• Listings Development
• Market Development
• Product Development
• Strategic Alliances
Transformational Capital Market Customer Experience
11/04/2012 15 The Nigerian Stock Exchange
Restoring the Market: Key Initiatives
11/04/2012 The Nigerian Stock Exchange 16
Term
Short (2011) Medium (2012)
Key
Init
iati
ves
Wit
hin
NSE
Co
ntr
ol
- Market Segmentation - Company Share Buy-Back - Introduction of ETFs - Investor Clinics - New Web Site - Revised Listing Rules - Market Making (rules approved)
- Securities Lending (rules approved)
- Short Selling (rules approved)
- Develop Product Liquidity and Depth - Attract and Retain More Listings - E2E Trading Automation - Continued Enhancement of Regulatory Programs - Financial Literacy Program - IFRS Compliance - Demutualization - Market Data Services - Advocacy - Dematerialization
Ou
tsid
e N
SE C
on
tro
l - AMCON Debt Resolution - Advocacy
- Review PFA Investment Guidelines - Tax Breaks on Transaction Fees - Policy on Large Cap Firms to Deepen Market - Access to SWF Funds - Exit Strategy for Privatized Entities - Reduce Focus on Dividends - Capacity of Local Institutional Investors - Broker Margin Debt Resolution - Broker Access to Funding
• Active advocacy:
• Investment of Sovereign Wealth Fund In the Nigerian Capital Market –
Ministry of Finance
• Alignment of Short Term Monetary Policy to Support Low Cost Long Term
Funding of Businesses – CBN
• Implementation of Proper Margin Lending Facilities – CBN
• Broker Access to Funding - CBN
• Investment of Pension Funds in Equities and new products - PENCOM
• Targeted Tax Breaks for listed companies – FIRS
• Listing of National Companies in the Capital Market - BPE
Seizing the Day- A Multi-Pronged
Effort is Needed
11/04/2012 The Nigerian Stock Exchange 17
“We expect Africa to benefit more than ever [in the
current global environment], because its debt is among
the lowest in the world. The workforce is better
educated than ever. The cost advantage has improved.
Technology allows countries to leapfrog investments.
Demographics are also tremendously attractive.”
Renaissance Capital, February 2012
Seize the Day-Nigeria on the March
again?
11/04/2012 The Nigerian Stock Exchange 18
Nigeria: Set to surpass South Africa this year as
Africa’s largest economy after re-basing of GDP
The NSE: with wholesale transformation
underway, poised to play its role as Africa’s
destination of choice for capital formation. Stay
tuned!
Seize the Day-Nigeria on the March
again?
11/04/2012 The Nigerian Stock Exchange 19
The Nigerian Stock Exchange Stock Exchange House
2-4 Customs Street
P.O. Box 2457, Marina
Lagos Island
Lagos, Nigeria
tpeterside@nigerianstockexchange.com
www.nse.com.ng
Thank You
11/04/2012 The Nigerian Stock Exchange 20
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