+ lbs alumni day by bismarck rewane ceo, financial derivatives company ltd. november 20, 2014...
TRANSCRIPT
![Page 1: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/1.jpg)
+
LBS Alumni Day
By Bismarck RewaneCEO, Financial Derivatives Company Ltd.
November 20, 2014
Nigeria – Always Does Better Under Pressure
![Page 2: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/2.jpg)
+Outline
Background- 5year View
Nigerian Structure, Size, Growth and Trends
Financial Markets
Policy Landscape
What Next?
![Page 3: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/3.jpg)
+Background- 5 year View
![Page 4: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/4.jpg)
+5-year View
When the going gets tough, the tough gets going- Joseph Kennedy, father of U.S.
President John F. KennedyStructure of the Nigerian economy has changed but only minimallyHighly oil and gas dependent – 94% of export revenuesAgriculture was the highest contributor to GDP at 32.85% in 2009
This has declined to 26.63% in Q3’14
![Page 5: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/5.jpg)
+5-year ReviewFastest growing sectors
Telecommunications:
34.18%
Mining and quarrying:
12.08%
Services: 10.02%
2009
![Page 6: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/6.jpg)
+5-year ReviewFastest growing sectors
Telecommunications:
34.18%
Mining and quarrying:
12.08%
Services: 10.02%
Electricity: 40%
Financial institutions: 32%
Arts and entertainment:
27%
2009 2014
![Page 7: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/7.jpg)
+ Then & Now
Second largest economy in
Africa with a nominal GDP
size of $271bn Growth rate of 6.9% GDP per capita: $1,718 Oil & gas as a % of total
exports:98% % of revenue: 70% Private consumption of
$204bn or 75.28% of GDP Government consumption:
$22bn
2009
![Page 8: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/8.jpg)
+ Then & Now
Second largest economy in
Africa with a nominal GDP
size of $271bn Growth rate of 6.9% GDP per capita: $1,718 Oil & gas as a % of total
exports:98% % of revenue: 70% Private consumption of
$204bn or 75.28% of GDP Government consumption:
$22bn
Largest economy in Africa with
a rebased GDP size of $510bn Growth rate of 6.2% (Q3’14) GDP per capita of $2,688.
Income inequality is
increasing as GDP accelerates Oil & Gas composition of total
exports has decreased to 94% % of revenue: 76%
Growth in private
consumption of $426bn, but
now accounts for a smaller
share of GDP: 72.4% Government consumption has
increased by 123% to $49.2bn
2009 2014
![Page 9: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/9.jpg)
+ExportsUS oil imports declined sharply
2009
Source: EIU
![Page 10: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/10.jpg)
+ExportsUS oil imports declined sharply
2009 2014
Source: EIU
![Page 11: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/11.jpg)
+Nigeria’s Exports
Gum Arabic
Cocoa
Oil
Rubber
Oil Palm
Cotton
![Page 12: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/12.jpg)
+Nigeria’s Exports
CocoaOil
Rubber
Oil Palm
Cotton
![Page 13: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/13.jpg)
+Nigeria’s Exports
Gum Arabic
Cocoa
Oil
Oil Palm
Cotton
![Page 14: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/14.jpg)
+Nigeria’s Exports
Gum Arabic
Cocoa
Oil
Rubber
![Page 15: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/15.jpg)
+Nigeria’s Exports
Gum Arabic
Cocoa
Oil
Rubber
Oil Palm
![Page 16: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/16.jpg)
+Nigeria’s Exports
Gum Arabic
Cocoa
Oil
Rubber
Oil Palm
Cotton
