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1 Click to edit Master title style REVIEW OF THE NIFC AND OFFICE OF THE NIGERIAN FINANCIAL OMBUDSMAN LEGISLATION: Presented by Mr. Haruna Jalo-Waziri EXECUTIVE DIRECTOR Business Development For Joint Senate committee on Banking, insurance and Other Financial Institutions July 24, 2013

2 Click Agenda to edit Master title style Executive Summary Our Understanding of Proposed Legislation Review of Global Best Practices Importance of Proposed Legislation to Nigeria Our Advocacy Track Record Our Value Add Proposition Conclusion 24-July-2013 The Nigerian Stock Exchange 2

3 Click Executive to edit Summary Master title style As a part of Federal Government of Nigeria s (FGN) goal to transform Nigeria into a competitive global economic force, there are several initiatives and legislation underway to support the Nigerian Vision The Nigerian Stock Exchange (NSE) is in full support of the FGNs transformational agenda and has dedicated the appropriate resources to assist the government Over the past two years, the NSE has been effective in managing advocacy initiatives, with the recent execution of the remove of VAT and Stamp Duties from market transactions. We have also been successful at providing margin debt relief to the stock broker community, working with several arms of the FGN As Nigeria considers the implementation of the Nigerian International Financial Centre (NIFC) and the Office of the Nigeria Financial Ombudsman legislations, the NSE can bring to bear its expertise and global network in ensuring seamless implementation It is important to note that IFC economies have grown very rapidly in the period since 1980, with average per capita annual growth rates of 3.3 percent, compared to 1.4 percent globally. As it relates to Ombudsman efforts, there are over 80 countries globally who have implemented and realized the value of this role The purpose of this presentation is to illustrate how the NSE can play a vital role in the legislative and implementation process by: Providing an overview of our understanding of the proposed legislation Reviewing international trends in international financial centres (IFC) and ombudsman platforms Detailing the importance of the proposed legislation to the Nigerian economy Stating the advantages and disadvantages of each bill Highlighting how we can assist in achieving the Vision 24-July-2013 The Nigerian Stock Exchange 3

4 Click Our Understanding to edit Master of title the style Proposed Bills The IFC bill seeks to establish the NIFC for the purpose of creating a world-class financial zone that would act as a catalyst for economic growth in Africa The NIFC will be established as a full service IFC focusing on a broad range of financial and ancillary services driven by a unique and separate regulatory, administrative and judicial framework in line with global standards To ensure global competitiveness,the NIFC may provide some of the following incentives for stakeholders; o o o o o Overview of NIFC Bill A competitive corporate and personal tax code A competitive VAT on products and services Centralized approach to business registration 100% ownership of businesses Industry specific incentives This bill seeks to establish the Office of the Nigerian Financial Ombudsman, as an independent body charged with the responsibility for resolving financial and related disputes in the Nigerian financial services sector and for related matters The Office shall have the capability to inquire into and settle any complaints or disputes related to the following; o o o Overview of Ombudsman Bill Individual or corporates Financial Institutions Regulators in the financial services sector Additionally, the Office shall have the power to entertain complaints and settle disputes in transaction relating to (i) banking (ii) mortgage (iii) insurance (iv) investment and securities, etc. 24-July-2013 The Nigerian Stock Exchange 4

5 London New York City Tokyo Singapore Chicago Hong Kong Paris Frankfurt Seoul Amsterdam Index Value New York City London Tokyo Hong Kong Singapore Shanghai Frankfurt Paris Zurich Chicago Index Value Click Leveraging to edit on Master Global title Best style Practices FACTS AND FIGURES IFC DEVELOPMENT INDEX There are over 75 IFCs around the world In 2011, the Xinhua News Agency of China, partnering with the Chicago Mercantile Exchange and Dow Jones & Company released the Xinhua-Dow Jones International Financial Centres Development Index The Global Financial Centres Index is compiled by the Londonbased British think-tank Z/Yen and is published annually by the City of London Corporation Worldwide Centres of Commerce Index is an index of the world's cities by MasterCard which provides rankings for 75 leading commercial cities Accordingly, Nigeria can leverage from best practices observed from leading economies GLOBAL FINANCIAL CENTRES INDEX WORLDWIDE CENTRES OF COMMERCE INDEX London New York City Hong Kong Singapore Seoul Tokyo Boston Zurich Geneva Frankfurt Index Value 24-July-2013 The Nigerian Stock Exchange 5

