FINANCIAL SECTOR REFORMS & GLOBAL ECONOMIC STABILITY: Challenges & Prospects Presented by

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1 Click to edit Master title style FINANCIAL SECTOR REFORMS & GLOBAL ECONOMIC STABILITY: Challenges & Prospects Presented by Mr. Bola Adeeko Head of Corporate Services Division, NSE for THE NATIONAL DEFENCE COLLEGE Abuja, Nigeria November 5, 2013

2 Click to edit Master title style The World at a Glance Impact of Global Financial Reforms Challenges to Global Economic Stability Reforms vs. Stability in Nigeria: Challenges and Prospects The NSE s Role in Stabilizing the Economy Q&A The Nigerian Stock Exchange 2

3 Click to edit Master title style 1. The World at a Glance The Nigerian Stock Exchange 3

4 Click Importance to edit of Master Global title Economic style Stability A Stable Global Economy leads to Improved Consumer Confidence Promoting economic stability is partly a matter of avoiding economic and financial crises. It also means avoiding large swings in economic activity, high inflation, and excessive volatility in exchange rates and financial markets. Instability can increase uncertainty and discourage investment, impede economic growth, and hurt living standards. A dynamic market economy necessarily involves some degree of instability, as well as gradual structural change. The challenge for policymakers is to minimize the instability of their own country and others without reducing the economy s ability to raise living standards through higher productivity, efficiency, and employment. Economic and financial stability is both a national and a multilateral concern. As recent experiences in world financial markets have shown, countries have become more interconnected. Problems in one apparently isolated sector, can result in problems in other sectors, and spillover across borders. No country is an island when it comes to economic and financial stability. Source: International Monetary Fund (IMF) - The Nigerian Stock Exchange 4

5 Click Importance to edit of Master a Sound title Financial style System A Stable Financial System is the bedrock to Global Economic Stability A country's financial system includes its banks, securities markets, pension and mutual funds, insurers, market infrastructures, central bank, as well as regulatory and supervisory authorities. These institutions and markets provide a framework for carrying out economic transactions and monetary policy, and help to efficiently channel savings into investment, thereby supporting economic growth. Problems in financial systems not only disrupt financial intermediation, but they can also undermine the effectiveness of monetary policy, exacerbate economic downturns, trigger capital flight and exchange rate pressures, and create large fiscal costs related to rescuing troubled financial institutions. Moreover, with increasing connectivity among financial institutions, and tighter financial and trade linkages between countries, financial shocks in one jurisdiction can rapidly spill over across financial sectors and national borders. Therefore, resilient financial systems that are well-regulated and well-supervised are essential for both domestic and international economic and financial stability. Source: International Monetary Fund (IMF) - The Nigerian Stock Exchange 5

6 Click The World to edit at Master a Glance title style Key Economies United States The U.S. economy remains at the center of events. Private demand continues to be strong, although growth has been hobbled this year by excessive fiscal consolidation. Politics is creating uncertainty about both the nature and the strength of the fiscal adjustment. Europe The core economies of Europe show some signs of recovery. This is the result of a change in mood, which nonetheless, could be largely self-fulfilling if consumers and firms decide to increase spending. BRICS Emerging Economies (with a focus on Sub- Saharan Africa) For some time, global growth has been boosted by the BRICS Brazil, Russia, India, China, and South Africa. But over the past couple of years, growth in these economies has begun to sputter, raising some fundamental questions. Why have the BRICS simultaneously slowed? Are the slowdowns merely cyclical or are they structural, with more profound implications for the global economy? According to the International Monetary Fund Chief, Moreover, in the threespeed global recovery now underway, the developing countries are leading the pack. After Asia, Sub-Saharan Africa is currently the second-fastest growing region. Source: International Monetary Fund (IMF) - World Economic Outlook, October 2013 The Nigerian Stock Exchange 6

