The Nigerian Stock Exchange Short and Medium Term Imperatives

Transcription

1 The Nigerian Stock Exchange Short and Medium Term Imperatives Presented by Ade Bajomo Executive Director, Market Operations & Technology At The Asset Custodians Investors Conference 9 th May /03/2012 The Nigerian Stock Exchange 1

2 Outline About the NSE Overview of The Nigerian Financial Market Challenges and Opportunities Governance Structure of The NSE Short Term Imperatives Medium Term Imperatives Recent Trends in the Capital Market Critical Role of Custodians In a Vibrant Market Q & A 31/03/2012 The Nigerian Stock Exchange 2

3 About The NSE Established in 1960; Company Limited by Guarantee Approx. 5 million investor Accounts: Foreign 81% of recent market activity Local 19% of recent market activity 234 active Broker-Dealer firms 28 member Issuing Houses Equities 199 listed cos. N7.23t ($46b) mkt cap Bonds 52 bonds N5.23t ($33.40b) mkt cap ETFs 1 ETF N1.09b ($6.96m) 14 electronic trading floors around Nigeria Services the 2nd largest financial center in sub-saharan Africa Figures as at 29-Feb /03/2012 The Nigerian Stock Exchange 3

4 The NSE s Vision To be the leading Stock Exchange in the African region for capital formation, driven by transparency, innovation, efficiency and liquidity. Strong Regulation and Supporting Regulatory Programs Growth- Enabling Market Structure 21 st Century Technology Strategies Targeted Listing and Product Efforts First-Rate Investor Protection Strategies 5-Year Target: $1t Market Cap 05/10/2011 The Nigerian Stock Exchange 4

5 Key Challenges A Pressing Need for Change EXECUTION AND OPERATIONAL EXCELLENCE Key Challenges ORGANISATION TECHNOLOGY GROWTH ASPIRATIONS / INCOME DIVERSIFICATION MARKET LIQUIDITY AND DEPTH RESTORE INVESTOR CONFIDENCE /LIQUIDITY LEGACY ISSUES DEMUTUALISATION REGIONAL LEADERSHIP 5

6 The Nigerian Economy In Context Banking Crisis Over but Impact High Delisting of 3 banks taken over by AMCON in 2011 wiped N170bn from equity prices Confidence of equity holders impacted Nigerian banks are now one of the best capitalised (and stable) due to continued success of AMCON Banking index up by 25% YTD (2012) GDP and Employment Relatively strong and sustainable GDP growth. 7.5% growth expected in 2012 Worsening trend in youth employment and overall job creation Unemployment rate estimated at 22% Tightening Monetary Policies High MPR at 12% with direct impact to bond and equity prices (flight to safety) Relative Exchange Rate Stability (between N155-N160 to the dollar) Global Competitiveness Difficult place to do business (index ranking remains low) Not in top 10 economies most likely to transform radically in short term Relatively high investor protection framework (ranks 65 in the world) Improved Credit Rating (Fitch BB-/Stable, S&P B+/Stable ) amidst global sovereign downgrades 03/11/2011 The Nigerian Stock Exchange 6

7 State of the Global Economy Debt Crisis in Western Economies Sovereign debt crisis in Europe threating survival of Euro Downgrading of sovereign credit ratings Impact on FDI for Nigeria and other emerging economies Global Capital Markets Showing Signs of Recovery Many now above post-2009 levels MSCI World Index Up 8.1% YTD (-4.23% down over 1 year) Global Economic Growth Continues to Ease Prolonged recession a stark reality for many European economies Slow down in growth for commodities, with impact on emerging economies 03/11/2011 The Nigerian Stock Exchange 7

8 2012 Outlook Global Nigeria 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* 2.6% (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% Economy growing at 7.5%+ Large population (largely under 30) Strong profitable growth businesses (Food & Beverages, Manufacturing) Relaxed labour and investment laws No capital gains tax Tax on dividends at 10% Short term outlook in oil prices positive Huge mineral reserves Under-exploited manufacturing base Entrepreneurship Can do, Will do Attitude Possibly strongest banking sector in the world in terms of capital ratio * Figures reported by World Bank 31/03/2012 The Nigerian Stock Exchange 8

9 Total Value of Shares Traded (Billions) The NSE Equity Market Performance ASI (Daily) Share Value ASI Peak: March 5, 2008 ASI 66, ,000 60,000 50, A N1,000 investment in 1996 would have been worth N13, , ,000 20, ,000-31/03/2012 The Nigerian Stock Exchange 9

10 Success Drivers Integrity Durable Wealth Creation Market Leadership Accountability Effective Corporate Governance Transparency and Strong Regulation Operational Efficiency Technology and Supporting Infrastructure Capacity Building Demutualisation Listings Development Market Development Product Development Strategic Alliances Transformational Capital Market Customer Experience