6 Click Case to Study: edit International Master title style Financial Centres London International Financial Centre Hong Kong International Financial Centre Dubai International Financial Centre London is Europe s leading financial centre. In 2009,17% of all global trading in equities took place, a higher proportion than anywhere except New York UK fund managers (predominately based in London) managed portfolios worth 11 per cent of the global total, second only to New York Commodity trading forms an important part of the London financial sector, as it hosts three major derivatives exchanges that account for around 15% of global trade Hong Kong s economic prosperity depends very much on its continued success in maintaining its status as an IFC Hong Kong led the world in total funds raised through Initial Public Offerings (IPOs) from 2009 to 2011, surpassing London and New York As at the end of 2011, there were 152 licensed banks (73 of which rank in the world s top 100), 20 restricted licensed banks and 26 deposit-taking companies The DIFC was established in 2004 as a financial centre to serve the region between Western Europe and East Asia The DIFC is now ranked as the world's fastest-growing IFC, and continues to attract international clients from around the world DIFC issues operating licenses for 6 sectors including banking services, capital markets, asset management and fund registration, reinsurance, etc. At the end of Q1 12, AUMs by DIFC-based companies was at $8.1bn

7 Click Case to Studies: edit Master Global title Ombudsman style Platforms Worldwide effort of Ombudsman Representation has strengthened Economic Development Emerging Market Examples Brazil: Hearing Officer usually heading a service called Ouvidoria acts in the Ombudsman role for Brazil, whereby each government agency defines its own service Russia: The Commissioner is appointed for a fixed term by the Parliament. The ombudsman cannot be dismissed before the end of his term, and is not subordinate to any body of power, including the President or the Government India: Designates several ombudsmen for the redress of grievances and complaints from individuals in the banking, insurance and other sectors. China: The China Ombudsman listens, discusses, answers questions, provides information, and identifies options and strategies for resolving a conflict situation Africa Examples Kenya: The Commission on Administrative Justice (CAJ) was established by the Commission on Administrative Justice Act South Africa: The Public Protector is an office established by the Constitution of South Africa. Its mandate to guard democracy, similar to the office of ombudsman in other countries There are over 80 countries around the world with Ombudsman offices, evident of the importance of the role in financial expansion and growth 24-Julyl-2013 The Nigerian Stock Exchange 7

8 Click Importance to edit of Master IFC to title Nigeria style INCENTIVE Change in Global Corporate Recognition Structure DESCRIPTION Nigeria to be recognized as a global financial market with legislation and an investment structures on par with other leading economies Financial inclusion (amongst international investing community) to drive expansion of capital market from an asset class (i.e. derivatives) and service offering perspective (i.e. hedge funds) Economic Development Change in governance Job Creation Academic research confirms that when financial sectors are more developed, economies grow faster, and that the greater development of the finance sector is a key cause Increase trending in FDI/FPI; increase tax revenues; and enhanced government funding options vis-à-vis the international bond market In addition to the employment opportunities created working for banks, insurance companies, intermediaries, hedge funds, etc., there are also jobs created working for related companies such as law firms, accountants, IT suppliers as well as the informal sector As an example, the wholesale finance sector contributed 1.36 million jobs across the EU in 2008 Growth of Tourism Industry The global tourism industry is worth an estimated $1.15 trillion in 2012, with revenue rising at an annualized 1.5% over the past five years IFCs in countries that cater to the tourism industry, such as Dubai and Hong Kong, can take advantage of tourism revenues thereby increasing fiscal income 24-July-2013 The Nigerian Stock Exchange 8

9 Ombudsman: Click to edit Master Improving title style our Global Perception Nigeria currently ranks 139 out of 174 nations in Transparency International s 2012 Corruption Perception Index Factors contributing to this poor ranking include, amongst other things (a) poor transparency in regards to public spending and contracting, (b) poor anti-money laundering rules, and (c) overall lack of accountability in the nation The implementation of the Office of Nigerian Financial Ombudsman creates an opportunity for an extra layer of transparency and independence, in addition to initiatives that the FGN is already pursuing to root our corruption and fraud in the country The Office of the Nigerian Financial Ombudsman can deal with items such as complaints from consumers about various financial matters including, banking, insurance, mortgages, pensions, savings and investments, credit cards, loans and credit, financial advice, stocks, shares, unit trusts and bonds Nigeria can leverage on global best practices from its peers in Africa or other developed/emerging markets to ensure the appropriate framework for independence is established For example, the Financial Ombudsman Service in the UK is funded by the UK's financial services sector through a combination of statutory levies and case fees (as compared to funding from a Gov t agency); Fees are paid by financial businesses that are regulated by the Financial Services Authority (FSA) or licensed by the Office of Fair Trading (OFT) and are automatically covered by law by the ombudsman service 24-July-2013 The Nigerian Stock Exchange 9