7 Click to edit Master title style 2. Impact of Global Financial Reforms The Nigerian Stock Exchange 7

8 Click Update to edit on Fiscal Master Policies title style As a result of Quantitative Easing (QE) in the United States, leading global exchanges are experiencing a growth sprout in total market capitalization due to more money in circulation. Nigeria has received approximately $4.4Bn in Foreign Portfolio Investments (FPI) as at the end of Q3 13. The country accounted for 28% of Africa s FPI in Nevertheless, it may be time for monetary policy to make plans for an exit from both quantitative easing and zero policy rates. While there are no major conceptual or technical issues involved, the communication problems facing the Federal Reserve are new and delicate. It is reasonable to expect some volatility in long rates as the US Federal Reverse s policy shifts. Although there have been a short term resolution to the ongoing government spending battle in the US, conflicts around increasing the debt ceiling over the next 3 months could lead to another bout of destabilizing uncertainty and lower growth. It is projected that fiscal policy will tighten less in the advanced economies in 2014 and stay broadly neutral in emerging market and developing economies. Among advanced economies, the pace of tightening will fall off appreciably in the euro area and the United States. However, this will be partly offset by tightening in Japan. Public debt will remain very high in the advanced economies in the medium term, while declining to about 30 percent of GDP in the emerging market and developing economies. Source: International Monetary Fund (IMF) - World Economic Outlook, October 2013 The Nigerian Stock Exchange 8

9 Click Global to Financial edit Master Reforms title style Update BRICS member countries continue to work towards tangible results on the initiatives on BRICS Development Bank and Contingency Reserve Arrangement (CRA). The United States may soon move to less accommodative monetary policies and higher long-term interest rates as its recovery gains ground. The primary challenge resulting from this change relates to managing the side effects and eventual withdrawal of accommodative monetary policy. The euro area is moving toward a more robust and safer financial sector, including a stronger monetary union with a common framework for risk mitigation, while strengthening financial systems and reducing excessive debt levels. There is still a lot to be done to improve financial reforms in Africa. However, in the last decade, there has been substantial progress. A major contribution to these achievements has been the sustained work of the Collaborative Africa Budget Reform Initiative (CABRI) a network of senior budget officials working in African ministries of finance. The Nigerian Stock Exchange 9

10 Click Global to Economic edit Master Trends title style Global Growth GDP vs. Inflation 5% 4% 3% 2% 1% 0% 3.18% 3.98% Source: International Monetary Fund (IMF) 2.87% 3.76% 3.59% 3.96% 3.76% 3.58% 4.07% 4.11% 4.12% 3.51% 3.52% 3.50% E 2014E 2015E 2016E 2017E 2018E Global GDP (%) Global Inflation (%) Emerging/Developing Markets vs. Advance Economies GDP Growth Forecast (%) 6% 4% 2% 0% 4.92% Global inflation to outpace global GDP until 2014 Emerging/Developing Economies to outpace Advance Economies by 2 times over the next 5 years 4.55% 1.47% 1.17% 5.07% 5.35% 2.03% 5.40% 5.46% 5.53% 2.48% 2.60% 2.58% 2.49% E 2014E 2015E 2016E 2017E 2018E Emerging market/developing economies GDP (%) Advanced economies GDP (%) Source: International Monetary Fund (IMF) The Nigerian Stock Exchange 10

11 Click Global to Economic edit Master Trends title (Cont d) style Crude Oil Forecast - Simple Avg. of 3 Spot Prices $110 $100 $90 $80 $ $ Crude oil prices projected to decline over the next 5 years Source: International Monetary Fund (IMF) $ $95.33 Traditionally, emerging market/developing economies tend to rely less on Gov t revenues to bolster their economies (please see chart below). Thus, the impact felt in the economy from a decline in Gov t revenues do to reduced oil prices may be limited. $91.23 $88.51 $ E 2014E 2015E 2016E 2017E 2018E Emerging/Developing Markets vs. Advance Economies Gov t Revenue as a % of GDP 40% 30% 20% Emerging/Developing Economies to rely less on Government revenues to stabilize their economies % 35.97% 37.11% 37.71% 37.68% 37.75% 37.81% 28.32% 27.59% 27.50% 27.28% 27.02% 26.85% 26.77% 10% 0% E 2014E 2015E 2016E 2017E 2018E Source: International Monetary Fund (IMF) Advanced economies Emerging market/developing economies The Nigerian Stock Exchange 11

