Draft/ Confidential

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

Nigeria – Governance and Political Risk Outlook

Address by Senator Udoma Udo Udoma

at the

Nigeria Development and Finance Forum (NDFF) 2014 Conference in New York

29th – 30th May 2014

THEME: “Entrenchment of Economic Growth in Nigeria

2

Nigeria is the largest economy in Africa

• GDP rebasing – now 26th in the world (Top 20 by 2020?)

• Stable macro-economic outlook

• Increased economic diversity and visibility on the global economic map

• New economic and investment opportunities

- Top African destination for FDI (UNCTAD, 2013)

- Among Goldman Sach’s “Next 11”

- Top destination for equity investments in frontier markets (Rencap, 2014)

Population - ~168mGDP - $510bnGDP growth rate – 6.4% (IMF, 2013)GDP per capita - $2,600Inflation rate – 7.8% (Apr, 2014)

3

Despite strong outlook, Nigeria still experiences many challenges

• Lack of adequate infrastructure

• Income inequality

• High unemployment

• Significant levels of poverty and growth disparities among regions

• Poor power supply

• Insecurity in the North East

Key Challenges

• Infrastructure – power, transport, housing, ICT

• Real sector – agriculture, manufacturing, oil and gas, solid minerals

• Human capital development – education, healthcare, labor and productivity, women and youth development.

• BUT – Governance challenges in executing the transformation agenda

Nigeria’s Priorities as defined in the Transformation Agenda

4

What is good governance and why does it matter?

• Why does it matter?

Promotes long term economic growth and development

Improves Government efficiency, transparency and accountability

Ensures sustainable and transparent framework of rules and institutions for businesses to thrive

Promotes political stability

Minimizes corruption

• What is it?“The manner in which authority is exercised in the management of a country’s economic resources for development” – World Bank

5

Recent news reflects poorly on governance in Nigeria…

• Alleged non-remittance of crude oil revenue by NNPC in January

• Suspension of CBN Governor in February

• Terrorist activity in the North-East by Boko Haram (nearly 4,000 deaths in 2014 alone)

• Kidnapping of 276 female students in Chibok, Borno State in April

- #BringBackOurGirls trending globally on social media

However,

- International support from USA, UK, France, China, Canada, Israel, Iran and neighboring countries

- May signal a turning point in the fight against Boko Haram

6

…however there are many positive developments

Significant progress in building the institutions that will strengthen governance over time; and

Nigeria is making progress on many other fronts

7

Nigeria: A thriving democracy with a strong, independent and critical press

• Democracy is strongly linked to good governance. 27 of the world’s top 30 most prosperous countries are democracies – Legatum Prosperity index™*

• Since 1999, Nigeria has operated a successful democracy with strong & independent legislature (checking powers of the President) and press (mostly privately owned)

- Print: > 30 national and provincial newspapers, >20 general interest magazines and journals, + a variety of local newspapers

- Radio and TV: over 20 privately owned stations

- Social media: Blogs, Twitter, Facebook

• Though Nigeria’s three democratic presidents produced by Peoples Democratic Party (PDP)

• Strong opposition emerging – All Progressives Congress (APC) formed from merger of main opposition parties, controls ~40% of the states and National Assembly

• 2015 general elections expected to be more competitive at all levels!

* Based on variety of factors including wealth, economic growth and quality of life

8

Increasing transparency in government operations, with independent and well respected regulatory agencies

• Freedom of Information Act in 2011

• Increasing public disclosure of government activity (e.g. budgeting, revenue accounts)

• Ministry of Finance announces forensic audit of oil revenue accounts by PWC

• Public hearings and corruption probes by the National Assembly

• Independent and well-respected regulatory agencies operating without much political interference

- CBN, SEC, AMCON, PENCOM, NDIC, NCC, etc.

Macro-economic stability, restored investor confidence, stable and strong banking sector…. foreign investor interest in banks being currently sold e.g. Enterprise Bank.

Mini Case Study: CBN - Handling the financial crisis

2008

2009

Global financial and economic crisis

Nigerian economy and banking system crisis – NSE Collapsed by 70%

2009 - 2011

CBN intervention

• Injection of N620bn of liquidity

• Establishment of AMCON

• Replacement of leadership in 8 banks

Today

2012 Successful recapitalization of some banks – Union Bank as an example

9

Ongoing privatization and deregulation of the Nigerian economy

• Fostering growth and development of the economy

• Reduced reliance on inefficient government parastatals for essential services

• More level-playing field for businesses

• Privatization of key sectors/services previously operated solely by the Government

- Telecommunications

- Broadcasting services

- Airlines

- Power – “A game changer”

• Next challenge - Deregulation of downstream petroleum sector and privatization of NNPC – will reduce opportunities for corruption

An example: Telecoms

Nigeria now largest telecommunications market in Africa, with 9% contribution to GDP in 2013

10

Independent judiciary and increasing citizen participation in governance matters

• Governance is improved when there is a rule of law

- Nigeria has a fairly independent judiciary

- Many successful court actions against the Government (including successful election petitions)

• Governance is improved when citizens participate more actively

- Several demonstrations to promote improvement in infrastructure and service delivery in Nigeria

- #BringBackOurGirls is a great example

- Government initiatives aimed at directly reaching end users of services e.g. Ministry of Agriculture

11

Nigeria is a proven investment case, not without risks but with strong fundamentals

Youthful (~60%) and entrepreneurial

population Average GDP growth rate of 7% over last 3

years

World Economic Forum (May 7-9) in Abuja - Billions of dollars in

investments commitments. Over 1,000 participants

Growing middle class (~23% of 168 million

population)

12

Example: UACN – High Return on Investment (ROI) in just 2 years

Date NSE Quotation Dividend PaidUAC Market

Capitalisation

31 Dec 2011 N29.70 N1.10 N47.5 billion

31 Dec 2012 N42.00 N1.50 N67 billion

31 Dec 2013 N67.00 (post-scrip 1 for 5=N80.44)

N1.60 N129 billion

21 May 2014 N56.20 (post-scrip N67.44)

N1.75 N108 billion

• 171% ROI between Dec. 2011 and Dec 2013• Price slightly lower now due to profit taking by investors, but still a good return• CBN official Naira/Dollar rate remained relatively unchanged since 2011 purchase

date

“If we are to be present in Africa, we need to be

present in Nigeria”

Francois Hollande,President of France

Draft/ Confidential

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent

Thank you!