10 Impact Click to on edit Financial Master title Markets style INCREASED MARKET ACCESS Greater access to international financial markets EFFICIENCY Products and services to be offered at the lowest cost to both institutional and retail consumers EFFECTIVENESS Creation of products and services is essential to meet the needs of customers STABILITY Establishment of a safe, sound and secure financial system able to withstand sudden adverse economic and financial shocks ENHANCED REGULATIONS Development of efficient rules and regulations to support an innovative financial system INFRASTRUCTURE Promotion of strong domestic institutions and efficient, stable payments 24-July-2013 The Nigerian Stock Exchange 10

11 Click Risk versus to edit Rewards Master title of Proposed style Legislation In considering the way forward for the proposed legislations, there are several advantages and disadvantages that must be accessed to ensure seamless implementation Nigerian International Financial Centre Nigerian Financial Ombudsman Rewards Risks Rewards Risk Enhanced economic development for Nigeria Deepen domestic financial markets Enhance integration with external markets Africa & Global Large capital funding requirements Public advocacy gap Political challenges Facilitates two-way, informal communication and dispute resolution to resolve allegations Improved Global perception on investor protection Independent from government Typically, recommendation / decisions are not binding Maintenance of full independence given government position Cannot provide a quick solution to complex problems Speed up infrastructural development Job creation Security & safety Project management Improved stakeholder management Bad practices may be remedied 24-July-2013 The Nigerian Stock Exchange 11

12 Click Our Advocacy to edit Master Track title Record style 1. VAT and Stamp Duty elimination from secondary market transaction cost (Awaiting gazzetting) 2. Margin Debt Relief by AMCON 24-July-2013 The Nigerian Stock Exchange 12

13 Click Our Advocacy to edit Master Track title Record style (Cont d) Review of Exit Strategy for Privatized Government Entities PPP Underutilization of the Capital Market Use capital market to address transparency, corporate governance, risk and public perception issues, while providing public opportunity to participate USD 56.5b investment required to meet Vision 20:2020 targets in key sectors Urgent need to attract diverse sources of capital, e.g., companies and funds that have raised capital from the market Our Recommendation Simultaneous listing of companies earmarked for privatization at the time they are sold Our Recommendation ICRC should make provisions for listed companies and funds in the ICRC Manual 24-July-2013 The Nigerian Stock Exchange 13

14 Click Our Role to edit in Achieving Master title the style Vision Assistance in drafting of proposed legislation Leverage upon our global counterparts for best practices Perform market and legal research Development of NSE rules to support proposed bills Support appropriate agency in seamless execution The NSE can play a vital role in helping to Achieve the Vision Aid in various selection processes, as necessary Grow knowledge base to support market expansion Evaluate & issue licenses to market operators Assist in determining optimal rollout structure Assist in execution of closely related initiatives 24-July-2013 The Nigerian Stock Exchange 14

15 Click Envisioning to edit the Master NIFC title style The Nigerian International Financial Centre is envisioned to be built and located in a state of the art residential and commercial city, developed using the latest eco-friendly materials and technologies 24-July-2013 The Nigerian Stock Exchange 15

16 Click Conclusion to edit Master title style The NSE is in full support of the proposed bills as we believe the NIFC and Office of the Nigerian Financial Ombudsman will further strengthen the Nigerian economy Given our recent track record with advocacy implementation, coupled with our constant cooperation with other global exchanges and organizations, the NSE can bring to bare its expertise and global network in ensuring the proposed legislations are implemented seamlessly Accordingly, we have committed resources to this initiative and stand ready to assist in the end-to-end process, as requested 24-July-2013 The Nigerian Stock Exchange 16

17 Click to edit Master title style Thank You Q & A

18 Click to edit Master title style Thank You Thank You Stock Exchange House 2-4 Customs Street P.O. Box 2457, Marina Lagos Island, Lagos, Nigeria