12 Click to edit Master title style 3. Challenges to Global Economic Stability The Nigerian Stock Exchange 12

13 Click 10 Key to Challenges edit Master to title Global style Stability #10 - Will food price inflation topple a key market? Food price inflation in India and China (two key BRICs) has been high, and while both countries are pursuing tightening measure little has been accomplished. The Chinese government is in danger of not living up to economic stability and growth promises. If inflation was to rise even higher, China's rural population may move against the government, forcing dramatic actions. #9 - Will a fragile Eurozone economy effect global growth? Although the Eurozone has made substantial progress in terms of financial reforms over the past two years to lower it s debt profile and market risk, its economic is still fragile. With top economies like France and Spain still weak on the debt and labor side, if additional problems arise, the euro area could be in for more trouble. The Nigerian Stock Exchange 13

14 Click 10 Key to Challenges edit Master to title Global style Stability (Cont d) #8 - Could China's liquidity problem grow into a full blown crisis? Tightening in China has led to massive spikes in SHIBOR, the Shanghai Interbank Offered Rate. This indicated that banks, companies, and government sponsored companies could be in trouble. If a company or bank was to default on its debt obligations, it is unknown how Chinese markets would react. #7 - Could a military conflict in Asia spark a regional slowdown? The Korean Peninsula has been tense over the past two years due to ongoing rhetoric between North Korean and South Korean. There has also been tension between China and Japan in recent times. Although the perceived tension in Korea has been subdued in recent times, the potential for the escalation of conflict remains in the region. The Nigerian Stock Exchange 14

15 Click 10 Key to Challenges edit Master to title Global style Stability (Cont d) #6 - Will the currency war lead to a trade war between the world's most powerful economies? As every economy in the world attempts to build an export-led recovery, countries are using their printing presses to devalue their currencies as a means to compete. But if the world is to show signs of contraction, nations may become more aggressive and shift from a currency war to protectionist trade policy. #5 - Will an unexpected spike in oil prices halt the growth of the world economy? Oil prices may have more to do with the health of the global economy than realized. Some say it was the trigger that caused the recession we just escaped. Although oil prices are projected to decline over the next 5 years, history has shown that a sudden catastrophic event, such as hurricanes/tsunamis or global warfare, can send oil prices sky rocketing. The Nigerian Stock Exchange 15

16 Click 10 Key to Challenges edit Master to title Global style Stability (Cont d) #4 - Will a war over U.S. spending spark a fiscal crisis? High level of debt has become an issue for the US Gov t, causing a recent shutdown, and conflicts over government spending. Markets have reacted to this uncertainty, sending U.S. treasury yields higher, further endangering the health of the U.S. government balance sheet. #3 - Could a deeper housing double-dip derail the U.S. recovery? Home prices in the US have been rising rapidly recently, to the point where there is talk as to whether the nation is entering into another housing bubble. A recent survey by the New York Times suggest that although the US is not in a bubble now, the US may heading towards one. Such a decline would inhibit some of the economy's most reliable spenders endangering the consumer outlook and, in turn, the U.S. recovery. The Nigerian Stock Exchange 16

17 Click 10 Key to Challenges edit Master to title Global style Stability (Cont d) #2 - Will the lack of proper infrastructure in emerging/developing economies stall global growth? Emerging economies are, to some degree, playing catch-up with investment, as strong existing infrastructure in mature economies gives their businesses a huge advantage. More than a fifth of BRICS businesses cite the poor quality of local transport (21%) and information and communications technology (ICT) infrastructure (21%) as likely growth constraints in #1 - What if Chinese tightening goes too far? China could be in store for a hard landing, if it engages in too heavy handed policy-tightening to combat inflation in the country. Societe Generale gives this scenario a 30% chance of happening. The result would be a slow down in what has become the world economy's second engine. There is no telling what the contagion would look like, and whether it would create a recession in the U.S. The Nigerian Stock Exchange 17