![Page 17: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/17.jpg)
+Nigeria’s Exports
Gum Arabic
Cocoa
Oil
Rubber
Oil Palm
Cotton
![Page 18: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/18.jpg)
+Trade Flows - Imports
2009
![Page 19: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/19.jpg)
+Trade Flows - Imports
2009 2014
![Page 20: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/20.jpg)
+Imports
Machinery
Chemicals
Wheat
Sugar
Iron & steel
![Page 21: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/21.jpg)
+Socio-Economic Indicators
Population of 158m
Labour force: 48.4m
Unemployment rate: 19.7%
Misery index (inflation +
unemployment rate): 33.6%
President: Yar ‘adua
Terrorism was focused in
the Niger Delta
5 years ago
![Page 22: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/22.jpg)
+Socio-Economic Indicators
Population of 158m
Labour force: 48.4m
Unemployment rate: 19.7%
Misery index (inflation +
unemployment rate): 33.6%
President: Yar ‘adua
Terrorism was focused in
the Niger Delta
Population of 170m
Labour force has increased
to 55m
Unemployment rate is
higher at 24%
Misery index is lower at
32.1% due to a slower rate
of inflation
President: Jonathan
Now focused in the North
Central and North East
5 years ago Current State
![Page 23: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/23.jpg)
+Demography: median age now
2009
Working age population: 81.3mGini Co-efficient 43.0
Above 65 years
![Page 24: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/24.jpg)
+Demography: median age now
2009
Working age population: 81.3mGini Co-efficient 43.0
2011
Working age population: 92.8mGini Co-efficient 43.7
Above 65 years Above 60 years
![Page 25: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/25.jpg)
+Monetary Condition Vs Policy
Monetary policy was
accommodative( MPR: 6%
p.a.)
CBN Governor: Sanusi
Inflation rate: 13.9%
Exchange rate of N148.9/$
External Reserves:$42.38bn
2009 2014
Monetary policy now contractionary (MPR: 12% p.a)
CBN Governor: Emiefele
Inflation rate: 8.1%
Naira has depreciated 16.18% since 2009 to N173/$1
External reserves down 11.4% to $37.55bn
![Page 26: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/26.jpg)
+External Balance
Trade balance of $25.4bn
Export revenue: $56.2bn
Brent crude: $61.9pb
Import revenue: $30.8bn
Current account balance:
$13.9bn
External Reserves consisted
primarily of portfolio funds
and hot money
Trade balance has increased by
62.99% to $41.4bn Export position of $94.3bn is
expected to decline due to lower
oil prices Brent crude: $79pb Import revenue is up 71.43% to
$52.8bn Currently at $19.4bn and may
be completely eroded due to
impact of lower oil proceeds Capital flow reversals have
intensified with the end of U.S.
Fed tapering
2009 2014
![Page 27: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/27.jpg)
+Financial Markets
![Page 28: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/28.jpg)
+The Stock MarketYear 2009 2014(Oct 31)
Market Capitalization N4.98trn N12.44trn
All Share Index 20,827.17 points 37,550.24 points
No of listed firms 216 188
No of ETFs - 3
No of listed upstream oil/gas firms
- 2
Market Makers nil yes
Total value of trades N684.4bn N1,104bn
ASI still far below 2007 levels; market P.E ratio of 25.66x
ASI below N9trn when adjusted for new listings;
DANGCEM, SEPLAT, CAVERTON, CWG
Stock market is still unreflective of GDP
Lacks depth with just equities and bonds
![Page 29: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/29.jpg)
+Banking System 1/2Year 2009 2014 (Sept.)
