Nigeria A Compelling Investment Destination Arunma Oteh Director General Securities and Exchange Commission 3 rd September, 2010
Background information on Nigeria Market information: Macroeconomic data (IMF 2010E) Population: 156 million Equity Market Capitalization: • GDP: $214billion NGN 6,000.bn (USD 40 bn) as at 31/08/2010 Average daily turnover (H1-10): Real GDP growth: 7% • USD 23,589,591 CPI inflation: 10.7% Opening hours: (Mon-Fri) Currency: Nigerian naira (NGN) Local time GMT • 10.00am - 12.00pm 10.00am - 12.00pm Settlement: T+3(Equity), T+2 (Bonds) Trading system: ATS Delivery: Electronic Tradable instruments: • Equities – Ordinary • Corporate bonds • Government bonds • Preference Stock • Industrial Loans Central depository : Yes Same-day funds : Yes Securities lending/short selling : No T+3 rolling settlement : No Page 2
Where Nigeria goes, Africa goes Africa contributes 2% to the world’s GDP Total Banking Assets Globally, 2008 EU 22% RoW, 24% RoW 47% EU, 48% Africa, 1% North America Japan, 10% 22% North Africa Japan America, 17% 2% 7% Nigeria contributes 14% to Africa’s GDP Total Banking Assets in Africa, 2008 Algeria Rest of Africa, 9% 1% Other SSA Egypt 25% Nigeria, 15% 13% South Africa, 45% Egypt, 25% Other North Africa South Africa 17% 17% Angola Nigeria Source: Reuters, IMF and Renaissance Capital estimates. Algeria, 13% 5% 14% Page 3
Stable macroeconomic environment 2010 Public debt estimates 140 • Low levels of debt 120 %/GDP 100 80 60 • Reasonable inflation 40 20 0 South Russia Nigeria China Zambia Africa Kenya Ghana Brazil Spain Ireland UK Germany India USA Greece • Relatively stable exchange rates 2010 Fiscal Deficit estimates 0 -2 -4 • Current account Surplus %/GDP -6 -8 -10 -12 -14 Ireland UK USA Spain India Greece Ghana Euro Area Kenya Nigeria South Africa China Russia Zambia Ivory Coast Brazil Page 4
Political commitment to reform agenda including Niger Delta amnesty program, free and fair elections, and economic reforms Average barrels per day rises post its amnesty program ‘I have also given a strong mandate to the head of Securities and Exchange Aug-10 2,000,000.00 Commission, Arunma Oteh, to use any Jul-10 2,030,000.00 means backed by law to bring all those Jun-10 2,010,000.00 who abused the capital market to book. May-10 2,085,000.00 Those who could not retire as planned Apr-10 2,025,000.00 because of losses sustained in the stock Mar-10 2,010,000.00 market crash should be confident that i Feb-10 1,940,000.00 feel their pains and will give the political Jan-10 2,025,000.00 cover to those whose jobs it is to Dec-09 2,010,000.00 pursue, apprehend and prosecute those Nov-09 1,910,000.00 responsible with the aim of restituting losses’. Oct-09 1,860,000.00 Sep-09 1,840,000.00 Aug-09 1,710,000.00 Facebook comment made on 31st July, 2010 Jul-09 1,680,000.00 by President Goodluck Jonathan Jun-09 1,720,000.00 May-09 1,790,000.00 Apr-09 1,720,000.00 Mar-09 1,760,000.00 Feb-09 1,790,000.00 Jan-09 1,890,000.00 - 500,000.00 1,000,000.00 1,500,000.00 2,000,000.00 2,500,000.00 Page 5
Opportunity to benefit from large population and rising income Population growth prospect Nigeria is the eighth most populous nation 1,600 1,338 2.50% 1,400 1,156 1,200 1.99% 2.00% 1,000 1.56% 1.41% 1.50% 800 1.29% 1.19% 1.14% 600 0.98% 1.00% 400 307 0.65% 240 199 175 156 156 0.50% 200 0.28% 49 - 0.00% China India US Indonesia Brazil Pakistan Bangladesh Nigeria South Africa 2009 GDP per capita- US$ (‘000) China India US Indonesia Brazil Pakistan Bangladesh Nigeria South Africa 50.00 GDP US$ (Trillion) 46.00 16.00 45.00 14.26 40.00 14.00 34.10 32.60 35.00 12.00 30.00 10.00 25.00 8.00 20.00 5.07 6.00 4.91 15.10 15.00 4.00 10.3 10.10 1.57 10.00 1.26 1.24 6.60 2.00 0.32 0.21 3.1 5.00 2.30 - - USA Japan China Brazil Russia India South Africa Nigeria USA Germany France Russia South Africa Brazil China India Nigeria Page 6