18 Click Current to edit Challenges Master in title Africa style Oil Price Volatility Inadequate Infrastructural and Human Development Discountinuity in Government Policies Inadequate Government Attention to the Capital Market Lack of Respect for the Rule of Law High Import Dependence Insecurity The Nigerian Stock Exchange 18

19 Peru Morocco Tunisia Mauritius Egypt Senegal Algeria South Africa Gambia Mauritania Namibia Ghana Kenya Libya Mali Benin Cote d Ivoire Burkina Faso (mb/s) Per 10,000 Population Nigeria Namibia S.A Zimbabwe Tanzania Kenya Morocco Nigeria km/1,000 Inhabitants Click Africa s to edit Infrastructure Master title Challenges style ELECTRICITY CO`NSUMPTION PER CAPITA, KW/Hr South Africa Libya Sey chelles Mauritius Botswana Namibia Eqypt Tunisia Gabon Swaziland Zimbabwe Algeria Zambia Morocco Mozambique Djbouti Ghana Cameroon Cote d'ivoire Congo Togo Angola Kenya Nigeria Losotho ,000 2,000 3,000 4,000 5,000 AFRICA ROAD NETWORKS (KM/1,000 INHABITANTS) AFRICA S BANDWIDTH SHORTFALL Source: CIA Fact Book; data as of 2009 The Nigerian Stock Exchange 19

20 Click to edit Master title style 4. Reforms vs. Stability In Nigeria: Challenges and Prospects The Nigerian Stock Exchange 20

21 Click The Nigerian to edit Master Banking title Sector style The Nigerian banking sector experiencing growth under stricter reform measures Consolidation Regulator-driven (N25b min. capital requirement) 25 banks from Expansion Focus on stronger capital base Regional expansion Higher exposure to the capital market 2009 Crisis Stock market crash Increase in NPLs CBN assessment of banks (corporate governance, capital adequacy, liquidity, risk management) CBN intervention 2011 Reforms Nationalization of banks and M&As Greater regulatory oversight Divestment from non-core banking businesses Introduction of NUBAN Improved competitive environment (focus on profitability and earnings sustainability) The Nigerian Stock Exchange 21

22 Click The Nigerian to edit Master Capital title Market style The Nigerian capital market is undergoing a transformation of great proportions Regulatory Innovation Easy access to loan facilities Increased Margin Lending 2007 Modernization Modern electronic trading facilities Significant inflows into the capital market 2009 Crash Macroeconomic instability Low financial literacy and market discipline Inadequate regulatory framework Poor governance Lack of liquidity SEC intervention 2011 Reforms Greater regulatory oversight Product diversification Investor education Technology Improved market structure Business development services Revised listing rules; amended issuer and broker/dealer rules and penalties Information and data The Nigerian Stock Exchange 22

23 Click Nigeria to edit Offers Master a Unique title Growth style Story Total GDP: USD billion (2012) Real GDP Growth (%): 6.2% (Q2 13) Inflation (%): 8.0% (Sep 13) External Reserves: US$45.7 billion (26 Sep 13) External Debt: US$6.920 billion (Jun 13) Total Population: 174.5bn (Jul 13 est.) Main stock markets: NSE (Sep 13) N17.72tr (US$114.16bn) Total market cap N11.66tr (US$75.08bn) Equities market cap Resources: Oil & Gas (2 nd largest oil reserves in Africa; 10 th largest in the world) Mining: coal, minerals, precious metals Commodities: agriculture, timber, rubber Industries: Leather, textiles, cement, fertilizer Best Performing Sectors: (Q2 13) Agriculture (40.1% of GDP) Wholesale & Retail Trade (17.3%) Crude, Petroleum & Natural Gas (12.9%) Telecommunications (8.4%) Others (6.7%) WESTERN SAHARA MOROCCO ALGERIA TUNISIA LIBYA MAURITANIA CAPE VERDE MALI NIGER SENEGAL CHAD GAMBIA BURKINA FASO GUINEA-BISSAU GUINEA BENIN Ghana NIGERIA IVORY SIERRA LEONE CENTRAL AFRICAN COAST TOGO CAMEROON REPUBLIC LIBERIA EQUATORIAL GUINEA REPUBLIC OF SÃO TOME & PRINCIPE CONGO GABON DEM REP CONGO Angola ZAMBIA SUDAN ERITREA ETHIOPIA The Nigerian Stock Exchange 23 EGYPT RWANDA BURUNDI Kenya ZIMBABWE NAMIBIA BOTSWANA MOZAMBIQUE SOUTH AFRICA UGANDA TANZANIA SWAZILAND LESOTHO MALAWI DJIBOUTI SOMALIA COMOROS MADAGASCAR MAURITIUS

