CARPE DIEM: THE NIGERIAN STOCK EXCHANGE AND THE … NSE and the Nigerian Opport… · CARPE DIEM:...

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


• 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


* 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?


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


• 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

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


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


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


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


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


“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?


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?


The Nigerian Stock Exchange Stock Exchange House

2-4 Customs Street

P.O. Box 2457, Marina

Lagos Island

Lagos, Nigeria

[email protected]

www.nse.com.ng

Thank You


mailto:[email protected]

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