2017 Debt Capital Market Conference Debt Capital Market Development Project Update Presentation Emmanuel Etaderhi September 28, 2017
Outline Part 1 Preamble 2 Part 2 The DCM Transformation Agenda 3 Part 3 Project Update Report 4-5 Part 4 Key Next Steps 6-7 Part 5 Other Updates 8-10 Part 6 Conclusion 11 1
Dubai’s Success Story - It all started with a dream QUICK FACTS: 1990 ▪ Allows 100% foreign ownership ▪ Free repatriation of profits ▪ Open – no exchange controls, quotas or trade barriers Accessible – served by over 120 shipping ▪ lines and linked via 85 airlines to over 130 global destination ▪ International trade has grown on average by over 11% per year since 1988 and regional economic growth and liberalization should boost demand further ▪ Dubai’s rapid transformation from 2016 desert village to global player is encapsulated in the aspirational statement of its ruler, Sheikh Mohammed Al Maktoum: “We want to be No. 1” ▪ Can the DCMD Project Dream assist in replicating Dubai’s success story in Nigeria? 2
The Debt Capital Market (DCM) Transformation Agenda DCM Transformation Aspiration 2020/2025 To become a world class, properly functioning DCM by 2020/2025 DCM Transformation Strategic Objectives Time to Market Market Depth (Debt to GDP) Investor Confidence Product Innovation/ Non-Sovereign Liquidity Investor Diversification Instruments Diversification DCM Transformation Levers Investors, Issuers Regulation Sustainable Housing & & Intermediaries Engagement/ Consolidation Finance Infrastructure Education ▪ Engage in efforts to ▪ Develop strategies for ▪ ▪ ▪ Facilitate Promote the Activate the Repo Investor promote low interest rate long-term financing market Readiness development of market and create structure with focus on pressing ▪ Champion Corporate liquidity housing infrastructure ▪ environmental, social and Promote the harmo- Governance ▪ in Nigeria Improve secondary governance (ESG) issues nisation and streamlining ▪ Enhance DCM affecting business/ ▪ of DCM regulatory Increase creation of market participation Research & Corporate investment decisions frameworks new long-term (treasurers/dealers) Credit Rating ▪ Promote impact investing, ▪ Drive end to end ▪ Improve Collaboration infrastructure products/ green bonds, issuance process across the DCM microfinance, credits for instruments improvement sustainable projects, Ecosystem ▪ Optimise transaction active ownership, financial costs Inclusion, etc. 3
Project Update Report S/N Activities Timeline RAG Set-up of the Debt Capital Market Development Apr. 2016 1. (DCMD) Project Office Formation and kick-off of the DCMD Project Sub- Apr. 2016 2. Committee Activities Development of the DCMD Project Website 3. July 2016 Presentation of summary reports at the Securities Aug. 2016 4. and Exchange Commission (SEC) Capital Market Committee Meeting (CMC) Development of Position Papers on DCM initiatives Oct. 016 5. 4
Project Update Report…/2 S/N Activities Timeline RAG Activation of the DCMD Project Advisers, 6. Nov. 2016 Transformation and Steering Committees 7. Nov. 2016 DCMD Project Launch Reconstitution of Market Liquidity & Apr. 2017 8. Enhancement and Housing & Infrastructure SubCos Addition of the Sustainable Finance Sub- 9. Sep. 29, 2017 Committee to the DCMD Project Strategic Partnerships on the Sustainable 10. Sep. 2017 Finance initiative 5
Way Forward: Key Focuses The implementation process has commenced on some of the SteerCo approved recommendations via SubCo Implementation Teams (SITEs) comprising of groups of two or three members from various SubCos for driving through the specific advocacy initiatives and sub-projects. RAG Initiative /Activity Estimated Timeline S/N Status Review of specific regulations restricting the insurance industry’s ▪ 1. Q3 2017 participation in the Nigerian DCM ▪ Commenced formal engagement with NAICOM to drive through reform initiative on September 13, 2017 Securities and Exchange Commission (SEC) Corporate ▪ 2. Q2 2017 Governance Scorecard Sensitisation Programme for Directors and Compliance Officers- Raising Standards through Scorecards ▪ Initial engagements was made with SEC Financial Standard and Corporate Governance Department on April 24, 2017 ▪ A letter highlighting the proposed modalities and possible areas of collaboration was sent on July 24, 2017 6