24 Click A Healthy to edit Macro-Economy Master title style GDP Growth (%) 7.5% 7.0% 7.0% Recent Economic Trends Nigeria Q GDP growth rate of 6.2% percent as against 6.3% percent in the corresponding quarter of 2012, and 6.99% in the fourth quarter of % 6.0% 6.3% 6.5% 6.6% 6.2% Inflation declined to 8.0% in September 2013, slightly from the 8.2% recorded in August This is the ninth consecutive month of single digit year-on-year rates being recorded 5.5% Monetary policy remains tight High MPR of 12% 5.0% Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 External Reserves drops to $45.70bn in September from $48.86bn recorded in May 2013 The Nigerian Stock Exchange 24

25 Click 2013 to Nigerian edit Master Economic title style Outlook Economic Growth Projected GDP growth of 6.2% according to the IMF (as at October 2013), which is not far-off from historical growth patterns of the Nigerian economy over recent years. Positive Government initiatives to continue - increasing power generation, financial inclusion, agricultural transformation, and strengthening fiscal discipline. Expect primary growth in agriculture and industrial sectors. Fiscal Policy Continued improvement in the banking system may lead to increased lending to the real sector (SMEs). Government committed to maintaining fiscal stability. External reserves expected to remain steady. Lower Inflation Levels Inflation is expected to maintain some level of stability throughout the year. The non-accommodative policy stance by the Central Bank, which targets single-digit inflation, is expected to promote inflation stability. Impact of Global Forces Retail investor s to compose a higher percentage of trading activity on the NSE. Nigerian companies courted to list on developed exchanges big pull by LSE and JSE. African exchanges still seeing exceptional growth (Ghana composite up 75.42% YTD and NSE ASI up 33.95% YTD). The Nigerian Stock Exchange 25

26 Click The Way to edit Forward Master title 3 Pillars style THE CAPITAL MARKET GOVERNMENT POLICIES PRODUCTIVE UTILISATION OF FUNDS Incentivisation to encourage increased listings on The NSE Government divestment through The Exchange (Discos, Gencos, IPPs) Consistent policies to encourage and support local production of substitutes to imported commodities Monetary and Fiscal policies to stabilize the economy Investment to support critical infrastructural development Human capital development Support job creation in strategic sectors of the economy To develop a vibrant capital market, reflective of the economy Enact policies to promote economic development Drastic reduction in cost of governance and increased investment in the economy The Nigerian Stock Exchange 26

27 Click The Capital to edit Market Master As title An style Enabler Government Government is biggest spender in the economy, hence its should utilize the capital market for economical development. To channel spending/co-financing of projects through the capital market. To create measures that will ensure listing of privatised power entities, Telcos and other large cap companies. Encourage the investment of a portion of the SWF in the capital market. To approach the capital market for projectspecific infrastructural bonds. Private Sector Availability of long term capital required for the development of the private sector. Companies to access long term debt or equity capital to finance development and expansion. Innovative financing for major infrastructural development. Increased participation by large cap companies in the capital market, especially in sectors insignificantly represented by the capital market (e.g. Utilities at 0%). Increased liquidity through the capital market. The Nigerian Stock Exchange 27