11 Key Initiatives The Organization Corporate Reorganization Business Development Technology Reconstitution of the Board Reorganization for Effectiveness and Efficiency Listings Sales/Retention Focus on Growing from $75B to $1T in 5 Years Upgrade of Trading and Market Management System to NASDAQ OMX X-stream Fully Operational Board Committees Transformation Programs Underway 5 Products in 5 Years (Equities, Bonds, ETFs, Options, Financial Futures) Build Business Technology Baselines and Process Automation Board Committee on Demutualization Formed Four Divisions to Better Position the Exchange as a Commercial Entity National Reach via Branch Network of 13 Trading Floors and Offices Advocating Full Dematerialization 11

12 Key Initiatives contd. Regulation Regulatory Program Investor Protection Market Structure Tailored Best -in-class Service for Issuers and Broker-Dealers Better Coordination with Other Regulators Reconstitution of Board of Trustees of Investor Protection Fund (N597m) Market Making and Securities Lending, and Development of a Short Selling Program Attention to Rules and Interpretations for Market Participants Compliance via Enforcement (Disclosures, Financial Reporting, Forecasts) Trade Guarantee Fund Consideration of an Increase in the 5% Band to 10% with an Intraday Auction at the 5% Mark Surveillance Automation (Conduct, Controls, Systems, etc.), e.g., SMARTS Eradication of Insider Trading, Market Manipulation and Issuing of False Statements Additional Support by the SEC s Establishment of a Similar Fund Longer Trading Day, Sponsored Access, Opening/Closing Auctions, etc. 12

13 NSE Markets and Boards: Five-Year Outlook Bond Market Govt. Bonds-Federal Govt. Bonds-State & Local Corporate Bonds/Debentures Options Market (2013) Stock Options Bond Options Index Options Equities Market Main Board Alternative Securities Market (ASeM) Futures Market (2016) Currency Futures Interest Rate Futures Etc. ETF Market (2011) ETFs and Indices 13

14 Outside NSE Control Key Initiatives Within NSE Control Short and Medium Term Imperatives 31/03/2012 The Nigerian Stock Exchange 14 Term Short (2011) Medium (2012) - 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) - AMCON Debt Resolution - Advocacy - 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 - 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

15 Technology At Heart of Initiatives 31/03/2012 The Nigerian Stock Exchange 15

16 Technology At Heart of Initiatives contd. 31/03/2012 The Nigerian Stock Exchange 16

17 Critical Role of Legislative and Executive Arms of Government in Achieving the Reforms Developing a market that is representative of the economy Agriculture: 40% of GDP 0% of market cap Oil & Gas: 16% of GDP 5% of market cap (Majority of national revenue, no downstream listed) Power: 8%of GDP 0% of market cap (13 companies recently created) Telecoms: 4.5% of GDP 0% of market cap (> 80m subscribers) Advocacy for Listings Passionately promoting companies and appropriate government institutions to list on the stock market through appropriate incentives Educating the public on the benefits of long term investment in a well run capital market Facilitating joined up development of capital market Government, regulators and industry participants 25/10/2011 The Nigerian Stock Exchange 17

18 Key Advocacy Initiatives 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 - PENCON Targeted Tax Breaks for listed companies FIRS Listing of National Companies in the Capital Market - BPE Nigerian Participation in Growth and Success of Multi Nationals through minimum ownership requirement initiative Ministry of Trade and Industry 03/11/2011 The Nigerian Stock Exchange 18

19 Re-emergence of The Nigerian Bull (2012 to?) 31/03/2012 The Nigerian Stock Exchange 19

20 03-Jan Jan Jan Jan-12 The NSE All Share Index 3 rd Jan to 4 th May Jan Jan Jan Feb Feb Feb Feb Feb Feb Feb Mar Mar Mar Mar Mar Mar Mar Apr Apr Apr Apr Apr Apr Apr May-12 23, , , ,666 22, , , , , , ,072 20,138 21,228 20, , ,671 20, , ,138 31/03/2012 The Nigerian Stock Exchange 20

21 Planned Outcome A capital market that lives up to its true potential in 5 years time, achieving $1Trillion capitalisation, and providing real opportunities for Nigerians and International investors to create and grow their wealth in a sustainable manner through active participation in the growth of the country The Future is Bright The Future is NIGERIA 03/11/2011 The Nigerian Stock Exchange 21

22 Q&A 31/03/2012 The Nigerian Stock Exchange 22

23 Thank You Ade Bajomo The Nigerian Stock Exchange Stock Exchange House 2-4 Customs Street P.O. Box 2457, Marina Lagos Island Lagos, Nigeria 31/03/2012 The Nigerian Stock Exchange 23