Investment opportunities abound in Nigeria Power Sector – Electricity capacity per capita Roadmap for Power Sector Reforms 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 1.6 • Achieve 40,000 MW by 2020 BRIC Average 0.62 • Required investment of US$3.5 billion/year over the next 10 India years Russia 1.52 • Government will incentivise private sector to make the China required investment Brazil • Pending investments by the private sector, the Government Others Average 0.26 will take active steps to ensure modest but genuine Philipines improvements in the amount and quality of electricity Pakistan supplied Mexico • Government will establish an appropriate pricing regime Indonesia • Establish a bulk purchaser who carries out bulk buying Iran pending a developed settlement, accounting system Egypt required for bilateral contracting Bangladesh • Government will provide credit enhancement to the bulk Africa Avg 0.13 purchasers that will enter into PPA with generating S. Africa companies and IPPs Zimbabwe • Strengthening the NERC so that private sector operators Zambia will have a level playing field Uganda • Government will divest from the 18 successor companies Tanzania though Sudan • Concessions to Kainji, Jebba and Shiroro hydro Senegal power generating plants Per capita electricity capacity is Nigeria • Sale of minimum of 51% of Thermal generating one of the lowest in the world Mozambique plants kenya • Transmission company will be handed over to a Ethiopia credible management company under a 5 year Ghana management contract Gabon • Sale of at least 51% of the Distribution companies Congo Page 7
Investment opportunities abound in Nigeria Mobile penetration Broadband penetration G-7 Average 971 BRIC Avg 141.9 BRIC-Average 421 India Russia Russia China China Brazil Brazil India Other emerging 104.4 Countries' Avg Others Emerging 216 countries average Philippines Philippines Pakistan Pakistan Mexico Mexico Indonesia Indonesia Iran Iran Egypt Egypt Bangladesh Bangladesh Africa Avg 44.5 South Africa Africa-Average 205 South Africa Zimbabw e Mobile penetration in Zimbabw e Zambia Market highly under- Nigeria is at the level Zambia Uganda penetrated. Uganda of that in other Tanzania Tanzania emerging nations… Sudan Substantial scope Sudan Senegal …but much less than for investment in Senegal Nigeria 55.3 Nigeria 223 broadband. that in BRIC and G7 Mozambique Mozambique countries Kenya Kenya Ethiopia Ethiopia Ghana Ghana Gabon Gabon Congo Congo Angola Angola 0.0 200.0 400.0 600.0 800.0 1,000.0 0.0 50.0 100.0 150.0 200.0 250.0 Mobiles (per 1,000 people) Internet/ '000 persons Page 8
Investment opportunities abound in Nigeria Road density Air passengers BRIC-Avg 187 BRIC Avg 145 Russia India China Russia Brazil 250 China India Brazil Others emerging 114 countries average Other 108 Philippines Countries' Avg Pakistan Philippines Mexico Pakistan Mexico Indonesia Indonesia Iran Iran Egypt Egypt Bangladesh Bangladesh Africa-Average 24 South Africa Africa Avg 60 Zimbabw e South Africa Zambia Zimbabw e Uganda Zambia Tanzania Uganda Paved road density in Sudan Air Penetration is low Tanzania Nigeria is ~1/5 th of BRIC Senegal Sudan compared to Other Senegal Nigeria 36 nations Emerging countries and Nigeria Mozambique BRIC countries. Mozambique Kenya Kenya Ethiopia Ethiopia Ghana Ghana Gabon Gabon Congo Congo Angola Angola 0 50 100 150 200 250 0 100 200 300 400 500 Road (km)/ '000 sq km Air Passengers ('000) Page 9
MSCI-EM & EMEA compared to NSE ALSI 1,000 1,200 1,400 200 400 600 800 0 Jan-00 Apr-00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 MSCI - EMEA Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 MSCI - EM Apr-05 Jul-05 Oct-05 Jan-06 May-06 NSE Aug-06 Nov-06 Feb-07 May-07 Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Page 10
Deepening and broadening the Nigerian Capital Markets 2007 • Encourage upstream oil & gas, and 4.46% 4.84% telecommunication companies to list in Nigeria to diversify the sector distribution of the NSE. 8.75% 3.08% Banking • Breweries Institutionalizing the stock market through Conglomerates encouraging collective investment schemes 62.47% including exchange traded funds, Islamic Building Material 5.54% funds, and other ethical funds, and REITs. Food & Bev Pet Marketing • Alternative investment Market to address funding needs for SMEs 2010 • Building a vibrant fixed income market on the 5.36% heels of a successful sovereign bond market 14.24% Banking • President recently granted tax waivers 42.83% Breweries granted that have reduced issuance costs 6.92% Conglomerates for sub-national and corporate Building Material government bonds by 300 basis points 12.04% Food & Bev 4.69% Pet Marketing • Pension assets total USD 13 billion and growing at more than 20% pa Page 11
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