28 Click to edit Master title style 5. The NSE s Role in Stabilizing the Economy The Nigerian Stock Exchange 28

29 Click Milestones edit in Master the Nigerian title style Capital Market 1960 The Nigerian Stock Exchange (NSE) was founded as the Lagos Stock Exchange 1980s Focus on increasing corporate governance in the market, on the back of international exposure via Reuters 1990s The IPF is operational; policy is enacted to encourage foreign participation; and the Exchange automates trading 1961 Trading began with 19 listed securities - 3 equities, 6 Gov t bonds and 10 corporate bonds 1970s The Lagos Stock Exchange becomes the NSE and several branches (with trading floors) are opened across Nigeria 2000s Modernization, strong GDP growth, an influx of local/ foreign participation ignite the market; weak regulatory practices rupture the market Since its inception, the NSE has assisted corporations with raising capital through the issuance of equity and fixed-income products The NSE has provided a platform for the FGN, individual States and Local Governments, and other government entities to raise funds for various types of projects through the issuance of debt The NSE is positioning to become the Gateway to African Markets To achieve this, the Exchange has embarked upon a transformation program to compete effectively in the global marketplace, while meeting the changing needs of our clients, and facilitating the mid- to long-term financing needs of the nation The Nigerian Stock Exchange 29

30 Click Our Role to edit in Stabilizing Master title the style Capital Market Primary market for the issuance of newly listed securities Secondary market for the trading of Provide market data and transparency Regulate members and participants Monitor the market Protect investors The NSE plays a vital role in the Nigerian capital market by: Providing a pricing mechanism between supply and demand for productive activities Providing a platform for capital raising including privatization and exit opportunities. Authorizing and monitoring market operators. Providing a robust capital market infrastructure and trading platform. Ensuring a orderly, fair and equitable market place by protecting the integrity of the market and investors from market manipulation. Providing a medium of exchange for retail and institutional investors to build and preserve wealth, while maintaining a robust Investor Protection Fund. The Nigerian Stock Exchange 30

31 Click Our Performance to edit Master vs. title Selected style Exchange Strong Global Performance (H1 13) 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% H1 13 performance shows the DJIA performing at 13.78%, reflecting the impact of the US s QE stimulus Although QE is driving performance of US capital markets, the Nigerian market is being driven more and more by local investors As QE is phased out, global investors may seek to cover positions in their respective local markets which may impact Nigeria in terms of foreign investors looking to sell down Performance in the Euro zone, as reflected in the FTSE AIM, is still sluggish as a result of the lingering debt crisis Globally, Nigeria remains one of the most attractive markets 10.00% 0.00% % % % Ghana Comp. Nigeria ASI Nairobi SE DJIA S&P 500 SEMDEX NASDAQ Composite FTSE 100 FTSE/JSE FTSE AIM MASI Hang Seng WIG 20 EGX 100 IBovespa The Nigerian Stock Exchange 31

32 Click The Nigerian to edit Master Capital title Market style Today 2010s Reforms take hold in the Nigerian capital market: growth-enabling market structure; stronger regulatory environment; targeted business development efforts; 21 st century technologies; first-rate investor protection programs; market development and improved operational efficiency $1 Trillion Market Cap Exchange-driven reforms have strengthened the market, e.g., regulatory oversight is stronger, the market is more efficient, and investors can count on a higher level of protection The Exchange is focused on establishing technology competitiveness, and is advocating policy changes necessary to enable the Nigerian capital market absorb the forces of change The Exchange is facilitating the creation of African Business Champions of tomorrow The Nigerian Stock Exchange 32

33 Technology: Click to edit An Master Essential title Capital style Market Enabler Moving with the Times The securities industry is largely driven by technology, whereby the ability to develop a focused strategy for the utilization and deployment of resources is critical. Support for new technology-driven trading approaches is key. Utilization of data (including those from social media) to develop automated trading strategies and enhanced risk management is now mainstream. Trading venues, regulators and regulated entities need to keep abreast of trends to make markets more transparent and fairer for investors and participants. Speed and robustness of technology systems are now critical success factors of modern trading venues, underpinning the achievement of scale economics. Key Industry trends include, but are not limited to: Mobile / E-trading Co-hosting and Co-Location Technology-enabled trading models Reduction in latency and increases in order book capacity Market surveillance technology The Nigerian Stock Exchange 33