No of Commercial Banks 24 21
No of Merchant/Islamic - 2 and 1
Total Assets N17.52trn N26.90trn
Total Deposit Liabilities N9.15trn N14.95trn
Total Loans to Private Sector
N7.38trn N12.19trn
Corporate Governance Structure
Poor/Lacking Fair/Improving
Risk Management Framework
Weak Strong
E-banking Infancy Stage Fast Developing
Value of Electronic Payment
N645.1bn N2.01trn (2012)
Number of clearing days 3 1
Non performing Loans (%) 36% (pre-AMCON) 3.7%; CBN limit is 5%
Average MPR 7.9% 12%
Cash Reserve Ratio 2% 75%: 18%Source: CBN, SEC, NSE
![Page 30: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/30.jpg)
+Banking System 2/2 Better regulated than before Gradually adopting global best practices in terms
of risk management Higher adoption of technology and electronic
platform Nigerian banks interested in the regional game
ETI, UBA, STANBIC on the lead ACCESS, FBNH and GUARANTY playing catch up
More resilient than peers in Kenya and Ghana But less profitable due to regulatory constraints
and focus on safety Average ROE FY2013: Nigeria 18%, Kenya 26%,
Ghana 45% Average ROE H12014: Nigeria 18%, Kenya 26%,
Ghana 47%
![Page 31: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/31.jpg)
+Pension Funds
Year Domestic Equities
Govt. Bonds
Money Market
Foreign Equities
Real Estate
Other
2009 14% 33% 37% 0.2% 9% 7%
2010 18% 41% 24% 1.2% 8% 7%
2011 13% 56% 13% 1.3% 8% 9%
2012 10% 63% 10% 1.0% 9% 7%
2013 14% 64% 12% 1.3% 5% 3.7%
06’2014 14% 64% 12% 1.26% 5% 3.7%
Total Pensions Assets of N4.08trn as at 2009 Compliance and remittance issues Limited investible asset classes
Total Pension Assets of N4.52trn as at August 2014 Just about 5% of GDP (in US dollars terms) Could easily double by 2020
![Page 32: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/32.jpg)
+PFA Asset Allocation….5 years on
PFAs doubled allocation to Govt. bonds within 5 years Mandatory contribution increased to 18% from 15% Pension funds may hit $50bn by 2018 from $26bn in 2014 where will PFAs invest, still Govt. bonds? Infrastructure deficit requires about $400bn funding Significant institutional reforms required
Land use act Speedy Judicial process
![Page 33: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/33.jpg)
+The 2015 Challenge A naira devaluation
More cost pressures for importers A Nigerian banking crisis after every naira
devaluation 1998, 2009, 2015?
As banks adhere to Basel II/III guidelines Stricter capital requirements
How to raise equity capital in a bear stock market? Significant pressure on profitability
Petrol subsidy removal Likely to be decided post-May 29th Case for subsidy removal more tenable with falling
oil prices Negative impact on the downstream players
![Page 34: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/34.jpg)
+Policy Landscape
![Page 35: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/35.jpg)
+Policies have been ProgressivePrivatization of the power sectorTrade liberalizationRestrictive monetary policyOpening up of markets
Investors are allowed in
Current account convertibility
Exchange rate devaluation, more market driven
Fiscal austerity measures to mitigate
against external shocksAutomotive policy to encourage local
production
![Page 36: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/36.jpg)
+2015 Outlook
![Page 37: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/37.jpg)
+2015 Outlook
2015 will be broken into 2 phases
Pre election and swearing in phase
Post election
Pre election and swearing in phase will be
dominated by politics
Increased government spending for
political campaign
Election-related instability
![Page 38: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/38.jpg)
+Post Election PhaseOil prices will rebound but unlikely to trade
above $90pbFiscal revenue will be determined by oil
price prospects Projected decline in government revenue from
4.5% of GDP in 2013 to less than 3.5% Oil production will be constrained by
ongoing policy uncertainty surrounding the PIB Thefts, leakages
Increased international borrowing to fund revenue shortfall
A low external debt/GDP ratio of 3.7% provides some headroom for this
![Page 39: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/39.jpg)
+Post Election Phase
Tax base will increase to boost
government revenue
Policy implementation will be slow given
political indecision, bureaucratic
inefficiency and corruption
Powerful state governors and strong
labour unions will remain a barrier to the
effective dissemination of government
policy and market based reforms
![Page 40: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/40.jpg)
+Post Election Phase
Naira is expected to trade at N175/$ at the
interbank market
Likelihood of a reduction in interest rates
and a change in monetary policy stance
Disposable income will reduce due to the
effect of a naira devaluation
Implementation of automotive policy and hike
in electricity tariffs
![Page 41: + LBS Alumni Day By Bismarck Rewane CEO, Financial Derivatives Company Ltd. November 20, 2014 Nigeria – Always Does Better Under Pressure](https://reader036.vdocuments.us/reader036/viewer/2022062320/56649d135503460f949e75c8/html5/thumbnails/41.jpg)
+
Thank you