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 The Nigerian Stock Exchange 1
Outline 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
State of the Global Economy 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) 11/04/2012 The Nigerian Stock Exchange 3
2012 Outlook - Global 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% * Figures reported by World Bank 11/04/2012 The Nigerian Stock Exchange 4
The African Renaissance? 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 Source: Renaissance Capital 11/04/2012 The Nigerian Stock Exchange 5
The Nigerian Economy 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 11/04/2012 The Nigerian Stock Exchange 6
Nigeria s Comparative Advantage 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 11/04/2012 The Nigerian Stock Exchange 7
Basic Functions of a Capital Market 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 11/04/2012 The Nigerian Stock Exchange 8
About the NSE 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 Figures as at 10-Apr-2012 11/04/2012 The Nigerian Stock Exchange 9
NSE Vision and Goal 11/04/2012 The Nigerian Stock Exchange 10
The NSE Advantage NSE services the 2 nd largest financial centre in sub- Saharan Africa NSE is the 3 rd largest stock exchange in Africa by capitalization NSE is the largest market in West Africa by company capitalization 11/04/2012 The Nigerian Stock Exchange 11
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 11/04/2012 The Nigerian Stock Exchange 12
Benefits of Listing 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 Visibility -- Inclusion in indices, portfolios Improved Brand Equity Sustainability Spreads risk of long-term investment projects 11/04/2012 The Nigerian Stock Exchange 13
Partnering for Value Added Services Corporate Governance Investor Relations Institutional Services Analyst Coverage Corporate Access Advocacy 11/04/2012 The Nigerian Stock Exchange 14
Drivers of Success 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 11/04/2012 The Nigerian Stock Exchange 15
Outside NSE Control Key Initiatives Within NSE Control Restoring the Market: Key Initiatives 11/04/2012 The Nigerian Stock Exchange 16 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
Seizing the Day- A Multi-Pronged Effort is Needed 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 11/04/2012 The Nigerian Stock Exchange 17
Seize the Day-Nigeria on the March again? 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 11/04/2012 The Nigerian Stock Exchange 18
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! 11/04/2012 The Nigerian Stock Exchange 19
Thank You The Nigerian Stock Exchange Stock Exchange House 2-4 Customs Street P.O. Box 2457, Marina Lagos Island Lagos, Nigeria tpeterside@nigerianstockexchange.com www.nse.com.ng 11/04/2012 The Nigerian Stock Exchange 20