34 Click Capital to Market edit Master Growth title Risks style Imbalance between supply and demand, and oversubscription of quality listed companies. Inadequate talent pool in the region to support rapid growth. Effective information dissemination. Sufficient legal due process and protection. Sufficient due diligence by market players. Relatively few listed companies when compared to regions like China and India. Low liquidity. Government policy. Risks Risk Mitigation Measures Clear delineation and segregation of responsibilities between capital market operators. Robust regulation and risk-based supervision. Greater enforcement of laws, rules and policies. Cultivation of strong and extensive network of domestic talent. Greater array of products and services. Good corporate governance. Quality new listings. The Nigerian Stock Exchange 34

35 Outside NSE Control NSE Key Initiatives Within NSE Control Click NSE Key to edit Initiatives Master title style Term Market Segmentation - Company Share Buy-Back - Introduction of ETFs - Investor Clinics - New Web Site - Revised Listing Rules - Market Making (approved) - Securities Lending (approved) - Short Selling (approved) - AMCON Debt Resolution - Advocacy - Enhancement of Regulatory Programs - Financial Literacy Program - IFRS Compliance - Market Data Services - Advocacy On-going - Develop Product Liquidity and Depth - Attract and Retain More Listings - Review PFA Investment Guidelines - Tax Breaks on Transaction Fees - Exit Strategy for Privatized Entities - Broker Margin Debt Resolution - Broker Access to Funding - ASeM Re-Launch - X-Issuer Portal - CSR Program - Delivery of X-Gen On-going - Product Innovation (e.g. ETFs, NDRs) - Coop with Other Exchanges & Global Orgs - Policy Advocacy - Demutualization - Derivatives Feasibility Study - Transaction Cost Analysis - Enhanced Rulebook - Whistle Blowing Program - Market Optimization - Operation of Investor Protection Fund - Automation of Transaction Lifecycle - Policy on Large Cap Firms - Access to SWF Funds - Reduce Focus on Dividends - Capacity of Local Institutional Investors (on-going) The Nigerian Stock Exchange 35

36 Click Sector to Contribution edit Master title Market style Cap Gap Analysis SECTOR CONTRIBUTION TO GROSS DOMETIC PRODUCT Market Cap as % of GDP (PPP): 21% Huge gap in capital market reflecting the economy CONTRIBUTION TO EQUITY MARKET CAP AGRICULTURE 40.06% 0.73% CONSUMER GOODS 17.32% 30.26% OIL AND GAS 12.90% 2.09% ICT 8.37% 0.56% OTHERS 10.43% 2.38% INDUSTRIAL GOODS 3.98% 31.26% FINANCIAL SERVICES 3.95% 30.42% CONSTRUCTION/REAL ESTATE 2.39% 1.83% SERVICES 0.60% 0.47% TOTAL 100% 100% Market Capitalisation as at 30 th Sep 2013 The Nigerian Stock Exchange 36

37 Click An Attractive to edit Master Investment title style Destination The Nigerian Stock Exchange 3 rd Largest Exchange in Africa by Market Cap* Approx. 5 million investors:* Local YTD 49.13% of market activity Foreign YTD 50.87% of market activity Avg. daily value traded YTD (N4.42b, $26.87m) Avg. daily volume traded YTD (424.24m) 234 Active dealing member firms 48 Dealing members/issuing houses 20 Ordinary members/issuing houses Equities and products: Total Market Capitalization (N17.72t, $114.16b) 196 listed equities (N11.66t, $75.08b) and 189 operating companies; 57 bonds (N5.98t, $9.07b) 1 ETF (N311.40m, $2.01m) Founded in electronic trading floors around Nigeria Data/figures as at the end of Aug 2013 Figures as at September 30, 2013 The Nigerian Stock Exchange 37

38 Click to edit Master title style THANK YOU Questions Thank & You Answers Stock Exchange House 2-4 Customs Street P.O. Box 2457, Marina Lagos Island, Lagos, Nigeria