Way Forward: Key Focuses../2 RAG Initiative/ Activity Estimated Timeline S/N Status Framework for the issuance of interpretive guidance notes in ▪ 3. Q4 2018 line with global standards to aid the understanding of regulation, drive transparency, consistency and fairness in capital market regulation ▪ Preliminary discussions has been kick-started with SEC on this initiative ▪ Further deliberations and position papers will be presented to the Commission for consideration and execution Identify and provide lasting solutions to the issues affecting ▪ 4. September 28, corporate debt issuances in the Nigerian DCM 2017 ▪ Discussion by Panelists at DCM Conference “Get a Rating Campaign” ▪ 5. Q2 2018 ▪ Enhancing the Culture of Rating by Existing/Potential Issuers Completed In progress 7
Other Updates Estimated S/N Sub-Committee Initiative/ Activity Timeline Regulation Tax Waiver on Bonds ▪ Q3 2018 1. • Equalisation of the tax exemption incentive for Consolidation sovereign and non-sovereign bonds. e.g. equal treatment of tax status of corporate and FGN bonds Drive Proper Documentation amongst Issuers to ▪ Q3 2018 Improve the Bond Issuance Process & Overall Time- to-Market for Bond Issuance • Creation of alternative models for streamlining the approvals cycle for applications for bonds issuances Regulatory Costs for Perfection of Securities ▪ Q2 2019 • Reduction in cost of perfection of security documents for secured instruments Tax Efficiency of Asset-Backed Securities ▪ Q4 2018 Transactions ▪ Improve tax efficiency of Asset Backed Securities (“ABS”) by issuance through Trust Structures Guideline on Liquid Asset Status for State Bonds ▪ Q3 2018 • Removal of tenor limit on the granting of liquid asset status or alternatively, an extension to ten- (10) year tenor at the minimum 8
Other Updates../2 Estimated S/N Sub-Committee Initiative/ Activity Timeline ▪ Investors, Issuers & Deepening of industry knowledge, improve capacity ▪ Q4 2018 2. building and increase participation by all market Intermediaries stakeholders Engagement/ Education ▪ Promoting mandatory continuous assessment ▪ Q3 2018 program and continuing education for capital market participants ▪ Increase in knowledge of fixed income products, by ▪ Q4 2018 intermediaries, thereby promoting their ability to market the products Innovative DCM Products for Infrastructure Housing & ▪ 3. Q1 2019 Development Infrastructure ▪ Increase the development of innovative debt capital market products for infrastructure development, e.g. infrastructure bonds, infrastructure debt funds, project bonds, securitised bonds, wrapped bonds, green bonds, etc. ▪ Implementation of appropriate regulatory framework ▪ Q3 2018 to promote housing development 9
Other Updates../3 Estimated S/N Sub-Committee Initiative/ Activity Timeline ▪ Adoption Market Liquidity & of a risked-managed approach for ▪ Q4 2018 4. securities lending by Pension Fund Administrators Enhancement (PFAs)/Custodians (PFCs) ▪ Activation of automatic settlement systems for money ▪ Q2 2018 market transactions upon maturity ▪ Improvement of price formation, transparency, ▪ Q2 2018 tradability and valuation of DCM products ▪ Development of a clear program for wider financial ▪ Q4 2018 inclusion, exploring various channels, e.g. mobile banking Completed In progress 10
Conclusion ▪ Global statistics have shown that the depth of a country’s capital market is positively related to its level of infrastructural development as well as the overall growth of the economy ▪ The DCMD Project aims to foster a highly liquid, deep, efficient and well-developed DCM, to boost growth and support the future development aspirations of the Nigerian economy 11
Thank you for your attention!
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